ABA Banking Journal - June 2008 - (Page 18)
Community Banking Pass the Aspirin: When is a bank large enough to warrant its own training function? p. 24 CONCLUSION OF A TWO-PART ABA BANKING JOURNAL ROUNDTABLE “What? No annual surprise bonus?” Facing tighter times, community bankers debate who should get the bank’s incentive bucks—and why eorge Marx found that he’d inherited a questionable compensation policy when he became CEO of his bank. About 12 years ago, he says, the bank had a really good year. “So our board saw fit to give everybody a bonus,” for that excellent performance, says Marx, who has been with Hazlehurst, Miss.’s Copiah Bank, N.A., for more than 30 years. But what started out as an unusual payment to mark great results, became something that celebrated getting to the end of another year. “It got to be where everybody expected it every year, regardless of performance,” says Marx. The banker decided that it was time for reality to settle back in. And so, when he became CEO eight years ago, he put a stop to the institutionalized bonus payments. He wanted bonuses to go to the real producers, those who truly made a difference, who really went above and beyond. “I’m a firm believer in the 80%-20% rule,” says Marx. “I think 20% of our folks account for 80% of our profits, and I just don’t believe in giving the underperformers a bonus.” So Marx took control. “I have a discretionary account that I G By Steve Cocheo, executive editor call ‘performance pay’,” says Marx. “I take $20,000 to $30,000 a year, and divvy it out to either officers or key employees who have been recommended to me by their supervisors for doing an extraordinary job. Nobody knows how the final decisions are made except myself. And it’s worked really well.” This is what Marx does for the true stars, the people who go above and beyond. He spoke about this discretionary program during a roundtable about human resources issues in which eight members of the ABA America’s Community Bankers Council met with ABA Banking Journal. (Part I, concerning the challenges of the multigenerational office, appeared in the May 2008 issue. The previous instalment can be viewed on www.ababj.com by clicking on “Digital Magazine” in the home-page toolbar. Once there, click on “Archives,” in the new page’s toolbar, to get to the May issue, if that issue does not appear.) Marx says the bank has long been a big believer in profit-sharing plans, and annually pays out 5% or 6% of after-tax earnings to all employees. One year the bank even sold a bond to pay for profit-sharing. Copiah Bank’s board has also distributed shares in the company to a handful of bank officers hired in the last few years. “That was the only way that we could get them to come aboard,” says Marx. “It was a way to give them an incentive pay program, through ownership.” Mixed views on performance pay The idea of paying people in a way to improve performance by giving them a stake of some kind has been around for decades in banking. In some parts of the financial services business, right now, incentive pay has a black mark against it. Many, for example, Subscribe at www.ababj.com 18 JUNE 2008/ABA BANKING JOURNAL
Table of Contents for the Digital Edition of ABA Banking Journal - June 2008
ABA Banking Journal - June 2008
Do Fee-based Services Have an Edge?
Snapshot: Net Interest Margins Vary Sharply with Size
100th Anniversary: Then & Now
ABA Chairman’s Position
"What? No Annual Surprise Bonus?"
Pass the Aspirin
Cover Story: Top Community Banks: How They Did...
...And How They Did It
First East Side Savings Bank
Mackinac Financial Corp.
The Peoples Bank
Managing the E-mail Monster
Handling PEPs in the Age of "L'affaire Spitzer"
To Advertise/Index of Advertisers
ABA Banking Journal - June 2008