In all our years of implementing and managing incentive programs, we’ve seen just a handful of community banks successfully implement one that was effective and profitable. Most will get something in place only to see average to below average results and many others will see their incentive plans fade away into the the land of “we tried it and it doesn’t work here”. There are plenty of mistakes that can be made when it comes to having an effective and profitable incentive program, so we’ve compiled a list of the five most common mistakes we have seen in our 20-plus years of developing incentive plans in community banks. We’re not saying your plan can’t exist if you’re doing some of these things. Odds are, some of you reading this may have incentive plans up and running in your bank that are currently making these very mistakes. What we are saying is this… If you want a profitable plan that is good for your customers, good for your employees, and good for your bank, then there is no way you can afford to make any of these mistakes.
- Paying for activity – There’s no better way to discourage your best employees and at the same time, encourage those who want to take advantage of the system. We’ll pay you for every phone call. We’ll pay you for trying, even though you didn’t get the sale. We’ll pay you for walk-in or call-in business. We’ll pay you more for 5 cross-sold debit cards than 1 primary checking account. If you pay for activity, your incentive plan is destined for failure. It will eventually fall to the scrutiny of your CFO the Board and common sense. The incentive plan must be profitable to the bank. Activity-based plans are anything but profitable.
- Setting goals that only the superstar employee can achieve – Not everyone is a superstar salesperson. Don’t fool yourself into thinking that you can put a really high production goal on someone and they’ll magically become a great salesperson. There’s no magic in banking! You have to manage, your incentive plan won’t do that job for you. People that set these high goals are usually the same as those who stretch the goals as well.
- Setting quotas – Don’t hit the quota and your fired. How crazy is that? This is managing to the minimum. When quotas are set, most employees will figure out how to get to the quota and stop. It’s the lazy manager’s way out of recruiting talent and developing those talents into strengths. With quotas, you can certainly get some results but they’ll be limited and nowhere near the profitability that should be achieved.
- Failing to manage the process on a weekly basis – No incentive plan manages itself. If you’re not conducting a weekly review meeting with your team leaders to recognized successes, review performance and address questions, then your incentive plan will never be implemented with the success that should be expected. A 10 to 15 minute weekly meeting is all that is needed.
- Not tracking advocacy – If you’re not tracking and rewarding the people (your advocates) who are actively referring you business, then you’re missing out on over 70% of the potential profitability of an effective incentive plan. This is your “unpaid” sales force in the community. Not tracking and then rewarding this group is the number one mistake that is made.
All of this seems easy enough, but if you don’t have a simple, automated tracking system in place, you’ll have no hope in addressing and managing these five areas. We have a tracking system designed for the incentive plan of community banks. You may be able to build your own or find one. Whatever you do, make sure the system is simple, requires limited input, and tracks advocates. If it doesn’t meet these three requirements then no one will use it and your incentive plan will fail before it even begins.
