Branch Incentives and Scorecards

By Steve Reider

At the start of the New Year, many banks unveiled new branch sales incentive programs. Most institutions build their branch incentive systems around scorecards, tracking tools that tally branch sales volumes relative to preset goals.  Scorecard design varies widely, depending on an institution’s target market segments, product and sales philosophy, and the maturity of its sales management process.  Primary areas of differentiation include not only the products that the institution tracks, but also whether the incentive program is based on branch-level or individual sales performance, whether the program applies to all branch staff or platform sales staff only, and whether payout potential is unlimited or capped.  However, several constants apply regardless of how an institution structures its branch incentive program.

The following six principles for branch scorecard design will foster a successful branch incentive system.

1.  Simple.
The scorecard should focus only on those primary sales behaviors that the institution wants to encourage and reward, with no more than six to eight categories in total. Categories may be denominated in units (number of new checking accounts sold) or dollars (amount of new installment loans booked), but the limited number ensures that branch sales personnel emphasize the handful of behaviors that drive the majority of the institution’s success. Do not attempt to replicate a performance review by putting every behavior and task on the scorecard; remember, if you tell the branch that everything is important, you’ve also conveyed that nothing is of paramount importance, outweighing all else.

2. Understandable.
There can be no uncertainty in terms of which products count toward scorecard goals and what values various actions carry. Branch staff should be able to replicate the scorecard results and payout calculations in a simple spreadsheet, or even on the back of a deposit slip. If staff cannot understand the direct link between specific behaviors and specific compensation, they’ll see less value in pursuing the scorecard goals.

3. Attainable.
Scorecard goals must be aggressive and reward only above-normal performance; if a bank offers payouts for simply performing at expectations, all it has achieved is an across-the-board increase in base compensation – with no incremental sales gain to offset that cost. That noted, while goals should aggressively direct branch staff toward increased sales efforts, the goals also must remain reasonably attainable. If goals are perceived as so high as to be completely unattainable, it will discourage all sales activity, since staff will see no difference in compensation between strong and minimal performance.

4. Controllable.
Perhaps the most important principle, the scorecard must reflect only items that remain within the sales staff’s control. This indicates scoring transaction accounts in units rather than dollars, as CSRs can influence how many products are sold but have little ability to influence balances. Further, profitability has no place on a branch scorecard. It is the fundamental responsibility of the product management group to design products with pricing terms that ensure profitability; branch staff can then feel free to sell as many of those products as possible so long as they meet customer needs, secure that those sales will yield benefit for the institution. Note also that branch staff have little to no control over lease payments, utility bills or ATM maintenance expenses, so any measures of branch operating profitability would impose accountability without granting corresponding responsibility, an unfair proposition for the branch staff. Be careful even with controllable expenses; for example, a scorecard that rewards managers for reducing expenses could lead to near term under-staffing that yields long-term service declines. Thus, while a branch manager’s annual review can rightly discuss staffing efficiency, that measure remains inappropriate for a sales scorecard.

5. Stable.
While scorecard categories and weightings can change periodically to reflect specific areas of marketing emphasis, do not routinely change the fundamental parameters of the scorecard. Rather, CSRs should know that each quarter they will be evaluated on a standard set of behaviors and goals that represent the heart of the institution’s sales training programs. Stability in measurement categories reinforces that the institution maintains a core mission for its branch system, to consistently pursue month after month. That noted, the scorecard can still encourage participation in periodic sales promotions, using bonus categories that offer modest incremental benefits beyond the core scoring categories.

6. Timely.
For an incentive system to prove effective, participants must perceive a direct link between the behaviors they execute in the branch and the reward for successful execution of those behaviors. In support of that, consider distributing incentive payments quarterly or even monthly so that participants derive immediate benefit from their outstanding performance. Distributing performance progress reports at more frequent intervals will also abet sales by allowing participants to track progress against sales targets.

By ensuring that branch scorecards adhere to these six principles, institutions will abet a sound, efficient branch incentive program that will prove viable for many years. With the branch still representing the number one avenue for new account openings, institutions should seek to motivate and reward those responsible for the day-to-day operations of the branch, and a scorecard built upon the above principles will provide that motivating force.

Steve Rider is President of Bancography, based in Birmingham, Ala. and provides consulting services, software tools and marketing research to financial institutions.