Professional Documents
Culture Documents
Incentive Plan
1 Mohammad Fheili
Mohammad Fheili
“Over 30 years of Experience in Banking. Contact Details:
mifheili@gmail.com (961) 3 337175
Mohammad has successfully delivered over 1,500
hours of training to professional bankers.
He served as an Economist at ABL, and Senior
Manager at BankMed and Fransabank: and he
currently serves in the capacity of an Executive (AGM)
at JTB Bank in Lebanon.
In addition, He worked as an Advisor to the Union of
Arab Banks.
Mohammad also served as Basel II Project
Implementation Advisor to CAB and HBTF Banks in
Jordan.
Mohammad received his college education
(undergraduate & graduate) at Louisiana State
University (LSU), and has been teaching Economics
and Finance for over 25 continuous years at reputable
universities in the USA (LSU) and Lebanon (LAU).
Finally, Mohammad published over 25 articles, of
those many are in refereed Journals (e.g., Journal of
Money Laundering & Control; Journal of Operational
Risk; Journal of Law & Economics; etc.) and
Bulletins.”
2
What Bonus Is, and Is Not!
3 Mohammad Fheili
Performance is Multi-
Dimensional!
A number of factors are carefully taken into
consideration in evaluating the performance of a single
branch:
The branch’s ability to manage (i.e., reduce) the cost of
fund.
The branch’s ability to generate income from both
interest and fees, charges and commissions.
The branch management’s ability to develop the
business of the branch, and help it grow sustainably.
The branch management’s ability to utilize the resources
at its disposal efficiently and effectively.
Each Staff’s ability to market Bank’s products and
services to existing and new clients.
4 Mohammad Fheili
Bonus Calculation, Allocation
and Payment
5 Mohammad Fheili
Bonus Calculation, Allocation
and Payment
PILLAR 1: Reflects the PILLAR 2: Reflects the PILLAR 3: Reflects the
Bank’s Strategy, and Key contribution of every function performance of every staff in the
Performance Areas to the branch’s Bottom Line Branch
iBr CoF > iBank CoF The branch in this case receives a penalty that is
based on the product between the differential in the
cost of fund and the volume of newly acquired deposit
fund.
iBr CoF = iBank CoF The branch in this case does not earn bonus that is
based on this criteria.
iBr CoF < iBank CoF The branch in this case receives a reward that is based
on the product between the differential in the cost of
fund and the volume of newly acquired deposit fund.
7 Mohammad Fheili
Calculation
. . . of Branch Bonus
8 Mohammad Fheili
CALCULATION of Bonus for
each Branch
Very Important: The General Management must decide about a “PROFIT
THRESHOLD”
PERFORMANCE KEY
WEIGHT
ITEM INDICATORS
Reduction in Cost of The Branch’s cost of fund relative to that of
α1% Fund (or Profitability) the Bank.
The actual weights assigned to each Key Performance Indicator “The Alpha”
parameters must reflect the strategic emphasis of the Bank: if Retail Banking
is stressed, α4 will carry relatively the highest weight.
9 Mohammad Fheili
CALCULATION of Bonus for
each Branch
PERFORMANCE KEY
WEIGHT
ITEM INDICATORS
Reduction in Cost of The Branch’s cost of fund to that of
α1% Fund (or Profitability) the Bank.
We Compare the branch’s cost of fund for deposits (New and Renewed during the
Period under consideration), and compare it to that of The Bank.
__If the branch’s cost of fund is lower, multiply the “Spread” by the volume of newly
Acquired fund for the period under consideration; and multiply by α1%. This amount
Is added to the calculation of the Branch’s Bonus for the period under consideration.
__If the Branch’s cost of fund is higher, we multiply the Un-favorable spread by the
volume of newly acquired deposits; and multiply by α1%. This amount will be a
“Penalty” in the calculation of The Branch Bonus amount.
10 Mohammad Fheili
CALCULATION of Bonus for
each Branch
PERFORMANCE KEY
WEIGHT
ITEM INDICATORS
Net New Deposit Funds
α2% Brought by Branch Staff
Current Account, Time Deposits, etc.
_ _% Current Accounts
_ _% Pass-Book Saving Accounts
Introduce more Details
into the calculation of _ _% Time Deposits
Branch Bonus
_ _% Other Liability Products
_ _% Deposit Renewal
11 Mohammad Fheili
CALCULATION of Bonus for
each Branch
PERFORMANCE KEY
WEIGHT
ITEM INDICATORS
Interest-Income Based Loan Facilities (Corporate, Commercial,
α3% Products Consumer); Etc. If deemed as a Branch Objective
_ _% Corporate Loans
__The volume of newly generated loans
is as important to the overall business in _ _% Overdrafts
The Branch as the quality of these _ _% Car Loans
assets.
_ _% Housing Loans
__Only loans generated by Branch Staff _ _% Bridge Loan
are considered in the calculation of the
_ _%
Bonus.
_ _%
__Volume of New Loans generated by Quality of Assets (% Bad
Branch Staff multiplied by (α3% Less _ _%
Loan and/or Delinquent)
percent Default and Delinquent) for the
period under consideration.
12 Mohammad Fheili
CALCULATION of Bonus for
each Branch
PERFORMANCE KEY
WEIGHT
ITEM INDICATORS
Fees, Commissions, and Bancassurance products; Plastic Cards; Call
α4% Charges from services Center; Etc.
_ _% Insurance Products
13 Mohammad Fheili
CALCULATION of Bonus for
each Branch
PERFORMANCE KEY
WEIGHT
ITEM INDICATORS
Branch’s Work Look for employee complaints; turnover; etc.
α5% Environment The HR Is able to rate all branches using this KPI
βo% Service Quality
__To be able to carefully observe and
monitor this performance indicator, we β1% Work Environment
need to look at: β2% Employee Satisfaction
Number of customer complaints at the
branch
Number and intensity of reported
behavioral incidents (between branch staff)
attributed to the work environment in the
branch
Discipline, leadership, teamwork must be
assessed and the outcome used in judging
the HR Environment of the Branch.
14 Mohammad Fheili
Allocation
15 Mohammad Fheili
ALLOCATION of Bonus to all
Functions in the Branch
Very Important: There is a number of distinct functions in each branch, but they
vary between one branch and the next.
16 Mohammad Fheili
Payment
17 Mohammad Fheili
PAYMENT of Bonus to Each
Deserving Staff of the Branch
Very Important: Whether the individual employee gets a bonus or not depends
on the outcome of his/her performance appraisal (PAR) for the period under
consideration.
INDIVIDUAL Bonus is paid to each staff member
WEIGHT
P.A.R. Based on the following.
100% “A” Performers __We multiply the amount allocated for
Each function-holder by the weight
75% “B” Performers According to his/her PAR.
50% “C” Performers __The amount of Bonus earned by the
branch, but was not distributed will be
0% “D” and “E” Performers retained by the Bank.
P. A. R. = Performance Appraisal Review (or Rating)
18 Mohammad Fheili
Summary
Employee-Incentive Plan
19 Mohammad Fheili
BRANCH BONUS with suggested
weights
BONUS PER 1 Amount
Weight Allocated Weight Allocated
BRANCH STAFF = Calculated X To Function held
By the Staff 2 X
To Staff based on
His/her PAR 3
Amounts In Dollars Weights in % Weights in %
CALCULATION of 1 ALLOCATION of Bonus to All PAYMENT of Bonus to
Bonus for each Branch functions in the Branch 2 Deserving staff 3
PERFORMANCE KEY BRANCH INDIVIDUAL
WEIGHT WEIGHT WEIGHT
ITEM FUNCTION P. A. R.
Net New Deposit 10% Head of Commercial Unit 50% “C” Performers
25% Brought by branch
staff 12% Customer Service; Retail “D” and “E”
0%
Performers
Interest-Income 12% Customer Service; Corp.
25%
Based Products 5% Head of LC-LG; Bills
3% Back-Office Support
20 1% Office Boy
Mohammad Fheili
Thank You
21 Mohammad Fheili