Insights on Incentives has as its sole purpose the facilitation of thought and discussion on the subject of incentive compensation for banks and credit unions.  Once a month NSS will be sending out an e-mail with one insight on the area of incentive compensation.  The insights will come from our research, discussion with customers and finally, those of you who decide to offer an insight on this important sales management issue.

In a previous Insight on Incentives we discussed using “gates” which provides for the non-payment on one measure if another measurement is not met. Another variation of this is linking measures with weighting. For example, a mortgage originator may have his product commission affected by his performance on referrals to other business units. A multiplier would be applied to his product commission that could either increase or decrease his commission rate based on his referral rate performance. Another possible linkage that could use weighting is linking product sales performance to overall deposit growth. Still another is linking product sales performance to cross-sell ratio.

Linking measures with weighting is another design tool for encouraging a balanced performance that is in-line with the corporate strategy.

While the answer is not one number there are some certain guidelines.

• The first one is focus. The less performance measures the more focus.
• The second guideline is your overall business objectives, which are seldom supported by just one measure.
• The last guideline is weighting. When you look at all of your performance measures as part of the whole, avoid having anyone fall below 15% of the target incentive compensation pool.

Having too many performance measures may lead to one of the measures being weighted too small to draw focus from the sales team. Three is usually a sound number with four working if they are of equal weighting.

Insights on Incentives is brought to you by NSS Corp.