A Toolkit for Designing and Implementing Staff Incentive Schemes

Publication Date: Apr 2005
Published by: MicroSave
Document Type: Toolkit

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Why are staff incentive schemes necessary and how should they be designed?

This toolkit provides step-by-step support in the design and implementation of staff incentive schemes.

It states that staff incentives are designed to motivate staff to achieve high performance levels, change behaviors and attitudes.

It argues that staff incentive schemes:

• Have powerful and positive effects on productivity, efficiency and quality of microfinance institution (MFI) operations;
• Must be transparent enough to allow staff members to understand the mechanics of the calculation;
• Should contain as many objective factors and as few subjective factors as possible;
• Should have goals that are attainable.

The toolkit provides a detailed examination of the following aspects of staff incentive schemes:

• The theoretical background;
• Basic building blocks;
• Principle design questions;
• Incentive schemes for different functional areas in MFIs;
• Steps in the design process. These include:
  • Define the incentive scheme’s objectives;
  • Identify staff members who contribute most to the scheme’s objectives;
  • Select incentive mechanisms;
  • Conduct the technical design work;
  • Analyze costs and benefits;
  • Run a pilot test;
  • Sell the scheme to staff;
  • Monitor and adjust the scheme as necessary.

The toolkit states that the two minimum requirements of staff incentive schemes are:

• Transparency;
• Fairness.

It concludes with a list of common mistakes that designers should avoid while developing the toolkit.