Operating Distribution

Definition

The Operating Distribution shows a company's position within the statistical distribution of its Peer Universe for a financial metric for a certain time period. Operating Distribution is thus the terminology for a graph as shown below.

Description

The Operating Distribution adds to the information provided by the Operating Index and Operating Rank by showing the distribution of performance on a given financial metric within the Peer Universe and for a certain point in time. The Operating Distribution is especially useful for evaluating the achievement of bonus targets for management incentive compensation.

The Operating Distribution facilitates the evaluation of the performance rank or percentile rank of an operating unit by showing the statistical distribution and the actual values of the financial metric. Additionally, the Operating Distribution endorses the identification of the most important peers and their relative positions.

Finally, Operating Distribution measures the quality of the data reported. The closer together the data points, or the steeper the slope of the distribution curve, the better the Peer Universe and the more valid the data. With Operating Distribution you can also plot the position of important competitors to identify specific operating winners and losers in your industry.

Application

The Operating Distribution is used primarily for indexed bonus targets. One can see the performance increase necessary to achieve an improvement in bonus allocation. The research company Obermatt typically updates the Operating Distributions three to four times a year. This enables an indication of which performance results in which incentive plans already from June onwards.

Additionally, Operating Distribution is also compiled for quality purposes. It validates the data points used for the computation of the Operating Rank. Since Operating Distribution is mostly used along the lines of the Operating Rank, the Application of the Operating Rank has to be considered as well.

Examples

The financial research company Obermatt AG (about) provides indexing performance analysis such as the Operating Distribution to clients. Request a quote for your company by contacting Obermatt AG (contact).

If you are writing a dissertation or master thesis on this topic, Obermatt AG (career) supports you.