Strengthening Short-Term Incentive Strategy 

Background
  • A diversified and listed investment bank with corporate finance, securities and futures brokerage, asset management and financing businesses has gone through rapid expansion.
  • Due to different stages of development for different businesses, this has led to imbalance on incentive funding and allocation across departments. Rapid expansion has led to huge demand for high quality human capital.

Objectives
  • Provide a clear line of sight on the linkage between compensation and business results
  • Encourage more cooperation among different departments; accommodate difference across businesses within a common compensation framework
  • Improve talent attraction and retention

Process and Key Features
  • Provided market practices on short-term incentive approach and allocation.
  • Optimized annual bonus mechanism by integrating commission and discretionary bonus. This includes:
    • Recommending cash based bonus as incentive tool; adopt a combination of top-down and bottom-up bonus funding approach;
    • Strengthening bonus mechanism for senior management, departments in front office with different development stages and back office:
      • Senior management - Reviewed bonus payout ratios and introduced discretionary payout ranges; 
      • Front Office - Commission based approach for mature departments; target bonus approach for departments that are still in investment mode. Both financial and non-financial KPIs affect final bonus payout for all departments
      • Back Office - Apply target bonus approach with KPI adjustment
    • Strengthened bonus allocation across departments and among employees.
    • Designed deferred bonus plan to prevent excessive risk taking and improve retention.
  • Conducted scenario and cost analyses.

Results
  • The recommendations were approved by the Board and fully implemented.

​Illustration: Market Practice for Incentive Funding 
Illustration: Incentive Funding Recommendations 
Illustration: Bonus Allocation Mechanism 
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