Published on March 16, 2016
1. Life without Bonus at a Bank?!? Tamás Hettinger Head of Compensation and Benefits
2. Banking Group with Co-operative Banking Roots 2 8 Regional Raiffeisen Banks and other shareholders 473 Raiffeisen Banks Raiffeisen Zentralbank Österreich AG 1.7 mn members (mainly private individuals) Note: Data as of Q3 2015 15 (home) markets in CEE worldwide in over 30 countries ~2,800 business outlets ~52,700 employees
3. Strategy Adaptation: A More Focused Universal Bank A More Focused Universal Bank Less complex Reduced risk profile Higher capital buffer Building on core competencies& = 33 Growth Consolidation & Efficiency
4. To… No variable pay at all?!? 4 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
5. 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? 5 The journey……
6. 6 Which Generations do we have on board? Head Office Generation Map 0% 20% 40% 60% 80% 100% B-1 B-2 B-3 B-4 EMP %ofemployees Management Level Gen Y Gen X Baby Boomer 0 100 200 300 400 500 600 6 7 8 9 10 11 12 13 14 15 16 17 18 NumberofEmployees(HeadOffice) Job Grades / Level Gen Y Gen X Baby Boomer Admin ManagementProfessionals
7. 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
8. 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? 8 Operations & Basic client servicing roles? Professionals? Top & Middle Management? Relationship managers?
9. 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) 9 What did we do? Changes for Employees Operations 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
10. 10 What did we do? Reduced Weight of Variable Compensation 0 10 20 30 40 50 60 70 80 90 TargetVariablePay(%ofbasesalary) Job Levels Illustrative values only 2/3 of head office employees Previous target bonus New target bonus
11. 0 10 20 30 40 50 60 70 80 90 TargetVariablePay(%ofbasesalary) Job Levels 11 What did we do? Reduced Weight of Variable Compensation Illustrative values only 2/3 of head office employees Role based allowance (fixed compensation)
12. 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 12 What did we do? Top Management = Group Executives
13. 13 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
14. A Success Story? We are optimistic… 14 We managed the group-wide implementation We are supporting line managers in the change process And we will see the business impact soon… Contact: firstname.lastname@example.org
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