Developing Staff Incentive Schemes (Report)

Why are staff incentive schemes important?
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This paper discusses the factors to consider in designing staff incentive schemes in the MFI sector.

Discussing why staff should be given incentives for good performance, the paper states that:

  • The staff works in remote areas on behalf of the owners and stakeholders; the quality of their decisions affect the whole institution;
  • It is an economically rational strategy to reduce staff fluctuation by paying competitive salaries;
  • Microfinance managers need incentives too, since their commitment is important to the success of the institution;
  • Adequate staff incentives have a positive influence on the overall institutional performance, including outreach and sustainability.

The paper lists types of incentives as follows:

  • Job satisfaction;
  • Possibilities for promotion;
  • Non-monetary benefits;
  • Monetary bonus systems;
  • Profit sharing;
  • Stock ownership.

The paper then discusses topics in connection with staff incentive schemes, some of which are:

  • Case studies and empirical findings;
  • International experience;
  • Factors influencing the choice and critical design issues;
  • Some common reasons for failure.

It concludes by listing the steps in designing an effective staff incentive scheme:

  • Definition and clarification of the strategic goals of the MFI;
  • Analysis of culture, clientele, products and processes;
  • Definition of the objectives of the incentive scheme;
  • Decision on how much the MFI is willing to spend - a cost-benefit analysis;
  • Staff members and occupational levels to be affected by the scheme;
  • Choice of incentive mechanism;
  • Technical design work;
  • Field test - selling the scheme to the staff;
  • Monitoring the performance of the scheme.

About this Publication

By Holtmann et al, M.