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Compute KPI Weights...

Precise mathematical formulas are used to determine how much each KPI’s stretch creates in incremental profit. Then, the relationship of each KPI’s contribution to the total improvement in earnings is computed and expressed as a weight. The greater the impact a KPI has on the bottom line, the higher its weight will be.

After all the KPIs have been weighted, the bank can make adjustments based on the the priorities they want to communicate to employees. However, achieving the right balance of weights among the KPIs is actually an exercise in stretching rather than assigning weights. To increase a KPI’s weight, increase its stretch. Conversely, to decrease a KPI’s weight, decrease it’s stretch.

Weighting KPIs based upon their impact on earnings guarantees that rewards will be tied to creation of economic value. Activity-based programs that only reward for referrals, new accounts or transaction volumes cannot make such a claim.