MicroLoan Foundation: Creating balanced staff incentives Daniella Hawkins, Social Performance Manager

INTRODUCTION TO MICROLOAN FOUNDATION Mission is to work with the poorest women and enable them and their families to move out of poverty Operational in Malawi since 2002 and in Zambia since 2009 Malawi: 29,000 clients; 96 staff (of whom 71 branch staff) Zambia: 5,000 clients; 30 staff (of whom 21 branch staff)

Challenges Organisational challenge: changing the mind-set from being financially focused Incentives challenges: Subjective Did not capture social elements Lack of organisational awareness of possible negative client impacts Poor staff motivation and lack of understanding

Previous Indicators Indicators not clearly defined Large number of indicators Annual bonus

Solutions ChallengesSolutions Subjective Formalised Key Performance Indicators (KPIs) Did not capture social elements Integrated new social KPIs Lack of organisational awareness of negative client impacts Carried out risk mitigation research Lack of staff motivation and understanding Carried out initial regional staff workshops and KPI roadshows training staff branch by branch Changed evaluations and bonus payments from annual to quarterly

Formalised KPIs

Quantitative and qualitative KPIs

Integrated new social KPIs New social category Loan OfficersBranch MangersRegional Managers Poverty data Quality of PPI data collected Completion of quality control checks Quality of PPI data collected Completion of quality control checks Client training Quality of client training delivery Client training delivery compliance Completion of quality control checks

Risk mitigation research Formalised existing focus group discussion, business assessment and exit interview questionnaires Created database linking quantitative elements from questionnaires to risk factors (e.g. client over-indebtedness, negative coping mechanisms, harsh collections practices, etc) ‘red flags’ calculated based on organisational financial benchmarks (staff targets)

Staff motivation and understanding Initial staff workshops: to ensure understanding of the social mission KPI roadshows: individual staff attention to ensure understanding of the changes to KPIs Quarterly bonus payments: after consultation with staff; to ensure motivation remained consistent throughout the year

Results Improved organisational understanding of the link between tough financial targets and potential negative impacts on clients Improved financial sustainability Improved productivity Improved PPI quality checks compliance Improved client training compliance and quality checks compliance Improved acceptance by staff of the link between performance and reward

Lessons for others Support from Senior Management Understanding what and how to measure non-financial activities MIS to administer financial and non- financial data Capable HR department: actively input into KPI design, pilot and full implementation Solid communication between departments, particularly HR and Operations

Costs Preparation: $5,000-$10,000 (depending on no. of workshops) Senior Management meetings Sensitisation workshops for all staff KPI redevelopment: $12,000 Senior Management meetings KPI development team meetings Developing bespoke KPI database Training HR staff in KPI database Developing staff training materials Ongoing activities: $31,500 (annually) of which $20,000 bonus payments for all staff KPI roadshows (annually in the first 2-3 years of implementation) HR assistant entering data into KPI database on monthly basis; communicating results to branches quarterly HR manager overseeing the KPI database and communication to branches Social Performance Manager overseeing the process, trouble-shooting, facilitating updates to the KPI database etc Bonus payments as relevant (20% of annual salary)

THANK YOU!