Compiled by: Chhaya Sehgal
The Winning Edge
Challenges in developing an incentive for back office and support
Need for incentive scheme for Back office
In Indian conditions generally in all Industrial sectors, Back office were generally paid a Fixed
Pay which was predictable & less challenging this in turn affected the performance of back
office support staff. Moreover the role of back office staff is being recognized as an essential part
of the operational success of the organization. This makes it important to design an incentive
scheme for back office staff so as to evaluate and reward the performers which includes
monetary rewards as well as non monetary rewards like promotions etc.
Bank’s back office is the backbone of its operations. Mainly in the Retail segment like Vehicle
Loan, Savings/Current Accounts, Consumer durable Loan, back office operations are much more
relevant. Now inquiries for Vehicle loans are increasing because of the fact that more and more
automobile companies are entering the various segments of the vehicle market. Easy finance
made the market bigger and finance companies/banks running for the customers. This has lead to
banks competing with each other to get the market share with ICICI Bank and HDFC Bank
leading the list. New enquiry generation, fast disbursement of loan and Client maintenance are of
utmost importance. Post loan disbursement documents are processed by bank’s back office
department. It is very much important for banks to disburse loan documents at the earliest
otherwise customer may switch over to other banks. So it is very much necessary that along with
the sale field force, back office team should equally be motivated with good performance
incentive scheme.
Challenges in developing Incentive for Back office & Support
Defining SMART (Specific, Measurable, Attainable, Realistic, & Timely) goals and linking the
same with the company’s goals is the challenge.
Back office operation of consumer loans is mainly involved in receiving the documents from
sales office and after scrutinizing the documents sends for disbursement. In this division,
productivity measurement is a tough task as there are no proper standard of measurement. Hence,
incentives are allocated based on Team performance.
The work itself is a major determinant of whether to pay for time or output. The work
characteristics to consider include
(1) Measurability of output;
(2) The relationship between effort and output;
(3) The degree of standardization;
(4) Requirements for quality as well as quantity;
(5) Competitive conditions;
Rationale of Incentive Scheme
Motivation: Incentive schemes which are fully transparent provide not only financial incentive
but also rewards people according to their level of performance.
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Corporate Objectives: It acts as a tool to achieve the organizational objectives
Individual Objectives: Helps in fulfillment of individual needs for growth in their careers.
Six Sigma Concept in calculating TAT and Error



Six Sigma is a measurement tool to evaluate the performance of the departments in terms
of quality standard, Turn around Time.
For Six Sigma Compliance, errors allowed are 3.4 out of 1 million cases processed which
is equivalent to ZERO
Whenever Number of errors is found, the same numbers are extrapolated to the tune of 1
million cases processed and accordingly sigma scores are derived.
Productivity



Actual productivity of the departments is compared with the standard productivity.
Productivity has been calculated based on the productive hours and number of documents
processed
Based on the above, excess or short manpower has also been derived.
Balance Score Card



Balance Score Card is a measurement tool which is based on the scores derived out of
Productivity Calculator, TAT and Error Sigma Score
Learning of the departments in terms of points against the benchmark given by
management
Audit Scores given by Internal Auditors based on their analysis against the bench mark
set.
Tools
Tools are available to calculate Six sigma, TAT & Error, Balance score card (enclosed)
Reservations about Incentive Scheme
Incentives for Back office staff are generally determined on the performance of the department
and not on individual performances. This may lead to non performer getting equal compensation
as compared to that of a performer within the same department. This will lead to dissatisfaction
among the employees.
Case Study - Sav Z Bank
Sav Z Bank has been doing exceedingly well in all the departments and has a Vision of soon
becoming one of the best Private banks in India. Sav Z bank deals in all the sections of retail
banking including the Vehicle Loan. The bank operations have been started in India 3 years back
and the processes are getting set all across the departments.
After the incentives for the year 2006 were paid in Jan 2007 based on fixed predictable incentive
being 8.33% of the basic pay, the employees of the bank were not very happy with the present
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incentive structure. The underperformers and excellent performers got the same rate of incentive.
HR Head of the bank found that because of this the attrition rate was also high. So he thought
about availing the services of a consultant for evaluating and rewarding the performance of the
employees. Genex Consultants who are pioneers in designing incentive structures were
appointed as consultants for setting processes to evaluate the performance of employees. They
were asked to draw an incentive scheme that is challenging and rewarding.
The bank was strong in retail operations which includes
1) Vehicle Loan
2) Consumer goods loan
3) Savings Account
4) Current Account
Each operation is headed by Associate Vice Presidents. Each operation has got various
departments like Vehicle loan has got
Post Disbursal Document (PDD) Updation
Minimal Data Entry
Customer Service
Rebooking
Detailed Data Entry (DDE)
File Boarding
Post Dated Cheque (PDC)Processing
Non post Dated Cheque (NPDC) Processing
File Retrieval
Foreclosure Processing
Refund Processing
Recommendations of Genex
Genex consultants studied the organizational structure and present incentive scheme. They
recommended complete scrapping of the present incentive scheme and recommended four
parameters for evaluating the performance of the employees as well the team/department.
The five parameters are
1) Productivity
2) Turnaround time (TAT)
3) Quality
4) Audit Score
5) Learning
The said parameters will be used to evaluate the performance of the entire work force of the
bank.
Industry standards have been recommended which will be used as a tool for comparing the
actual. The standard are given below for the vehicle loan operations:
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Productive Hours 450 minutes per day
Team
PDD Updation
Minimal Data Entry
Customer Service
Rebooking
Detailed Data Entry
File Boarding
PDC Processing
NPDC Processing
File Retrieval
Foreclosure Processing
Refund Processing
Processing Time per Doc/Request
(Minutes)
4
12
45
6
15
2
5
6
10
25
15
Genex has recommended introducing “Balance Score Card” in the bank for evaluation of
performance. Productivity should not be less than 100% as per the consultant’s recommendations
to the management. For that they created two tools
1) Productivity Measurement
2) TAT (Turn Around Time) and quality in terms of SIGMA value
HR department should receive the actual performance of individual employees from the
department head as well as the report of the internal auditor who has carried out audit in the
department at the end of the year.
The actual will be then compared with the standard by using the above tools and performances
are measured.
Ratings
Rating 3
Employees
Rating criteria
Score between
80% to 90%
Rating 4
Score between
70% to 80%
Rating 5
Score below
70%
Calculations of
Incentives and promotions
Ratings
40% of the employees 65% of basic yearly salary as Bonus
(Good Performers)
and 12% hike in the basic salary (No
Promotions)
30% of the employees
35% of basic yearly salary as Bonus
(OK Performers)
and 10% hike in the basic salary (No
Promotions)
5 % of the employees No Bonus and No Hike in the company
(Poor Performers)
(Will have to leave the company within
a pre specified period.
Rating Concept
Maximum number of employees eligible for each rating are calculated as below:
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Total Strength
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% to be applied
5.00
20.00
40.00
30.00
5.00
Ratings
1
2
3
4
5
Maximum Employees eligible
1
2
4
3
1
For example – Sometimes it may happen that there may not be anyone who will be rated 5 but
based on performance levels, he may move from rating 4 to rating 5 ( because 5% should move
to Rating 5).
Data for the calendar year 2007 is mentioned below; HR DEPT. was provided the same by
the department head for productivity
Department wise actuals for the calendar year 2007
Team
PDD Updation
Minimal Data Entry
Customer Service
Rebooking
Detailed Data Entry
File Boarding
PDC Processing
NPDC Processing
File Retrieval
Foreclosure Processing
Refund Processing
Monthly Volume
**Average Number of employees
Achieved
125000
85000
8000
4500
85000
85000
45000
30000
15000
25800
12000
50
91
25
2
115
15
20
16
15
56
17
1140000
1008000
81000
54000
984000
1020000
468000
360000
180000
309600
144000
** Leave and other absenteeism has been taken care in the average number of employee
calculation
Following are the data for the learning scores earned by respective departments/auditors
Department
PDD
Minimal Data Entry
Customer Service
Rebooking
Detailed Data Entry
File Boarding
PDC Processing
NPDC Processing
File Retrieval
Foreclosure Processing
Refund Processing
Benchmark
1000
1000
1000
1000
1000
1000
1000
1000
1000
1000
1000
Learning Score
1200
900
617
1800
1200
700
900
300
450
1000
1050
Audit Score against 100
85
98
82
97
98
96
92
89
83
95
99
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Compiled by: Chhaya Sehgal
The Winning Edge
The below data was provided showing number of cases processed out of TAT and quality report
for the sample audits done. Any document processed out of TAT to be considered as an error
possibility in performance measurement of Processing. And Error possibilities per document
are 2 in case of PDD and for rest departments it is 1 for the purpose of Quality check. Genex
recommended that TAT and Error measurement for any activity is equally important so this has
to be taken in to consideration while determining the rating for the department.
Total
Population
Measure of Performance
Out of
TAT
Total
Population
Error
Population
PDD Updation
PDD Updated with in TAT
Quality check on PDD
1140000
-
1500
-
138000
264
98400
192
7200
48
5520
12
97584
12
98820
48
45900
12
37440
24
18240
12
Minimal Data Entry
Files Processed with in TAT
Quality Check on files Processed
1008000
216
Customer Service
No of requests Processed with in TAT
Quality of Closure of requests
81000
780
Rebooking
Rebooking of Cases with in TAT
Quality of the rebooking cases
648000
12
Detailed Data Entry
Cases done with in TAT
Quality check of DDET done cases
984000
216
File Boarding
Files Processed with in TAT
Quality check in Files batching and Processing
1020000
1020
PDC Processing
PDC sent for Banking with in TAT
Quality check on PDCs Processed
468000
300
NPDC Processing
NPDC Processing with in TAT
Quality check on NPDCs processed
360000
84
File Retrieval
Files retrieved with in TAT
No of wrong files retrieved
180000
9216
Foreclosure Processing
No of requests processed with in tat
309600
72
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Quality for closure of requests
31020
12
14400
12
Refund Processing
No of requests processed with in tat
Quality for closure of requests
144000
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Sigma scores will be evaluated in a following manner:
Sigma Score
Achievement in %age
5.00-6.00
4.50-4.99
4.00-4.49
3.00-3.99
<3.00
100%
80%
60%
40%
0%
Current Salary structure for Team leaders (employees as mentioned in the case study) of
respective departments are as follows
Employee Name
P.Ashok
Hemalata Vishwanathan
Mahadev Padwal
Priya Paralkar
Rekha Rawat
Sanjay Kumar Pahi
Sanil
Sanjeevan Shinde
Yogesh Dhuri
Sachin S.Wavale
Vinod Shetty
Sav Z Bank Limited.
Current Salary Statement
Designation
Department
Team Leader
PDD Updation.
Team Leader
Minimal Data Entry.
Team Leader
Customer Service.
Team Leader
Re-booking.
Team Leader
Detailed Data Entry.
Team Leader
File Boarding.
Team Leader
PDC Processing.
Team Leader
NPDC Processing.
Team Leader
File Retrieval.
Team Leader
Foreclosure.
Team Leader
Refund Processing.
Basic
10,500.00
9,500.00
9,250.00
9,750.00
10,000.00
9,500.00
9,750.00
9,250.00
10,250.00
10,000.00
10,500.00
108,250.00
Questions : You are required,
1.
2.
3.
4.
5.
To calculate the Productivity , Six score for TAT and error & Balance Score Card
To arrive at the rating based on the above scores?
To calculate the incentive and the increment post PMS process?
For whom promotion will be recommended?
Comment on how the productivity, performance indicators and balance score card are
interlinked to provide a strategic tool for performance measurement and reward
dispensation.
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