Guatemala, Antigua

Credit Staff Performance Management FI NCA LA, COO workshop

October, 2012

Agenda COO workshop

Day OneTime Activity Facilitating

9:30-9:50 Performance Management at FINCA Jana

9:50-10:10 Performance Management Concept Carlos

10:10-10-30 Key Performance Indicators Jana

10:30-10.45 Workshop Goals, Technique, Ground Rules: Sergio

10:45-11:30Team Work: Set & Agree Performance Targets and Standards --

11:30-12:45 Discussion: Set & Agree Performance Targets and Standards Sergio12:45-01:45 Lunch

01:45-02:30 Team Work: Monitor Results / Performance --02:30-03:45 Discussion: Monitor Results / Performance Jana04:15-05:00 Team Work: Provide Feedback --05:00-06:15 Discussion: Provide Feedback Carlos

Day Two

Time Activity Facilitating09:30-10:15 Team Work: Evaluate Performance --10:15-11:30 Discussion: Evaluate Performance Sergio11:30-12:15 Team Work: Reward Performance --12:15-01:30 Discussion: Reward Performance Jana

01:30-03:00 Lunch03:00-04:30 Dashboard/Scorecard Software Demos Libni/Renata04:30-06:00 Project high-level Action Plan and Project Team Jana

Why manage performance ?

Gross Loan Portfolio – September 2012

October 2012 projected

October 2012 actual

Current Gap2013

projected2014

projected

Ecuador $50,788,929 $39,511,667 $11,277,262 $73,774,241 $92,991,293

El Salvador $10,498,894 $7,932,044 $2,566,850 $15,037,671 $18,797,089

Guatemala $22,473,477 $14,976,763 $7,496,714 $31,124,095 $42,166,966

Haiti $2,048,539 $359,564 $1,688,975 $4,487,027 $6,489,863

Honduras $9,470,993 $7,445,532 $2,025,461 $13,952,332 $19,533,265

Mexico $53,141,642 $42,565,433 $10,576,209 $75,918,502 $93,443,446

Nicaragua $10,741,796 $10,359,148 $382,649 $15,332,998 $20,882,069

Number of Active Loan Clients – September 2012October 2012

projectedOctober 2012

actualCurrent Gap

2013 projected

2014 projected

Ecuador 60,023 50,475 9,548 71,885 84,700

El Salvador 8,963 8,222 741 16,032 27,174

Guatemala 48,478 41,562 6,916 59,150 68,550

Haiti 8,596 1,565 7,031 16,968 22,972

Honduras 12,981 11,364 1,617 18,214 21,976

Mexico 175,130 134,976 40,154 234,294 275,380

Nicaragua 19,515 24,645 (5,130) 25,465 29,783

Why manage performance ?

What gets measured and believed in gets done !

Measurable high quality performance

PM is people management

guiding, monitoring, coaching , encouraging

Individual Credit staff

Commitment, performance targets, Daily Tasks

Institutional Values, Mission, Business Strategy, Business Goals

Translated

Current Situation – source problems ?

• recent institutional and management Changes ( e.g. new management in most subs. )

• Institutional values, purpose unclear, often unclear business strategy

• High staff LO/CTL rotation, staff not mature, low skill level, low commitment

• Management not clear on mid-managers roles. (e.g. second LO)

• Mid managers were often:

too early promoted,

lack leadership skills and understanding of their own responsibilities,

not well lead nor supported by upper managers (traveling BMs)

• Lack of information, processes and tools for management of LO daily work

COOs must design the roles, processes and tools on all levels of front-line

operational management !

Performance Issues

typical issues: • First weeks of the months always have low performance.

• Most Disbursements and recovery in the last days of the month.

• Higher credit risks are taken during those days

• Goals seems to be to big (how do you eat an elephant ? Tools ?)

• Managers not aware on progress towards monthly goals.( what info. do I measure?)

• Is hard to take measures, when the month is about to end.

facts and conclusions: • Months will always have 30 days (or less).

• Goals are not going to reduce and LOs number can not increase suddenly

• Performance depends on the commitment and effort of the whole team.

• Commitment and motivation to reach goals must be high.(driven by management)

• Even when effort is high, performance may still be low.

improve the quality & the organization of daily LO

and CTL efforts.

Why the workshop ?

goals: 1. Initiate a regional project resulting in design and implementation of an effective front-line

Performance Management approach in all FINCA LA Subsidiaries

2. Generate COOs ownership of front-line Performance Management resulting in commitment and

pro-active leadership during Subsidiary implementation.

specific objectives : 3. List of KPIs for Performance Management at LO and CTL level;

4. FINCA Performance Management process flow - a “translation” of generic 5-phase PM model in

to FINCA realty

5. Review software solutions to support Performance Management

6. Project Action Plan (1st draft indicating What? Who? Deliverables? When?),regional project team;

Guatemala, Antigua

Measuring Operational Performance FI NCA LA, COO workshop

October, 2012

Loan Officer Productivity

Key Performance Indicators – managing numbers

• Achievable: reasonable targets considering the resources (mechanism for target setting, buy -in)

• Owned: and relate to performance of one individual

• Actionable: – populated daily so staff can act immediately ( daily info.)

• Easy to understand: LO /CTL must know how to directly influence (new clients)

• Few in number: (3-5) - focus staff attention on main tasks.( e.g. # disb. Per month )

• Standardized: definitions, standardized calculations and integrated on several levels.

• Measurable: absolute nr ,% change, deviation from standard (AC,% of target)

• Time Based: deadline or time period. (by end of month, during the week)

meaningful measurement for performance against targets or standards on different levels of the organization:

How to decide on front-line operational KPIsmetrics for targets

• Loan Portfolio, Active Clients,

• PAR1/30 +WO trailing,

• Clients per LO, LP per LO , etc.

Operational success indicators at

FINCA ?

• Loans disbursed, New clients, Repeat clients,

• LP disbursed, average Loan size disbursed,

• Groups disbursed, new groups created,

• Clients per Group, Clients deserted

• PAR1-30, LO case load, Others

LO outputs and performance numbers with

direct impact on FINCA success!

• If focused upon - will have strongest impact.

• Can be directly influenced by LO and CTL

• Progress measured on a daily / weekly bases

• Logically interconnected with FINCA success

• Balanced selection between Quality and effectives (e.g. new clients/desertion/nr of disb.)

Select 3-5

metrics as Key Indicators for LO

performance.

How?

Targets – KPI values we aim at..

• Personal targets – LO, CTL, BM specific – not just team targets• Established according to a defined mechanism • Must be realistic and believed in – not established in a vacuum

How do we set targets:

1. Top down: COO →BM →CTL (→ LO)

2. Feed back circle: (CTL ↔ LO) →(BM ↔COO)

3. Automatic Algorithm based on productivity standards:

COO/BM → IS → (CTL↔LO)

Some reflection on setting targets:

• It is easier to achieve smaller targets in smaller periods of time.

• Goals are achieved in daily basis, so lets define them on a daily basis.

• If monthly goals are nor achieved, its because of low performance days.

• There is no reason to disburse loans only at the end of the month.

• There is no reason for low performance the first weeks of the month.

Thoughts on target development

Indicators + Assumptions/Standards: • Average Loan size (different by Branch/Product ) • Nr of Loans disbursed per LO standard– 3 levels • % of client desertion • Nr of AC per Group• Maximum nr of groups per LO

Indictors + Targets:

1. For each LO define AC closing and $ collected next month

2. From closing clients deduct Client desertion = min. nr of repeat loans target

3. LO disb. standard – target on repeat loans = new clients disbursed target

4. (new + repeat loans) x average loan size = amount disbursed target

Establish disbursements as daily targets.

We wish you an enlightening workshop