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Four Key Principles for Efficiency-Driven Incentive Compensation Management in the Banking Industry

This is the first in a two-part series that examines incentive compensation management in the banking industry and a best practice approach to drive better alignment, efficiency and compliance.

Are your company’s compensation incentives strategically aligned with your overall financial goals?

It’s challenging trying to find that ultimate sweet spot.

Putting a proper solution in place is especially important in the banking industry where attempting to create alignment across a network of diverse business units and products increases the potential for inefficiencies.

Just look at your points of contact with customers.

An average customer may interact with:

  • Retail banking representatives
  • Investment advisors
  • Mortgage specialists
  • Insurance agents
  • …or countless other staff

Each interaction is a sales, referral or bundling opportunity, but coordinating this strategy across the entire network can create inefficiencies and undermine alignment.

Intangent has observed these inefficiencies throughout the banking industry – fragmented compensation solutions that were developed independently by departments or absorbed via acquisition.

Overcoming these inefficiencies requires a flexible, scalable compensation system and some best practices.

1. Incentive compensation management in the banking industry must measure and track activity

It’s important to get a clear picture of incentive compensation costs versus goals achieved.

Set a multi-year goal for your compensation plan, continue to measure and track performance and make sure you understand the impact that incentives are having to your bottom line.

2. Incentive compensation management must learn and adapt

The market is changing quickly, so your compensation-incentive structure must be flexible and ready to adapt.

Building on your understanding of incentive-based performance (described in point # 1), keep your plan competitive and continue to make adjustments so incentives on the bottom align with the top-level goals.

3. Successfully roll-out your plan

Getting your team on-board with the bank’s plan is a key part of alignment and making sure all employees act in accordance with the bank’s overall priorities.

Buy-in is critical.

Distribute clear, meaningful plans that have a visible and meaningful connection between compensation opportunities and executive goals.

4. Make alignment your top priority

A front-line retail representative who understands that she will be compensated by referring a customer to the wealth management group will likely take initiative to do so.

When the customer meets with wealth management, the employee’s scorecard will record the referral and the ICM system will reflect that the compensation plan is driving the company’s goals.

It’s a function of “alignment” driving a virtuous cycle of company growth.

We understand first hand the critical importance of efficiency-driven incentive compensation management in the banking industry.

Our experience includes the successful implementation of flexible, accessible solutions for US regional retail banks, US national banks and Canadian national banks.

In each case the solution replaced the bank’s legacy system, often a manual system that simply relied on Excel spreadsheets. Adopting a flexible, scalable, ICM solution increased efficiency and created sales incentive models to drive desired behaviour and maximize future performance.

We want to hear from you

Are you struggling to align your compensation incentives with your financial goals? What best practice approach have you undertaken for enhanced incentive compensation management in the banking industry?

Have you found the right tool to support this strategy?

Click the "Let's Talk" button anywhere on the site to get in touch with us, or reach out to us via Twitter or LinkedIn!

 

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