Pub. 7 2017-2018 Issue 3

16 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S Strategic Compensation H uman capital is likely the most expensive resource a bankhas, and we all know our people are important in a customer facing business, so why not be strategic with it? Almost every business has a written strategic plan that states profitability goals, growth goals, three-year plans, etc. Frequently, the board and execu- tive management spend multiple days working on suchaplan. However, when it comes to compensation, less thanhalf of banks (47%of the201banks surveyed in our 2016 Compensation Trends Survey) have a written compensation philosophy. Banks are for profit businesses, so it certainly seems to make sense that their compensation programs should be in-line with the strategic goals of the organization. All employees are not the same anddonot provide the same value to the bank. As such, they should not all be paid at the median of the market, always receive the same annual 3%sala- ry increase, and receive the same bonus or incentive as their peers. Unless, of course, the strategic plan says youwant to be average and you want all your people to be average as well! We are confident that we never seen a strategic plan with those goals in it. The Compensation Philosophy Most organizations start the stra- tegic compensation discussion with the development of a compensation philosophy. This document, often only a page or two, primarily identifies a few key items. 1) What are we trying to accomplish with our compensation programs, 2) What compensation programs do we have available to our employees, 3) Who qualifies for these programs and why, and 4) Where do we want to position ourselves versus market? The compensationphilosophy statement should be a living document BY KRISTEN KOSTNER, SENIOR CONSULTANT AND MATT BREI, PRESIDENT, BLANCHARD CONSULTING GROUP