Designing Staff Incentive Schemes to Balance Social and Financial Goals
This paper discusses the role of staff incentive schemes (SIS) in achieving a balance between social and financial goals. It attempts to identify best practices of how SIS can be designed to balance social and financial goals using four case studies among Microfinance Network member institutions, namely, BRAC (Bangladesh), BancoSol (Bolivia), PRIZMA (Bosnia and Herzegovina) and Equity Bank (Kenya).The paper states that effective SIS must be accepted by staff, and must meet the requirements of fairness and transparency. It states that:
- Goals or benchmarks set out for staff must be attainable;
- Staff members who perform better than others should be eligible for higher rewards;
- Compensation system should reflect the hierarchical levels within the institution;
- SIS should be kept as simple as possible, and should be explained carefully and in detail to all staff;
- Accrual of rewards should be based on objective performance measurement indicators rather than on subjective performance assessments.
The paper suggests that where possible, SIS should be pilot-tested before implementation. Regular monitoring and adjustments in the SIS is important. These adjustments, however, should not be too frequent and should be properly communicated to staff.
