Speaker's Corner 24: Staff Incentives: MicroLinks- Microenterprise Learning Information and Knowledge Sharing (4.1.3 )

Speaker's Corner on Staff Incentives
April 15-17 2008

This Speaker's Corner was co-hosted by USAID, the MicroFinance Network, and CGAP.

Thank you to all participants for their contributions during the three-day forum.

Download the Compilation Document with all postings shared in the online conversation.
See all discussion postings in the forum, or read:
- The Forum Welcome Message by Mattias Grammling.
- Day 1 Opening Message: Positive and Negative Effects of Staff Incentive Schemes
- Day 1 Summary Message
- Day 2 Opening Message: Designing Staff Incentive Schemes for Different Positions
- Day 2 Summary Message
- Day 3 Opening Message: Balancing Social and Financial Goals with Staff Incentives
- Day 3 Summary Message
- Day 3 Closing Message
Download resources shared by forum moderators and participants, including the article, What Are the Most Effective Staff Incentive Schemes? posted on the Microfinance Gateway.
E-mail any feedback or questions to us at speakerscorner@microlinks.org.
Interested in future Speaker's Corners or other microLINKS events? Sign up for the monthly Connections newsletter.

About this discussion: According to the recent “Banana Skins Survey 2008” among 300 microfinance stakeholders, staffing is one of the biggest and fastest rising risks in microfinance institutions (MFI). Staff incentive schemes (SIS) play a key role in an human resources strategy: not only do they influence who gets hired and who resigns, but they are mainly designed to increase organizational efficiency by enhancing staff productivity and loan portfolio quality. A worldwide survey on the use of staff incentives conducted by the MicroFinance Network (MFN) and the Consultative Group to Assist the Poor (CGAP) has revealed that most MFIs use incentive schemes and that practitioners’ perceptions are largely positive. Poorly designed systems, however, can quickly backfire and produce negative effects on staff motivation.

This Speaker’s Corner attempted to reveal best practices in the design of efficient staff incentive schemes. Co-hosted by the MicroFinance Network, CGAP, and USAID, it was moderated by Mattias Grammling, Martin Holtmann and Martha Ottenbacher. Each day, participants were invited to share their own experiences, questions and comments in the discussion forum:

Day 1 (April 15) – Effectiveness and efficiency of Staff Incentive Schemes. A discussion of the main features of efficient staff incentive schemes: How much should we pay as incentive? What types of incentive schemes are most efficient? What are the factors to consider and how to make it work?
Day 2 (April 16) – Staff incentives for different functional levels of staff. The success of staff incentive schemes largely depends on an accurate performance measurement, but how to assess the performance of credit officers, tellers, branch managers, accountants, and others? Should you have SIS for staff whose individual achievements cannot be measured? How to incentivise savings mobilisation or insurances? How can we design a comprehensive remuneration system that is fair to all positions?
Day 3 (April 17) – Social performance dimensions in SIS. Although MFIs have a “double bottom line”, staff incentives are typically designed to improve efficiency and profitability. Considering the growing interest in balancing social and financial goals, it is surprising that social performance indicators are not yet widely used in staff incentive schemes. Is it necessary to employ social performance measurement indicators in staff incentive schemes in order to achieve social goals? Which social indicators should be used to reward staff?

What's a Speaker's Corner?
A Speaker's Corner is an online discussion designed to help practitioners share and learn from each other's experiences. You can participate by reading and posting messages on this page or through your e-mail. Speaker's Corners are organized monthly. An overview of upcoming discussions is posted on our main Speaker's Corner page.

Resources

The section below includes useful resources, selected by forum moderators and participants. A good place to start is the article, What Are the Most Effective Staff Incentive Schemes?, by Mattias Grammling and Martin Holtmann on the Microfinance Gateway.

Documents

Grammling/Holtmann: What Are the Most Effective Staff Incentive Schemes? (Article on the Microfinance Gateway) Publication Date 04/2008

Introduction of Incentives for Staff Introduction_of_Incentives_for_Staff.doc Publication Date 04/16

Short Video: Anton Simanowitz discussing social performance management (Episode 3)

Staff Incentive Schemes Compilation Document Staff_Incentive_Schemes_Compilation.pdf Publication Date 04/2008

The Role of Staff Incentive Schemes in Balancing Social and Financial Goals: Evidence From Four MFIs Publication Date 03/2008

Pitfalls and Unintended Outcomes: Advice on Designing and Implementing Staff Incentive Systems Pitfalls andunintended outcomes_3.pdf Publication Date 12/2006

Designing Staff Incentive Schemes to Balance Social and Financial Goals Publication Date 09/2006

McKim / Hughart: Staff Incentive Schemes in Practice: Finding of a Global Survey of Microfinance Institutions Publication Date 09/2005

Holtmann / Grammling: A Toolkit for Designing and Implementing Staff Incentive Schemes Publication Date 08/2005

Holtmann: Designing Financial Incentives to Increase Loan Officer Productivity: Handle With Care! Publication Date 04/2001

Bazoberry: We Aren’t Selling Vacuum Cleaners: Prodem’s Experiences with Staff Incentives. Publication Date 04/2001

Discussions

Staff Incentives Discussion ID: 22446

Subject	Views	new	Posts
Day 3 Summary During our third day, we discussed the role of staff incentive schemes in balancing financial and social goals. One line of discussion focused on whether incentive schemes that are designed to improve ...	493		1
Closing message Dear all, Many thanks for all your valuable contributions. It was a great pleasure to share ideas on staff incentives with you, and I hope you have enjoyed the discussions. I have learned quite ...	485		3
Welcome to day 3 –Balancing social and financial goals with staff incentives Welcome to the third day of our Speaker’s Corner on staff incentive schemes. Today, we will focus the discussions on the design of staff incentive schemes that balance social and financial goals as ...	653		16
Re: Ideas for balancing social and financial performance Whatever the incentive scheme is, it should be easy to understand and easy to be put in practice, e.g the information needed to do all the calcultations should be easy to get. Moreover, I think that ...	468		2
Re: Ideas for balancing social and financial performance Hi Nhu-An,I agree with you, social performance is not just about how poor your clients are. Which indicator to use should depend on each MFI's mission, and this is particularly relevant when we talk ...	490		1
Ideas for balancing social and financial performance [Posted on behalf of Anton Simanowitz]Below are some suggestions I gave to an MFI in terms of presenting an incentive scheme that balances social and financial goals. If…… you bring in target ...	515		10
Re: Social performance measurement on short-term and individual levels Loan officers tend to concentrate their operations close to the branch. As a mechanism to increase outreach (and be fair with loan officers) I propose a differential economic incentive for getting ...	466		1
Re: Social performance measurement on short-term and individual levels I've heard that some partners of Grameen Foundation are using PPI score as a parameter in order to reach the target populations.I think it's an interesting additional use of PPI - though the internal ...	463		1
Incentives for Senior Management I understand that branch location, product design and policies to follow up on delinquent clients can significantly influence the achievement of social goals. These factors are largely under the ...	534		2
Why I think incentives are important to achieving social performance (email from Anton Simanowitz) [Posted on behalf of Anton Simanowitz]Dear all,I'd like to share some of my experience working with an MFI (SEF, South Africa) that makes a serious attempt to balance social and financial performance ...	612		10
Day 2 Summary The very active second day’s discussions focused on some technical issues in the incentive scheme’s design for different functional levels of staff: It seems that there is a wide consensus that ...	494		1
Re: Calibration of loan officer incentive schemes I had the opportunity to see a SIS that rewarded the selling of all sorts of products such as insurance policies, savings accounts, long-term deposits, savings accounts for children, among others. ...	506		2
Resource documents posted on the Website -- You are invited to add yours Hi everyone,Thank you for your active participation in this forum. The document that Erum Farhad shared earlier, Introduction of Incentives for Staff, is posted in the resource area of the main ...	453		1
Re: Staff incentives for non-credit staff As far as bonus allocation is concerned, all staff members can be grouped vertically into two groups ie., main operations team and support team and within the teams staff shall be graded based on few ...	487		1
Re: Calibration of loan officer incentive schemes Martha,In the context that MFIs diversify their product range as they grow and become mature, with or without transforming to banks, I also wonder how MFIs change their staff incentive schemes over ...	497		2
Re: Team incentives Michael,Thank you for sharing this. I wonder if team-based incentives are the answer when the MFI reaches to have a variety of products like a normal commercial bank. What do the others think?When the ...	458		1
Staff incentives for non-credit staff I have observed a high interest in how to design incentive schemes for other than lending staff. Thus, I open this thread, so we can keep our discussions better structured. We had already a lot of ...	565		6
Welcome to day 2 – Designing incentive schemes for different positions After our lively discussions yesterday, I am excited to open our second, somewhat more technical session: Staff incentives for different functional levels of staff. Some rightly pointed out that staff ...	696		4
RE: Staff incentives for non-credit staff Stuctured awards such as Best officer of the month etc contribute alot towards enhancing the productivity and retaining the effecient employees.Recognition in form of exposure is one of the greatest ...	465		4
Re: Staff incentives for non-credit staff For incentivising the Head office staff, what would you suggest on forming cross functional teams and then giving out team rewards. This could further trigger achievement of new initiatives in the ...	490		4
Calibration of loan officer incentive schemes Loan officers work in (sometimes very) different operational circumstances for which they are not accountable. For instance, some manage individual microloans and others may be responsible for village ...	612		6
Re: Welcome to day 2 Designing incentive schemes for different positions I think the two main critical elements for designing the incentives schemefor lending staff are:Loan officer's productivity; growth in number of loans and number of MicroSaversDepth of poverty; ...	559		8
RE:Welcome to day 2 Designing incentive schemes for different positions In response to Sachin's point regarding measuring the qualitative aspect of microfinance such as depth of poverty, so as I mentioned earlier this can be quantified by using proxy indicators of ...	462		2
Day 1 Summary I think we had very fruitful discussions during the first day. We could identify key issues that are important to make incentive schemes successful. Of course, there is no “one size fits all”: Tony ...	499		1
Re: Welcome to day 1: Positive and negative effects of staff incentive schemes #2. What are the negative effects of staff incentive schemes?The negative effect of a staff incentive scheme design based on long term focus of the Institution is to loss those head starter performers ...	735		6
Welcome to day 1: Positive and negative effects of staff incentive schemes Welcome to the first day of the Staff Incentives Speaker’s Corner. Today, we will discuss the effectiveness and efficiency of staff incentive schemes. Two recent surveys on staff incentive schemes ...	997		16
How much should we pay? And whom? I see two very important points coming up in our discussions: 1. How much should we pay as incentives (e.g. in percent of the total pay)? 2. What is the percentage of staff that should qualify f ...	617		9
Re: Welcome to day 1: Positive and negative effects of staff incentive schemes Can we consider career perspective as a tool for staff incentive scheme? for young or start-ups MFIs the growth of business and the perspective of career in the Institution may be included in the ...	506		2
Welcome to the Speaker’s Corner on Staff Incentive Schemes Welcome to the Speaker’s Corner on Staff Incentive Schemes. Over the next three days, we will discuss critical issues in the design of staff incentive schemes that can make them a success or failure. ...	631		7
RE: Welcome to the April 15-17 Speaker's Corner on Staff Incentives [Staff Incentives Discussion] It is better to design staff incentive scheme(s)based on the long term focus of the Institution. Thismeans the incentives will be biased on cumulative(unbroken) work performance, commitment & ...	478		2
Effects on staff retention and recruitment A number of participants have raised an interesting issue: what are the effects of staff incentives on staff retention? I understand that some say, paying high incentives will lead to higher staff ...	556		2
Re: Welcome to day 1: Positive and negative effects of staff incentive schemes Dear Fahan,I must agree with you.If some one thinks that the monetary rewards to staff based on certain parameters like portfolio quality and clients enrollment is going to help the MFIs then I would ...	496		1
Welcome to the April 15-17 Speaker's Corner on Staff Incentives Welcome! This is the main event area where the messages in the April 15-17 Speaker's Corner on Staff Incentives will be posted. You can participate on this site or over e-mail. When you ...	667		9
RE: Welcome to day 1: Positive and negative effects of staff incentive schemes We at The First MicroFinanceBank Ltd offer annual increments based upon yearly appraisals to all the employees based upon their achievement of\ targets. Currently we are planning to introduce some ...	514		1
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