28 HќќѠіђџȱ юћјђџ ѝџіљȱ2014 tion has become an integral part of this process. ȱ ȱȱȱȱȱ to any incentive compensation plan is educating and building employee acceptance. In most cases, the traditional merit-based system is familiar and comfortable to employees, and represents less risk. A new incentivedriven plan, on the other hand, requires a higher level of performance, with rewards tied to performance. For these reasons, it is best to ȱȱȂȱȱ- ture over a period of time to allow for employee education and acceptance. Concurrently, however, banks are ȱȱĴȱȱ ȱȱĴȱȱȱ- ęȱǯ ȱ ¢ȱȱȱęȱ review their current compensation practices to decide whether changes are warranted. This process, in itself, requires a great deal of research. ȱ ȱȱȱȱěǰȱ however, have found that incentivebased compensation can help reach new levels of productivity and ę¢ǰȱȱȱȱȱ¢ȱ crafted to be manageable and Ĵǯȱȱ While there is no single ȱȱȱęȱ all organizations, an appropriate compensation process can result in ȱęȱȱȱęȱȱȱ bank and employees. 1. Develop a compensation policy statement. State the desired purpose, approach, results, ȱȱȱȱȱȂȱ compensation plan to create a framework for the program. 2. ęȱǯȱName the parties responsible for developing, implementing and reviewing compensation activities. The board of directors should appoint ȱȱĴȱȱ ȱȱȂȱȱ review and analysis, and provide ęȱȱȱȱ full board. Management should review, analyze and determine bank needs and the best approach available. The board approves all ȱȱȱȂȱ recommendations. 3. Gather information. Sources of compensation information include state associations,* government publications, chambers of commerce, colleges and ǰȱȱȱęȱ service salary surveys. Using market salary data allows for ȱ ȱȱȱȱ to the market. 4. Establish base salaries. Once salary information has been collected and reviewed, establish salaries or salary ranges for all positions. Then develop procedures for reviewing employee performance and making ¢ȱǯ 5. Work within budgetary constraints. Budgets determine ȱȱȱȱĜȱ ȱȱ¢ȱǯȱ The salary program establishes a method to allocate the dollars available using guidelines, departmental allocations or equal increases for all employees. The best approach is to establish salary increases based upon individual performance and the relationship of the individual salary to the salary data. 6. Consider incentive compensation. Banks should examine how ȱȱȱĴȱ motivate employees to serve customers and to improve productivity: % Sales incentives. Providing sales incentives for opening new accounts will increase business ȱȱěȱȱȱ more sales-focused. One widely used incentive is a monetary reward for each type of sale. % Overall bank performance incentive program. The most common type of incentive program is to reward employees based upon annual bank performance. In designing this program, focus on the measurement system and ȱǯȱ ȱȱȂȱ historical performance and ȱȱȱȱ annual goals. The reward ideally provides payments to employees for results achieved and additionally motivates them for further improvements. % ȱȦȱȱ incentive programs. Employ the same process as the overall incentive programs to set individual and/or departmental goals. Once expectations are ȱȱȱęǰȱ apply that system to any unit within the bank, such as loans, operations and/or branches. It is important to ensure that goals are achievable, and that the rewards are reasonable for the expected results. * For salary information from the Indiana Bankers Association, please contact Rod Lasley at 317-3879380, email: RLasley@indianabankers.org. 'HYHORSLQJ DQ (IIHFWLYH &RPSHQVDWLRQ 3URJUDP Continued from page 27. Nominations are being sought for the 25 Most Powerful Women in Banking list, selected by the editors of American Banker magazine. The annual feature highlights the professional achievements of the ¢Ȃȱȱ ȱȱ spotlights institutions that promote gender diversity in leadership. Banks of all sizes are invited to nominate one or more women with senior status within their organizations. The deadline for nominations is May 30; results are to be published in October. For details, go to: www.americanbanker.com/ women-in-banking. ¶3RZHUIXO :RPHQ LQ %DQNLQJ· 1RPLQDWLRQV 6RXJKW
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