The document outlines a framework for an employee incentive plan focused on performance-based bonuses for branch network staff at JTB Bank. It details the criteria for calculating bonuses, including factors like cost of funds, income generation, and individual performance appraisals. The plan emphasizes that bonuses are discretionary and must reflect both branch and individual contributions to the bank's objectives.

1. Mohammad Fheili
Framework for Employee-
Incentive Plan
Branch-Network Staff
Even the best
plan will fail if not
communicated &
implemented
properly
1

2. 2
Mohammad Fheili
“Over 30 years of Experience in Banking. Contact Details:
mifheili@gmail.com (961) 3 337175
 Mohammad has successfully delivered over 1,500
hours of training to professional bankers.
 He served as an Economist at ABL, and Senior
Manager at BankMed and Fransabank: and he
currently serves in the capacity of an Executive (AGM)
at JTB Bank in Lebanon.
 In addition, He worked as an Advisor to the Union of
Arab Banks.
 Mohammad also served as Basel II Project
Implementation Advisor to CAB and HBTF Banks in
Jordan.
 Mohammad received his college education
(undergraduate & graduate) at Louisiana State
University (LSU), and has been teaching Economics
and Finance for over 25 continuous years at reputable
universities in the USA (LSU) and Lebanon (LAU).
 Finally, Mohammad published over 25 articles, of
those many are in refereed Journals (e.g., Journal of
Money Laundering & Control; Journal of Operational
Risk; Journal of Law & Economics; etc.) and
Bulletins.”

3. What Bonus Is, and Is Not!
 The payment of a Bonus for a given year must not be
considered a precedent whereby employees can expect
the same every year.
 Bonus payment must be strictly performance-based.
 Bonus is paid at the discretion of the management of
JTB, and if and only if the performance of a staff exceeds
expectations (. . . as formulated during the assignment of
objectives).
 Bonus payment is a function of the performance of the
respective branch and that of the individual staff.
Mohammad Fheili
3

4. Performance is Multi-
Dimensional!
A number of factors are carefully taken into
consideration in evaluating the performance of a single
branch:
 The branch’s ability to manage (i.e., reduce) the cost of
fund.
 The branch’s ability to generate income from both
interest and fees, charges and commissions.
 The branch management’s ability to develop the
business of the branch, and help it grow sustainably.
 The branch management’s ability to utilize the resources
at its disposal efficiently and effectively.
 Each Staff’s ability to market Bank’s products and
services to existing and new clients.
Mohammad Fheili
4

5. Bonus Calculation, Allocation
and Payment
• Calculation of Bonus for each branch must be based
on a “Business [Performance] Plan”.
Management must be able to build up reasonable expectations
about branch performance so ‘actual’ performance is measured
against ‘expected’ over the relevant time frame.
• Allocation of Bonus to each member of the branch
staff must be based on the function that each individual
occupies during the period under consideration, and how
such a function contributes to the bottom line.
• Payment of Bonus to each member of the branch staff
depends on the outcome of the Performance Appraisal
Review (PAR) system for the period under consideration.
Performance review is the sole property of the immediate
Supervising Officer.
Mohammad Fheili
5

6. Bonus Calculation, Allocation
and Payment
CALCULATION of
Bonus for each Branch
ALLOCATION of Bonus to All
functions in the Branch
PAYMENT of Bonus to
Deserving staff
Based on Business
Generation
_Reduction in Cost
of Fund
_Volume in Interest-
based Products
_Volume in non-
interest Based
services
_Work Environment in
the Branch
Based on each function’s
Contribution to business
Development in the
Branch
_Branch Manager
_Deputy BM
_Head of Commercial Unit
_CSR
_Teller
_Head of Operation
_Clearing
_Office Boy
_Etc.
Based on each staff’s
Performance Appraisal
Review System
_“A” Performers
_“B” Performers
_“C” Performers
_”D” and “E” do not
receive any bonus
irrespective of how the
branch performs
PILLAR 1: Reflects the
Bank’s Strategy, and Key
Performance Areas
PILLAR 2: Reflects the
contribution of every function
to the branch’s Bottom Line
PILLAR 3: Reflects the
performance of every staff in the
Branch
(From the Job Description
if any)
Mohammad Fheili
6

7. iBr CoF iBank CoF=
iBr CoF iBank CoF<
iBr CoF iBank CoF>
The branch in this case receives a penalty that is
based on the product between the differential in the
cost of fund and the volume of newly acquired deposit
fund.
The branch in this case receives a reward that is based
on the product between the differential in the cost of
fund and the volume of newly acquired deposit fund.
The branch in this case does not earn bonus that is
based on this criteria.
Illustration: Cost of Fund – CoF /
Br=Branch
Mohammad Fheili
7

8. Calculation
. . . of Branch Bonus
Mohammad Fheili
8

9. CALCULATION of Bonus for
each Branch
Very Important: The General Management must decide about a “PROFIT
THRESHOLD”
PERFORMANCE
ITEM
KEY
INDICATORS
WEIGHT
Reduction in Cost of
Fund (or Profitability)
The Branch’s cost of fund relative to that of
the Bank.α1%
Fees, Commissions, and
Charges from services
Plastic Cards; Domiciliation, …; Etc.α4%
Interest-Income Based
Products
Loan Facilities (Corporate, Commercial,
Consumer); Etc. (If deemed as an objective – or KPI)α3%
Net New Deposit Funds
Brought by branch staff
Current Account, Time Deposits, etc.α2%
Branch’s Work Work
Environment
Service Quality; Complaints; turnover; etc. HRD
Is able to rate all branches using this KPI.α5%
The actual weights assigned to each Key Performance Indicator “The Alpha”
parameters must reflect the strategic emphasis of the Bank: if Retail Banking
is stressed, α4 will carry relatively the highest weight.
Mohammad Fheili
9

10. CALCULATION of Bonus for
each Branch
PERFORMANCE
ITEM
KEY
INDICATORS
WEIGHT
Reduction in Cost of
Fund (or Profitability)
The Branch’s cost of fund to that of
the Bank.α1%
We Compare the branch’s cost of fund for deposits (New and Renewed during the
Period under consideration), and compare it to that of The Bank.
__If the branch’s cost of fund is lower, multiply the “Spread” by the volume of newly
Acquired fund for the period under consideration; and multiply by α1%. This amount
Is added to the calculation of the Branch’s Bonus for the period under consideration.
__If the Branch’s cost of fund is higher, we multiply the Un-favorable spread by the
volume of newly acquired deposits; and multiply by α1%. This amount will be a
“Penalty” in the calculation of The Branch Bonus amount.
Mohammad Fheili
10

11. CALCULATION of Bonus for
each Branch
PERFORMANCE
ITEM
KEY
INDICATORS
WEIGHT
__The End-of-Period volume of newly acquired deposits LESS Average balance of
These deposits for the period under consideration is multiplied by α2% to calculate
this component of the Branch Bonus. If the difference is negative, the branch earns
No Bonus from this parameter (To capture “bad” intentions)
__The weights assigned to Deposit Funds (and to its sub-components)
is a function of the “need for liquidity” for the Bank (Strategic Decision)
__Newly offered liability products must be handled on an exceptional basis. Bonus
must be paid directly (every month until sales is stable), and it must be earmarked for
the sale/marketing of this specific “new” product/service.
Net New Deposit Funds
Brought by Branch Staff
Current Account, Time Deposits, etc.α2%
Current Accounts_ _%
Pass-Book Saving Accounts_ _%
Time Deposits_ _%
Other Liability Products_ _%
Deposit Renewal_ _%
Introduce more Details
into the calculation of
Branch Bonus
Mohammad Fheili
11

12. CALCULATION of Bonus for
each Branch
PERFORMANCE
ITEM
KEY
INDICATORS
WEIGHT
__The volume of newly generated loans
is as important to the overall business in
The Branch as the quality of these
assets.
__Only loans generated by Branch Staff
are considered in the calculation of the
Bonus.
__Volume of New Loans generated by
Branch Staff multiplied by (α3% Less
percent Default and Delinquent) for the
period under consideration.
Interest-Income Based
Products
Loan Facilities (Corporate, Commercial,
Consumer); Etc. If deemed as a Branch Objectiveα3%
Corporate Loans_ _%
Overdrafts_ _%
Car Loans_ _%
Housing Loans_ _%
Bridge Loan_ _%
_ _%
_ _%
Quality of Assets (% Bad
Loan and/or Delinquent)
_ _%
Mohammad Fheili
12

13. CALCULATION of Bonus for
each Branch
PERFORMANCE
ITEM
KEY
INDICATORS
WEIGHT
Fees, Commissions, and
Charges from services
Bancassurance products; Plastic Cards; Call
Center; Etc.α4%
Insurance Products_ _%
Domiciliation_ _%
Safe Box_ _%
Car Inspection Fees_ _%
_ _%
_ _%
_ _%
Quality of Product (% of
Cancellation, etc.)
_ _%
__The volume of newly generated fees,
commissions and charges is as important
to overall business in the Branch as the
quality of these products (e.g., no repeat
business, . . . )
__Volume of New products/services sold
by Branch Staff multiplied by (α4% Less
percent canceled) for the period under
consideration.
Mohammad Fheili
13

14. CALCULATION of Bonus for
each Branch
PERFORMANCE
ITEM
KEY
INDICATORS
WEIGHT
Branch’s Work
Environment
Look for employee complaints; turnover; etc.
The HR Is able to rate all branches using this KPIα5%
__To be able to carefully observe and
monitor this performance indicator, we
need to look at:
Number of customer complaints at the
branch
Number and intensity of reported
behavioral incidents (between branch staff)
attributed to the work environment in the
branch
Discipline, leadership, teamwork must be
assessed and the outcome used in judging
the HR Environment of the Branch.
Service Qualityβo%
Work Environmentβ1%
Employee Satisfactionβ2%
Mohammad Fheili
14

15. Allocation
. . . of bonus to each function in the branch
Mohammad Fheili
15

16. ALLOCATION of Bonus to all
Functions in the Branch
Very Important: There is a number of distinct functions in each branch, but they
vary between one branch and the next.
KEY BRANCH
FUNCTION
Bonus is allocated to each staff member
Based on the following.
WEIGHT
Branch Manager
1__The amount of Bonus calculated for the
branch is multiplied by the assigned weight
for each function.
2__The amount is then divided by the
number of staff occupying this function
For the period under consideration.
3__Other functions may be considered (e.g.,
secretary, Security, etc.)
λo%
Head of LC-LG; Billsλ5%
Head of Commercial Unitλ2%
Customer Service; Retailλ3%
Customer Service; Corp.λ4%
Head of Operations Unitλ6%
SWIFT Operatorλ8%
Clearingλ9%
Back-Office Supportλ10%
Office Boyλ11%
Deputy Branch Managerλ1%
Tellerλ7%
Mohammad Fheili
16

17. Payment
. . . of bonus to each individual staff
Mohammad Fheili
17

18. PAYMENT of Bonus to Each
Deserving Staff of the Branch
Very Important: Whether the individual employee gets a bonus or not depends
on the outcome of his/her performance appraisal (PAR) for the period under
consideration.
INDIVIDUAL
P.A.R.
Bonus is paid to each staff member
Based on the following.
WEIGHT
“A” Performers __We multiply the amount allocated for
Each function-holder by the weight
According to his/her PAR.
__The amount of Bonus earned by the
branch, but was not distributed will be
retained by the Bank.
100%
“C” Performers50%
“D” and “E” Performers0%
“B” Performers75%
P. A. R. = Performance Appraisal Review (or Rating)
Mohammad Fheili
18

19. Summary
Employee-Incentive Plan
Mohammad Fheili
19

20. BRANCH BONUS with suggested
weights
CALCULATION of
Bonus for each Branch
ALLOCATION of Bonus to All
functions in the Branch
PAYMENT of Bonus to
Deserving staff
PERFORMANCE
ITEM
WEIGHT
Reduction in Cost of
Fund
(or Profitability)
15%
Fees, Commissions,
Charges
25%
Interest-Income
Based Products
25%
Net New Deposit
Brought by branch
staff
25%
Branch’s Work
Environment
10%
KEY BRANCH
FUNCTION
WEIGHT
Branch Manager20%
Head of LC-LG; Bills5%
Head of Commercial Unit10%
Customer Service; Retail12%
Customer Service; Corp.12%
Head of Operations Unit9%
SWIFT Operator3%
Clearing3%
Back-Office Support3%
Office Boy1%
Deputy Branch Manager15%
Teller7%
INDIVIDUAL
P. A. R.
WEIGHT
“A” Performers100%
“C” Performers50%
“D” and “E”
Performers
0%
“B” Performers75%
Amounts In Dollars Weights in % Weights in %
BONUS PER
BRANCH STAFF =
Amount
Calculated X
Weight Allocated
To Function held
By the Staff
Weight Allocated
To Staff based on
His/her PAR
X
1
1
2
2
3
3
Mohammad Fheili
20

21. Thank You
Mohammad Fheili
21