Case studies

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Background

The Federal Home Loan Bank Of New York (the Bank) is part of the congressionally chartered, nationwide Federal Home Loan Bank System, created in 1932 to provide a flexible credit source for member financial institutions engaged in home mortgage and neighborhood lending. The Bank operated an annual Incentive Compensation program for all of its Officers.

During the year 2000, the Bank's Incentive Compensation plan included goals related to the Bank's division, department and individual performances. With this complexity, it became apparent that setting up, managing, administering and communicating the new plan and the incentive results would prove to be a difficult task given the tight time constraints required in making incentive payments to participants of this program.

As a result of theses challenges, the Bank's Human Resources division in concert with its IT Division immediately began to search for a cost-effective solution to achieve full-automation of its incentive compensation plan that would result in greater accuracy, speed and efficient administration as well as effectively communicate incentive results to participants of the program.

Challenges

Like most large organizations, the Bank already had an established incentive compensation plan; however, it desired a more efficient method to administer its incentive compensation program. Most of the Bank's challenges took the form of the following:

  • Achieve complete and full automation of its existing incentive compensation plan.
  • Develop an organizational system for tracking and administering the plan without the use of spreadsheets.
  • Achieve a high level of awareness amongst corporate officers as to the key corporate goals, how they are expected to perform in order to achieve them and how increased level of performance will benefit them and the organization.
  • Create comprehensive reports detailing the goals at each level of the organization, financial resources allocated, progress at quarterly intervals, reporting on individual, group, department and corporate levels, etc.

Solution

The H.R. and IT Executives immediately determined that in order to obtain the greatest benefit from their current incentive compensation plan, software automation was a worthwhile endeavor. After a review of TPower, the decision was made to use Themos's software to automate the Bank's incentive plan. The selection was based on the software's ability to create and track goals at all levels of the organization and to create individual scorecard objectives based on customizable, easy to implement system. TPower offered a streamlined data entry method by allowing the plan administrator to enter financial information once instead of multiple times as in the case with spreadsheets. In addition, TPower's capabilities to reduce administrative burden regarding bonus approval and processing and to generate final calculation statements for each individual in an expeditious manner was recognized.

Implementation

Once the decision was made to use TPower, Themos immediately began to work with key personnel to understand the current compensation plan in place and to create a plan of action to achieve the Bank's automation goals. The Bank submitted to Themos all of their compensation plan Excel files for careful analysis. Themos then developed a sample compensation plan using TPower and presented it to the Bank's management for preliminary approval. After the approval process, Themos collected the necessary data and developed the final compensation plan the Bank would use for that fiscal quarter. The plan was then submitted to the Bank's Audit group for final approval. Upon completion of the approval process, copies of individual bonus reports were submitted and explained to all plan participants.

Results

Within the first month of Themos and the Bank's working together there was a noticeable difference with how the compensation plan data was organized and stored. Themos was able to reduce over one hundred MS Excel files to one single database file accessible via TPower. After further review of the compensation plan, it was determined that minor adjustments needed to be made. TPower allowed the Bank's management to experiment with various calculation scenarios without impeding its original structure. This in turn allowed management to determine which calculations would be the most accurate.

Monitoring the progress of goal achievement with the Bank's officers proved to be a valuable feature of TPower because it provided management with more accurate projections of incentive compensation payout. This in turn allowed for proper budgeting and greater focus on key corporate goals.

Achieving full-automation of the Bank's incentive compensation plan was the end result of joint efforts. Instead of estimating incentive compensation payout, the Bank's Officers received a factual statement explaining how their bonus was derived. The Bank's management received comprehensive and accurate projected payout and actual payout reports allowing for flexibility with plan management and approval. Final bonus payout reports were available for review by the Board of Directors within 10 working days of the plan year-end. The payouts were approved and paid out in record time.

Benefits

    The resulting benefits from the implementation of TPower can be summarized as follows:
  • Facilitate the automation of Incentive Compensation administration, progress tracking, Bonus Calculation and Reporting.
  • Provide plan participants with clear focus on their Core Competencies and Bank Objectives
  • Speed up the calculation process of Bonus Payouts
  • Maximize the accuracy of Bonus Payouts
  • Anticipated substantial reduction in administrative burden on the HR Group
  • Speedy Rewards facilitated the Motivational forces within plan participants to move on with renewed vigor and focus on the new challenges lying ahead.

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