IFI governance


World Bank staff incentives

8 April 2013 | Inside the institutions

The World Bank Group’s staff incentives and compensation schemes are considered important drivers of the Bank’s successes and failures. According to the Bank’s 2012 review of its compensation schemes, they are reviewed every year in order for the organisation to remain a competitive employer which attracts “global talent”.

In 2010 the World Bank Group adopted its internal reform agenda with the objective of making the Bank “more efficient, effective and accountable”, which has implications for staff incentives. In financial year (FY) 2012, the total staff costs were $734 million for the International Bank for Reconstruction and Development (IBRD, the Bank’s middle-income country arm), $750 million for the International Development Agency  (IDA, the Bank’s low-income country arm) and $524 million for the International Finance Corporation (IFC, the Bank’s private sector arm).

There are two basic types of staff compensation, variable and fixed pay. Variable pay depends on staff performance measured by a pre-determined set of criteria, while fixed pay does not. The Bank does not provide details of the criteria it uses. Variable pay schemes can broadly be divided into performance-based salary increases and performance-based awards.

Performance-based salary increases

Within the performance-based salary increase, common to all World Bank Group institutions, there are two types of increases: the basic performance-based salary increase (PBSI) and the supplemental merit increase (SMI). For FY 2012, they together accounted for 2.8 per cent of the total staff costs. The size of a staff member’s PBSI depends on their performance evaluation, called the salary review increase (SRI, ranging from a low of 1 to a high of 5) and the staff member’s starting salary. For the same SRI, the PBSI is higher for salaries up to $60,100 and lower for salaries from $197,200 upwards. For example, a staff member with SRI 5 and earning a high range salary would get a 2.1 per cent increase, whereas a staff member with the same SRI score but earning a low range salary would get a 5.7 per cent increase. The SMI is an additional salary increase only available to staff with either SRI 4, who receive an additional 0.5 per cent, or a rating of 5, who receive 1.5 per cent more.

Table 11: FY12 Performance-Based Salary Increase Matrix

Salary Range Zone SRI Performance Category
2 3 4 5
Min Max Min Max Min Max
1 0.0% 0.60% 3.10% 3.60% 4.40% 4.90% 5.70%
2 0.0% 0.60% 2.10% 2.40% 3.00% 3.30% 4.00%
3 0.0% 0.60% 1.30% 1.40% 1.60% 1.70% 2.10%

SRI ratings are given relative to the performance of colleagues in a department. The Bank’s corporate guidelines cap SRI 4 and 5 ratings at 25 per cent and 11 per cent, respectively, per department. Several criteria are used to judge staff performance for the SRI ratings which are not consistent across departments. Staff have annual objectives which the evaluations are conducted against. The IBRD and IDA did not provide details about what criteria are used. At the IFC, there are four main factors for an investment officer: hitting volume targets, financial return of investments, contribution toward the IFC development goals (see Update 81), and ratings on the development outcome tracking system (see Update 62, 58). However, currently no fixed formula is used for weighting these criteria in the review process, meaning departments have freedom to assign weightings as managers see fit.

Performance-based awards

Performance-based awards, commonly known as bonuses, are increasingly being used. For FY 2013, the 2012 review of staff compensation recommended “setting aside funds of $16 million for non-salary awards programmes”, $1 million more than the previous year. The IFC is devoting the largest amounts to non-salary programmes. For FY 2012, IFC awards amounted to $11 million or 2.4 per cent of IFC’s total payroll. IBRD/IDA devoted $3.75 million and the Multilateral Investment Guarantee Agency, the Bank’s political insurance arm, $184,400.

The IBRD/IDA team awards are designed for team accomplishments. They are open to all teams and awarded to all the team members. They are capped to 5 per cent of the market reference point (the average labour market salary) and can range from $400 to $2,000 per person. The IFC’s corporate awards are similar but applicants have to go through a panel review.

IFC-specific awards include the annual and department-based individual performance awards, which are for staff with SRI 4 or 5 ratings and can go up to 15 per cent of the base salary. This year the IFC intends to spend $4.6 million on these awards. Secondly, the scorecard awards recognise investment departments achieving the best performance according to scorecard indicators, such as client satisfaction and development impact. Although there are no official weights to the different indicators, there is a development impact threshold a department has to achieve in order to be eligible.

Thirdly, there are long-term performance awards which reward teams and individuals for their project results over a three year period. They can go up to 20 per cent of the recipient’s base salary and in order to qualify for these awards the projects need to exceed certain development and financial thresholds as well as go through a panel review. The IFC does not publish the details of this process. For FY 2013, the IFC intends to spend $7.6 million on long-term performance awards. Lastly, the smart lessons award aims at recognising knowledge transfer. On top of two $2,500 grand prizes, there are five prizes of $1,500 and five of $500.