The performance of the bank branch manager is often difficult tomeasure. Evaluation can include such variables as loan quality,deposit growth, employee turnover, complaint levels, or auditresults. However, many other factors that influence performance,such as the rate structure, changes in the market area served bythe branch, and loan policy as set by senior management, are beyondthe branch manager’s control. The appraisal system presently usedby First Trust Bank is based on points. Points are factored in formanager’s potential productivity and for the actual quality andquantity of work. In this system, the vast majority of raises arebetween 4 and 10 percent of base salary.
Sales growth is a major responsibility of a branch manager.Although many salespeople are paid a salary plus bonuses andcommissions, no commissions are paid on business brought in by abranch manager. therefore, one problem for the bank has beenadequately rewarding those branch managers who excel at sales.
In May 1999, First Trust Bank opened a new branch in NorthsideParkway, located in a high-income area. Three computing banks hadbeen in neighborhood for same 15 years. Jim Bryan, who had grown upin Northside Parkway area, was selected as branch manager. Inaddition to Jim, the branch was staffed with five qualified people.Senior executives of the bank had disagreed about the feasibilityof opening this branch. However, it was Jim’s responsibility to getthe bank a share of the market, which at that time consisted ofapproximately $28 million in deposit.
After one year of operation, this branch had the fastest growthof any ever opened by First Trust Bank. In 12 months, deposits grewto$6 million, commercial loans to $1 million, and installment loansto $0.5 million. As measured by Federal Reserve reports, the newbranch captured 50 percent of the market growth in deposits overthe 12 months. The customer service provided was extremely good,and branch goals for profit were reached ahead of schedule. Awareof the business, Jim looked forward to his next raise.
The raise amounted to 10 percent of his salary. His boss said hewould like to have given Jim more, but the system wouldn’t allowit.
1 Should Jim have been satisfied with his raise sincethis was the maximum raise the system allowed?
2 Do you think the bank currently offers adequate salesincentives to its branch managers ? If not, what would yourecommend ?
