Life without bonus at a bank?!

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Information about Life without bonus at a bank?!

Published on March 16, 2016

Author: HRTechWorld


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:

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