Where's My Bonus?
The bank with no sales campaigns or product targets
The prevalence of bonus cultures and performance incentive schemes across companies is already well documented. Although, what about companies that make a strategic choice to not operate in this way?
I’m not referring to your average company that don’t offer bonuses because of financial reasons. This would include the case of companies that would like to pay their staff bonuses but can’t afford to, and also those that could afford it but decide not to pay bonuses because they want to keep staff costs down.
Why I think this topic is interesting to look at more closely is because:
Bonus payments are common within the private sector and for-profit companies
A positive relationship between pay and performance is widely accepted
It’s not just about what is delivered for customers, but also how
Let’s dive deeper into the details on bonus payments and try to figure out how all of this relates to customer outcomes.
Objectives and target-setting
A bonus incentive scheme should work well in environments where performance can be clearly measured against set targets, such as Sales.
In Customer Value Management (also known as CVM), we operate in a post-sales environment with existing customers, which I’ve previously described as a mix of art and science.
There is both a quantitative and logic-driven side to this (e.g. Finance & Analytics), and also a qualitative and emotion-driven side (e.g. Marketing, Customer Service).
A further dimension to consider would be time horizon. Think of this as your short-term, medium-term and long-term Strategy & Planning.
It would be fairly easy to come up with Key Performance Indicators (KPIs) and targets across the above activities, customer lifecycles or for an overall customer portfolio.
Although, another complexity is that there is sometimes a measurement problem across some activities in customer-focussed fields (e.g. Relationship Management).
To drive customer value and achieve a transformational impact, we need to work across a broad spectrum of activities in parallel as alluded to above.
I won’t go deeper on this for now and try to solutionize, but will instead leave this open with a question for you to consider with regards to the bonus pay question:
Are objectives & targets (to which bonus pay is linked) customer or company-focussed, clearly measured and over which time horizon?
Whilst there is relationship between customer and company outcomes — the customer will create most value for you at the point where he thinks you’re creating most value for him (quote from Don Peppers) — this doesn’t necessarily work the other way around.
A bank that takes a customer-first approach
Founded in 1871, Svenska Handelsbanken is a leading Nordic bank and describes itself as one of the world’s strongest banks with its roots in local communities and trusting relationships.
What is different about the way they operate is that the company does not have:
❌ Sales targets
❌ Sales campaigns
❌ Product targets
❌ Short-term annual bonuses
Instead, employees at Handelsbanken participate in a long-term profit-sharing scheme and benefit from sustainable growth in the bank.
The thinking behind this strategy is that it is freeing them to always put customer needs first, do what is right for the customer every time and take a long-term approach.
As per Handelsbanken’s 2024 annual report, they also got the results to show for it:
Operating profit of SEK 35,016 million (full-year result for 2024).
Highest customer satisfaction rating for private customers in the banking sector in a survey carried out by the Swedish Quality Index (SKI), achieving a score of 69.9 compared to other banks which were in the 66.8-68.5 range
Closing thoughts
What we do for customers is important, but even more so how we go about doing things. On the pay & reward question, this is important because we need to consider the following:
→ Objectives and motivations drives behaviours
→ Behaviours drive actions
→ Actions drive results
… but what type of results? Are they customer-focussed or company-focussed?
I started this post by talking about bonus cultures, and I will conclude this post by talking about cultures. Perhaps a ‘no-bonus culture’ is a force to reckon with for driving positive customer outcomes?
Note, this is not the same thing as giving management a green light to start paying people less, while kicking the can down the road.
A critical factor must be to ensure a strong company culture and bring onboard staff who have additional non-financial motivations and who are committed to the company mission and care deeply about customers.
Do let me know your thoughts and where you stand on this! I’d love to hear your take.
What do you think of Handelsbanken’s approach?
Is this a model that other customer-centric companies could learn from?
Until next time,
Jens