Designing Staff Incentive Schemes to Balance Social and Financial Goals

Publication Date: Sep 2006
Published by: MicroFinance Network (MFN) & CGAP
Document Type: Paper

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Role of effective staff incentive systems in helping organizations balance social and financial goals.

This paper finds that well-designed staff incentive schemes (SIS) can indirectly support the overall organizational mission. It explores the role of SIS in balancing social and financial goals of an MFI. The paper states that:

• Most SIS aim to meet the two goals of financial performance and outreach;
• While it is easy to design incentives that focus on productivity and the achievement of financial goals, it is difficult to provide staff with incentives to achieve social goals as well as monitor the achievement of social goals in the short term;
• Incentives can be designed to achieve productivity without detracting from social goals in the short term and reward social achievements in the long-term.

The paper examines the SIS of four institutions – BRAC (Bangladesh), BancoSol (Bolivia), PRIZMA (Bosnia and Herzegovina) and Equity Bank (Kenya) to identify best practices. It concludes that if MFIs can agree on the measurement of a small number of social impact indicators, they could be included in the overall corporate performance scorecard.