Abstract: At First National Bank & Trust, Ft. Walton Beach, Fla., there's no doubt that its three-year-old incentive compensation plan pays dividends. We're definitely seeing greater productivity throughout the organization since our plan went fully into effect, says J. Larry Beasley, executive vice-president and chief financial officer of the $165 million-assets bank. Officers work much more efficiently when they know the performance of their department is directly translatable into cash in their pockets. And because we make payments quarterly, participants [officers and department heads] are constantly aware of the value of being as effective as possible. Despite complexities bordering on the Byzantine, the bank and its five branches-situated far enough west in Florida to be on Central Time-has split its operations into 47 different units. Some of these are departments, some branches, some individuals, according to Beasley. But, he emphasizes, or savings within each sector are not judged in vacuum. The percentage of improvement is matched against quality customer service rating, based largely upon customer feedback. Clearly, we can't have our employees running roughshod over customers in pursuit of greater profits, says Beasley. Therefore, the highest percentage of profit sharing goes to groups with quality service rating of 97% or higher. Eighty percent is the minimum quality rating at which we will share profits. Below that amount, no matter how far above the 10% minimum ROE group soars, we would not make profit sharing payments. Sectors explained. Beasley explains that the 47 sectors cover every aspect of the bank's operations. Almost all are grouped in three categories: (1) profit centers-judged by whether they can produce net profits greater than those of the prior year; (2) cost centers-judged on their ability to provide high quality bank services at reduced costs; and (3) support groups-graded by the efficiency with which they operate, as measured by overall bank ROE. The profit centers include each of the five branches; six commercial officers (each one center); the automated teller machine operation; and departments overseeing commercial banking, dealer paper, mortgage originations, private banking, credit cards, bank investments, and mortgage servicing. Cost centers include deposit, bank and loan accounting; loan servicing; data processing; other real estate owned'. and litigation. Support groups include consumer and commercial collection; credit analysis; bank administration; financial reporting; management information systems; property management; the executive department; auditing; security; purchasing; human resources; and marketing. Assets up, employees down. To ensure fair plan, the bank had to create more than 6,000 new general ledger accounts to track individual and departmental performance. However, Beasley is convinced that the effort was worthwhile because the bank has grown from assets of $136 million and 150 employees in 1986 to assets of $165 million and 118 employees at present. Beasley says that while other factors have contributed to the reduction in the employee roster, a lot of the credit must go to the new cash profit sharing plan. Furthermore, he emphasizes, we've not had to hire an officer from outside the bank for the past four years. The profit sharing plan is just part of First National's compensation program, accounting for more than $300,000 in payments last year. According to Beasley, out of total of $3.3 million paid in salaries and incentives in 1989, salaries accounted for $2,547,610. Another $500,000 consisted of payments to the bank's 401k contributory and non-contributory plans and other employee benefits. How it works. To calculate the profit sharing amount for profit center department, says Beasley, the bank starts with the year-to-year increase (if any) in gross income of the center. …
Publication Year: 1990
Publication Date: 1990-05-01
Language: en
Type: article
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Cited By Count: 1
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