life without bonus at a bank?!
TRANSCRIPT
Life without Bonus at a Bank?!?
Tamás HettingerHead of Compensation and Benefits
Banking Group with Co-operative Banking Roots
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8 Regional Raiffeisen Banks and other shareholders
473 Raiffeisen Banks
Raiffeisen ZentralbankÖsterreich AG
1.7 mn members (mainly private individuals)
Note: Data as of Q3 2015
15 (home) markets in CEEworldwide in over 30 countries
~2,800 business outlets~52,700 employees
Strategy Adaptation:A More Focused Universal Bank
A More Focused Universal Bank
Less complexReduced risk
profile Higher capital
buffer
Building on core competencies& =
33
GrowthConsolidatio
n&
Efficiency
To…No variable pay at all?!?
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Adaptation of Compensation Structure
From… ~26.000 employees with annual bonus~26.000 employees with monthly or quarterly incentives
Objectives for changing the compensation structure… Reflecting better the moderate risk appetite of the bank Stressing stability and supporting retention and
motivation Emphasizing group thinking and team work Simple system with flat costs
+ React on increased regulatory pressure on variable compensation
Lots of questions came on the way…- What keeps our people going? Where can intrinsic motivation work?- Can we retain our top performers without bonus?- Does our performance management approach still make sense?- What do our managers need as support? - How can we overcome silo-thinking?- Can the same approach work in Austria
and e.g. in Russia?
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The journey……
?!?
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Which Generations do we have on board?Head Office Generation Map
B-1 B-2 B-3 B-4 EMP0%
20%
40%
60%
80%
100%
Gen YGen XBaby Boomer
Management Level
% o
f em
ploy
ees
6 7 8 9 10 11 12 13 14 15 16 17 180
100
200
300
400
500
600
Gen YGen XBaby Boomer
Job Grades / Level
Num
ber
of E
mpl
oyee
s (H
ead
Offi
ce)
Admin ManagementProfessionals
What makes our people stay or leave?
Which factors have the strongest correlation with retention? I know what is expected from me at work
At work, I have the opportunity to do what I do best every day I have the materials and equipment I need to do my work right My supervisor cares about me What are major motivation factors for
staying in the organisation? Pride in the organization Affiliation Meaningful work / opportunity to grow Compatible manager
7Source: Gallup study, analyzing employee engagement survey questions; Harvard Business School study
Source: IMD, Kinley and Ben-Hur (2015)
Intrinsic Motivation
Autonomy = sense of being in control / having a
choice Mastery =
sense of being good in my job / challenging tasks
Purpose = Connection with
Task
Intrinsic Motivation:motivation fueled by internal feelings not by any external reward
Where can we build on Intrinsic Motivation?
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Operations & Basic client servicing roles?
Professionals?
Top & Middle Management?
Relationship managers?
Professionals & Middle Management Cancelled variable compensation for the majority Strongly reduced annual bonus remains only for functions
where its amount is really significant according to market practice
Competitiveness maintained through role-based allowances (fixed compensation element, linked to job)
Significant part of the bonus pool linked to overall group performance (33% weight in subsidiaries; 50% weight in head office)
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What did we do?Changes for EmployeesOperations and Basic Client Servicing roles Monthly or quarterly incentives kept Area of application (segments) reviewed
Criteria: standardized processes, no impact on risk-profile e.g. call centers, operations, retail branch staff
No monthly / quarterly incentives in the future in e.g. mid-markets, corporate banking, workout
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What did we do?Reduced Weight of Variable Compensation
Series10
10
20
30
40
50
60
70
80
90
Job Levels
Targ
et V
aria
ble
Pay
(% o
f ba
se s
alar
y)
Illustrative values only
2/3 of head office
employees
Previous target bonus
New target bonus
Series10
10
20
30
40
50
60
70
80
90
Job Levels
Targ
et V
aria
ble
Pay
(% o
f ba
se s
alar
y)
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What did we do?Reduced Weight of Variable Compensation
Illustrative values only
2/3 of head office
employees
Role based allowance (fixed compensation)
Group Executives (~top 200 managers of the group)
Significantly reduced variable compensation
Strict, mid- and long-term oriented step-in criteria
Strong impact of overall group performance
“Top Teams” approach
Deferral schemes (3-5 years) and malus / claw-back processes compliant with regulatory requirements
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What did we do?Top Management = Group Executives
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What´s next?
Focus: Performance Management- PM can breath up!- Concentrating on feedback & development
instead of “justifying bonus”
Leadership Development- Motivation of employees without monetary tools
Fine-tuning of related systems / processes
- Total Reward Approach / Communication- Employee value proposition- External Benchmarking / Recruitment
A Success Story?We are optimistic…
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We managed the group-wide implementation
We are supportingline managers in the change process
And we will see the business impact soon…
Contact:[email protected]