Compensation Plan Design
Challenge
Recent legislation in the Kingdom of Saudi Arabia had required the local Commercial and Retail banks to spin off their investment banking, brokerage, and asset management businesses. As a result, a need grew to alter the compensation plans and strategies of these newly created firms.
The Boards involved had a traditional retail banking background/mindset when it came to compensation. Thus, McLagan was sought out to assist in the transformation of each firm’s compensation practices.
Solution
At the time of the engagement, McLagan had already worked with five of the major Saudi banks. This allowed the consulting team to leverage their prior industry knowledge in providing deliverables to the newly autonomous firms.
With the combination of proprietary expertise and clearly identified goals of the firms, McLagan was able to take the existing retail banking-based compensation structures and develop more market driven compensation plans.
In some ways, these were green-field plans, but the legacy of parents was always present. Also, in most of these firms, McLagan established stock option or restricted share plans, positioning the employees to partake in the upside of a potential IPO.
Results
With the implementation of totally new compensation strategies, the new banking, capital markets, and asset management firms were able to attract and retain top talent, and thus, remained competitive in a high growth region.
Increased profit sharing served as strong motivation for employees to drive up the bottom line. As a result, annual revenues have grown rapidly, to levels where management of some of the firms feel confident they will meet their IPO timing goals.
