We’ve read articles recently that incentive plans don’t work. We’ve seen banks end their failed attempts to implement incentive plans, and we’ve dealt with banks that believe employees get a salary for their job so why should they get incentives. Without the proper plan and process in place, we would strongly recommend not having an incentive plan as it will create more problems and costs than it’s worth. The reality is that most banks do incentives poorly by stretching goals, setting quotas, paying employees based on “team” performance and not actively managing the process. In fact, many banks end up losing money through their incentive plans. However, if you don’t pay incentives to your top producers based on performance, then they will go somewhere else that does. In golf, most of the top talent didn’t play in many tournaments toward the end of the year. Then the FedEx Cup was introduced with a $10 million incentive to the winner… guess what? Now they all play through the end of the year. Incentives done right, most definitely work.
Effective incentive plans will…
- Pay 5-10% of first year profit on a cross-sold product to the employee.
- Pay for sales not activity
- Pay for individual performance not team. Paying incentives to employees based on team performance will demotivate your best people.
- Pay managers based on team and individual performance
- Manage the process through weekly and daily meetings (5 to 15 minutes)
- Motivate with money (#4 motivator and the glue to the process); motivate with competition (#5 motivator); motivate with recognition (#1 motivator); motivate with a score showing advocacy and that your job makes a difference (#2 motivator).
A poorly executed incentive plan will be a disaster for your bank and a demotivator for your best employees. An effectively managed incentive plan will add 10-15% per year to your bottom-line with existing employees, attract great employees, motivate employees on many levels (not just money), and will contribute to the career development of your employees.
