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BirdsEye View

Shelby Reno, Director of Marketing for Independent Bank in MI, made an insigtsful comment on my Generation XYM article: "Generational difference is a fascinating topic. As I read the article, I couldnt understand why Gen X was bunched up with Y and M because Gen X defined some interesting shifts in growing up after the Boomers, like being the first generation to deal with divorced parents and working mothers. We were the latchkey kids, not recipients of helicopter parents. We had to learn to take care of ourselves with little to no parental supervision (remember, Boomers is the me generation) in late afternoons through evenings. We did not have a lot of structure, and we werent playing soccer every week on traveling teams. We had much more free play without a lot of toys but a lot more solitude. Your list on the background of the three generations fully describes Gen Y and Mnot Gen Xers. Our homes and schools were not lavishing praise on us. We were not in school when all kids got awards and every grade level held a graduation party starting in Kindergarten. That was a Gen Y invention (back to the heli parents). And Gen Xers are not in entry level jobs anymore; we are management and senior management. Dont forget that we started coming into this world in the late sixties, which means the majority of Gen Xers are in their mid-30s to early 40s." As I look back upon my own kids, she is SO right!

Liat, my daughter, 19, said: "I don't know if I necessarily agree with the assumption that people my age like structure and authority... I like it when my bosses are more friendly with me, as opposed to more formal. It's best to be one or the other though, I think.

I personally prefer being given the information on how to get something done, and then just doing it myself. Being micro-managed isn't fun. However, this might be just me :)

I also think that although kids in my generation are confident, not all of us are necessarily arrogant or cocky. When that one guy in BirdsEye wrote that we're all totally arrogant, I really took a bit of offense at that.

Also, one thing I feel nobody is mentioned is how a lot of kids my age are so idealistic. I mean, maybe it's my school, or my friends, but I feel like I know a lot of people who want to work for a cause rather than just for money. "

Jenny Gould's son Jeremy (she is EVP of Retail Banking, First Citizens Bank, SC, he is 27), wrote after reviewing my article: "Please keep in mind, I am answering this as a Gen Y and a psychologist.

I think the person who wrote this does have the right idea, but has completely missed on a few key components:

1. He/she says that kids in XYM are use to parents adoring them, but yet states that we watched our parents work endlessly for their jobs. This is a contradiction. It is a horrible thing to say, but it is more accurate to say that gen YM (maybe a little for X) were spoiled. YM has had the most disposable income as kids compared to previous generation. This is as a results of parents being more career focused. Also, keep in mind in the states, kids were victims of the "No student left behind" campaign. My point in a nut shell, XYM are use to getting things no matter what level of effort they put in. Which leads to my next point. . .

2. Restructuring of rewards is required, but it is important to reserve BIG rewards for BIG accomplishments. Offering fast tracking careers for any Joe Blow will result in problems. Also, constantly rewarding a behavior is not effective. For example: giving someone a 25% incentive every year will not work long term. Giving them a goal every year and rewarding them with a promotion, raise, etc will be more effective. (I wrote a paper on this:) )

3. I have no studies to support this, so this is my own opinion. A lot of the time, people in pervious gens find their job difficult because they are trying to adapt to new ideas and technologies. Gen YM have grown up with this, therefore find this aspect easy to adapt to.

Other then that, I think that person (AB: that's me) has the right idea ".

Gil, 17, is a senior in high school. He elected UCLA as his college, and I'm thrilled, since both Liat (Chicago) and Paul (Indiana) are away from home, and Asi, who was considering California for his Plastic surgery practice, will probably settle in New York. Thank goodness Guy, Monica and Isabella are still in San Francisco!

Arik, 13, placed third in the Western States wrestling championship. Football is next.

Have a great week,

Anat

Article synopsis: We spent too much money on incentive plans not to pay closer attention to them. The article offers best practice elements in building your incentive plans to ensure you get the most value out of your investment.

BUILDING A SUCCESSFUL INCENTIVE PLAN

We spend millions of dollars each year giving our employees and executives incentives for sales, overall performance, efficiencies etc., yet many of the dollars do not bear a strong return on the investment. I've been asked recently to identify the underpinnings of a solid incentive plan. In fact, the topic never gets off the "hot" list. Below are my thoughts regarding the appropriate principles to utilize as you structure your incentives.

Simple

Our incentives are too complex. We refuse to exclude even minor elements and dilute incentives by including too many parameters, each of which stands for a few hundred dollars of incentives and, therefore, is marginalized. We also want to make absolutely sure that no one will get paid inappropriately, so we bind the plan with countless rules. As a result, the plan becomes so complex that folks don't know EXCATLY what they have to do to earn a SPECIFIC amount of money. In such situations, incentives cease to be motivational; they become after-the-fact recognition.

Controllable

Incentives that include components not under the employee's control are not only ineffective in motivating behavior, they are DE-motivating. I know you want your employees to be mindful of all aspects of bank performance, but if they can't control occupancy expense, holding company overhead etc., why saddle them with that item? It seems arbitrary to the employee and typically does not inspire attention and improved performance.

Focused

Many incentive plans have too many elements to them. Management doesn't want to detract attention from too many performance indicators, and, consequently, detracts attention from ALL, since employees do not believe they can succeed on so many fronts. Further, too many items end up with 5-10% of the total incentive dollars at stake, and get marginalized. You'd be better served by focusing on what really matters and allocating meaningful dollars against each of these 3-4 key indicators. It's management's responsibility to figure out what those indicators are. Often, a solid leading indicator can ensure the accomplishment of several lagging indicators, which facilitates both employee engagement and shareholder returns. For example, if you goal the number of "quads" (sales of 4+ products to a single household) sold per banker, you will inevitably get meaningful growth in your debit cards and other simple retail products. Therefore, you don't have to goal debit card sales; the Quad goal will take care of that.

Trackable

All incented employees must be able to check at any moment in time where they are relative to goal and to being "in the money". There is huge moti9vational value in this very knowledge, since employees can then manage their own activities toward achieving the goal and the incentive associated with it.

Stable

Changing incentive plans and goals too often sub-optimizes the sales force. Inconsistent direction takes the wind out of the people's sails, as they run with all their might in one direction, and then cut mid-stride to change directions. Zig-zagging isn't as effective as a straight line. Change is inevitable and necessary, but if it occurs too often, it dilutes the power of incentives and casts doubt upon management's judgment.

Well-funded

Everyone acknowledges that incentives are powerful, but funding them is an eternal challenge. I believe it's better not to pay incentives than to pay puny amounts that won't make a difference in the employee's pocketbook. So, especially in today's world, where do you find the money to adequately fund incentive plans? I recommend a simple formula that has worked for me: out of every $1 that the shareholder makes, take 7 cents and allocate them toward incentives. This way, the shareholders are assured a fair distribution of the profits generated by the employees, as are the employees themselves. Plus, your CFO will be less concerned abuot over-paying.

A rock in many a CFO's shoe, though, is paying multiple times for each sale. In theory, one can squander the entire profit from a sale by paying the teller, banker, commercial banker and possible the cash management rep for the very same referral and sale. Using the formula above eliminates this concern, and also facilitates de-layering of incentive plans, something most of us do routinely.

A few other comments bear mentioning:

• Expect abuses. If you put significant dollars on the table, you'll get abuses. It's inevitable. Don't get disheartened; perform random audits and fire a couple of cheaters (we gently call them "gamers", but I call it cheating). The abuse will never stop, but will be minimized.
• It's easier to raise incentives than to reduce them. So, if in doubt, pay less and keep your powder dry.
• Recognition is often as important as money, if not more. Just because you have a rich incentive plan it doesn't mean that recognition becomes irrelevant. On the contrary, the more you engage your sales forces, the more their craving for recognition grows.