Balanced Incentive for Frontline Staff: A Tool for Financial Institutions

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This tool considers staff incentive system design from one specific viewpoint—ensuring that clients are not harmed due to flawed staff incentives. The tool discusses the importance of balanced incentives, meaning incentives that balance financial performance (e.g., portfolio growth) with strong client protection practices (e.g., respectful treatment of clients). FIs can use this tool to improve their own incentive system for frontline staff.

Many financial institutions (FIs) choose to reward specific staff achievements as a way to encourage desirable outcomes such as portfolio growth and strong customer service. These FIs must make important decisions about which outcomes to incentivize, which indicators to use in staff evaluation, and how to assign weights to each indicator. This tool makes recommendations about how FIs can ensure that adequate client protection practices are taken into account in the design of staff incentive systems. Staff incentives should never unintentionally incentivize the mistreatment of clients by staff. The tool focuses on incentives for frontline staff (loan officers, sales people, etc.), as these staff have the most direct contact with clients and therefore, greater opportunity to harm or protect clients.

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