SPTF Annual Meeting 2015: Day one notes
How Does SPM Help Financial Institutions Address Operational
Challenges?
Successful and sustainable SPM practices are those that allow MFIs to confront pressing
operational challenges such as client exit, staff turnover, and product decisions. This session was
split into two parts, which allowed participants to explore real-life case studies and discuss how
MFIs can SPM to improve their operations and benefit clients.
Case study 3: Responsible HR Practices Address Staff Satisfaction and Retention
This session examined the operational challenges of increasing staff satisfaction and retention.
Microloan Foundation Malawi discussed their methodology for incentivizing staff based on a
clear set of social and financial criteria, and how their method benefits both staff and the
institution. Al Majmoua (Lebanon) will discuss how their Human Resources practices contribute
to high staff satisfaction and retention.
Speakers: Solymar Torres, Human Capital MF; Daniella Hawkins, Microloan
Foundation Malawi; Youssef Fawaz, Al Majmoua—see PowerPoints posted here
MicroLoan Fund Malawi (MLFM)
The challenge was to improve the staff incentive structure. They employed a suite of activities
to address a weak incentive system. After some review, the institution determined that staff
incentive system suffered from four main problems:
1) The indicators were numerous and subjective e.g. “personal attributes” so bonuses
were not seen as tightly connected to performance.
2) There were no social indicators in the incentive system—only financial
3) The senior management did not understand whether the institutional targets they set
might be negatively impacting clients.
4) Staff motivation was low because bonuses were given once a year at the end of the
calendar year, which was during the rainy season and therefore a low time for both
clients and loan officers.
The institution organized a response to address each of these challenges with a goal-oriented
solution. The organization:
1) Created quantitative Key Performance Indicators (KPIs);
2) Added social KPIs to the set of indicators e.g. quality of client poverty data collected and
quality of client training delivered;
3) Carried out a risk assessment to identify potential client risks; and
4) Changed the bonus system to quarterly payments instead of annual.
The current incentive system includes both quantitative aspects (92%) and qualitative aspects
(8%). The quarterly evaluations are quantitative and each counts for 23% of the total, while the
qualitative evaluation is performed once annually at the end of the calendar year. There are cut
off criteria which loan officers must meet to be eligible for a bonus. For those that meet the
eligibility criteria, there are 3 levels of achievement for each criterion—loan officers receive
larger rewards as they reach each new level of achievement.
MLFM is currently piloting ways to further refine their incentive system. For example, to make
the qualitative portion less subjective, they are using checklists during branch visits filled by the
supervisor for each employee. For the quantitative portion, they are piloting monthly bonuses
instead of quarterly ones to see if that helps further motivate staff.
Since staff motivation was an issue, the institution developed several strategies to address this
problem. These included:
 Staff workshops to explain the new incentive system,
 KPI road shows where supervisors met individually with each employee to test and
ensure their understanding of the new system, and
 Quarterly bonuses.
Results of implementing these changes included:
 increased productivity (which rose from 370 clients/loan officer to 417),
 increased spot checks of loan officers (up 36%),
 increased spot checks of training (up 300%),
 enhanced perception of a link between performance and reward, and
 increased financial sustainability.
Costs included:
 preparation of materials and training for helping staff understand their KPIs and
incentive scheme ($5,000-10,000, depending on the number of workshops delivered)
 development of KPIs ($12,000)
 ongoing staff costs total $31,500 per year, of which $20,000 is for bonuses.
Recommendations to other MFIs include:
 Obtain buy in from senior management.
 Define what to measure and how the data will be collected, especially for non-financial
services or behaviors.
 Update MIS as needed – best is to have all data in one integrated database.
 Ensure good internal communications especially between those who produce the data
(e.g. Operations), and those who use the data (e.g. HR).
Al Majmoua (Lebanon)
Between 2007 and 2013, the institution experienced 30% growth year on year. This growth
brought challenges, such as a decreasing proportion of women clients, an increase in client drop
out, and a decline in customer service.
To address these challenges, Al Majmoua decided to create a culture of SPM, improve products
and customer service, and to better understand their clients through market segmentation.
Starting in 2012, the institution created a SPM Committee and a Social Dashboard as well as an
SPM action plan to address these issues. The items from the institutional action plan were
integrated into each Department’s action plan. They also updated the Code of Conduct.
The solutions to these challenges were multifaceted. The HR department worked on increasing
the social commitment of staff through updating the recruitment process. Whereas before the
loan officers had simply received 2 days of on the job training in the field, now a classroom
portion of their training was introduced. Additionally the candidates were asked to shadow a
loan officer for two days in the field before applying for the position to ensure that the
candidates understood better the nature of the job. Once hired, the loan officers had a 10-day
training process including 6 days in the classroom and 4 days in the field. In the classroom
portion of the training they spent half a day on the Code of Ethics, half a day on customer
service, and two hours on SPM.
To increase the number of women in staff positions throughout the organization, women
employees were given more flexibility in their work day and the timing of their work so they
could better balance work and family commitments.
To ensure the staff was incentivized to help the organization achieve its social objectives, the
end of the year performance appraisal was revised to include incentives tied to the following
indicators:
 the percent of women clients,
 the number of customer complaints,
 client drop out rate, and
 the percent of clients classified as vulnerable (e.g. in the institution’s target population).
On an operational level several steps were also taken:
 A systematic evaluation was conducted of the causes of client drop out and of the
customer complaints registered through the call center.
 Internal Audit was tasked with following up on customer complaints to ensure timely
and satisfactory resolution.
 Two annual staff retreats were organized to promote better communications.
 Quarterly staff newsletters and board reports discussed SPM and related operational
issues and changes.
Results include:
 a better knowledge of SPM and the institution’s mission among staff,
 increased use of the customer hotline,
 increased customer satisfaction (from 80% to 93%),
 an increase in the proportion of female clients (from 30% to 56%),
 increase in the percent of female staff (now 36% of staff is female), and
 customer service improved.
Lessons learned:
1) Slow growth is better and there needs to be a focus on SPM throughout the process.
2) A strong team of people to conduct staff training is important to the success of these
changes.
3) If the organizational culture is compatible with SPM then the changes are easier to
implement.
4) There needs to be a SPM champion and an interdisciplinary team of people on the SPM
committee.
5) It’s important to add social objectives to the staff incentive structure.
6) Embedding SPM into normal business operations helps keep costs down.
Additional points that emerged during the question and answer period:
MLFM – In 2013 the adjustments to staff incentives were made. The staff retention increased
3% the first year after the changes and 7% in the second year after the changes went into effect.
The staff better understood the system so it was more transparent and more effective.
AM – People do not like change. Initially the customer complaints hotline made the staff feel
defensive. However, management was determined not to give up on the hotline and eventually
staff got used to it.
MLFM – In order to deepen outreach to the poor they had to train staff on the new processes
and unify them behind the social objectives of the organization, which is outreach to the poor.
They aligned the messages in the staff training and the KPIs and the messages from supervisors
and senior management. 9/60 of the bonus for staff is tied to the results of the PPI and this
allowed the organization to deepen its outreach to the poor, which is now 52% of clients under
$1.25/day poverty line (whereas the national average is 55% of the population under this
poverty line). The incentives look at both data accuracy and volume.
AM – Go slowly on making the changes so that people can understand the system and adjust to
the new incentive structure. The started by having 80% fixed and 20% variable and now are up
to 70% fixed and 30% variable in terms of staff compensation.
MLFM – Tools are available to help make these changes cost efficient. They used Freedom From
Hunger’s methodology for training staff. The KPI database was developed in-house. Field staff
spend 1-2 days per month on data collection. The person who answers the customer
complaints hotline also makes phone calls to check on whether the client training was done well
(this is about 1 day per month of her time). If the HR person does not have a background in
microfinance it may be necessary to train them as well so they can better understand how
operations works and how to support them.