Using Incentives to Improve Performance
Commercial Lenders at Union National Bank, Little Rock, Arkansas

by Bill Abernathy, Ph.D.

Commercial lenders were paid a percentage of the profitability of their loan portfolios. Profitability was adjusted for each loan’s risk rating, related accounts, and past due status. The officers found the formulas used to compute loan profitability too complicated so the plan initially produced only modest improvements. We then designed a computer program that allowed the officer to enter the parameters of a potential deal before the deal was made. The computer would calculate the incentive value of the deal. The officer could then “what-if” various parameters to arrive at the version of the deal that would give him the most incentive pay. With the introduction of this program, loan officer performance increased substantially.

Dr. Abernathy is founder and CEO of Abernathy and Associates Learn more about Abernathy and Associates at http://www.abernathyassociates.com/