NBTC: Getting Sales Incentive Compensation right

NBTC: GETTING SALES INCENTIVE

COMPENSATION RIGHT

Salubi Raymond8/05/2014

Overview• T Mac was ‘repatriated’ by NBTC in

late 2006 to ‘capture the retail banking market within three years’

• In an attempt to make the CBG profitable, he set the DSA model

• The DSA was aimed at increasing revenue by 25% while reducing OPEX by 30%

Overview• CBG Division’s 2008 third quarter business

report reached the head of division T- Mac .

• Year-to-date revenues had reached N20 billion (about US$135 million), narrowly exceeding the 'stretch target' set for the entire year.

• About 75 percent of the division's phenomenal growth was accounted for by the DSA (Direct Sales Agents) model introduced in early 2007.

Strategic ImperativesCost

Increase in profit Margin Quality

bank’s premium brand & customer service Quality

Commitment High performance

Institutional Constraints

Rational ChoicesSince there is no right way to

manage human resources, the focus should be on the best fit and alignment with the Organizational strategy

Rational Choices

Resourcing

125 core sales forceFocused on selling

regular & newly developed products

to existing customers

Base pay of N 160KHad other benefits

Hired on a renewable contract basis tied to

performanceMandated to

aggressively grow the market by selling

to new customers25K base pay+

commissions tied to performance

No other benefits

Core Staffs DSAs

Rational Choices Contingent employees were used

Employment security wasn’t guaranteed

Rational Choices

• Lag the market• Raises were based on performance• Long term tenure wasn’t rewareded• Large differentials between

employees

Compensation

IssuesSpiraling incentive

compensation costs, Increasing attrition

of the DSA team Imprudent and

highly inappropriate practices perpetuated by some DSAs,

Unhealthy rivalry between the core sales team and DSAs,

Poor customer service satisfaction survey ratings

Problem

Misalignment between the incentive system and the objective of the business

The DSA model

Both

Solutionthe challenge here is to fix the ‘broken’ incentive system without breaking the DSA model

Recommendations

• Purpose/Objectives has to shine through loud and clear and be the driver ( Strategy)

• Use motivation and non financial incentives

• Use multiple layers of reward• Increase employee involvement

Conclusion