Organizational Behavior Case Study: TD Bank MIP Program

This report analyzes the Management Incentive Program (MIP) of Toronto-Dominion Bank (TD Bank), examining its impact on organizational behavior. The study outlines the program's structure, issues related to motivation, performance management, and learning. It explores organizational theories such as Maslow's Hierarchy of Needs, Alderfer's ERG Theory, and McClelland's Need Theory to understand employee motivation and the shortcomings of the MIP. The report highlights the lack of clear communication, subjective performance evaluations, and the program's potential to stifle creativity. A revamped incentive plan is proposed, focusing on improved communication, clearer selection criteria, and a three-step implementation process. The analysis emphasizes the importance of aligning the MIP with the account managers' diverse roles and the need for equitable compensation. Ultimately, the case study seeks to provide insights into how TD Bank can enhance its MIP to better motivate and retain employees, thereby improving organizational performance.

Running head: ORGANISATIONAL BEHAVIOUR 1
Organizational Behaviour
Student details

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Executive Summary
The main objective of this report is to analyze the Management Incentive Program of
Toronto's –Dominion bank. This project highlights information on different organization
theory which influence organizational behavior. The issues in the Management Incentive
Program are discussed and the revamped strategic plan for implementing the Incentive
Program is discussed in the report. The various elements of the report are summarised as
follows:
a. To describe the overview of the case example
b. To describe the issues faced relating to motivation, performance management, and
learning.
c. To describe the solutions and changes like communication and selection criteria
which guided in revamped plan.
The revamped incentive program suggest that the management incentive plan was
implemented in rush which has led to poor communication and execution of the plan. The
organization structure and motivational theories which can help in guiding the employee to
achieve the company’s vision are discussed. The Revamped incentive plan is divided in
three-step process to provide better understanding.

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Contents
Introduction...........................................................................................................................................4
Overview...............................................................................................................................................5
Issues in MIP.........................................................................................................................................5
Revamped Incentive Plan......................................................................................................................9
Planning and Feasibility Phase..........................................................................................................9
Implementation phase......................................................................................................................11
Administration Phase.......................................................................................................................12
Conclusion...........................................................................................................................................13
Reference List......................................................................................................................................15

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Introduction
Organization behavior is the discipline which systematically studies the attitudes and
behaviors of individuals as well as groups (Adrian Wilkinson, 2016). The whole discipline is
to define the organization structure in more compact way. As far as management is concerned
it is the one of the basic responsibility of managers to analyze how employees work
contributes towards productivity and effectiveness of the organization (Machado & Paulo
Davim, 2014). It is important to note that the thorough knowledge of organization behaviors
and theories can lead the companies to make improvements towards company’s competitive
advantage. The traditional methods of management were planning organizing leading and
controlling the financial material and human resources of an organization (Adcock, 2011).
The new views of manager involve coaching, guiding the employees to reach performance
which is extraordinary.
Organization behavior helps management in understanding human behavior in form
of different theories (Peris Bonet, Peris-Ortiz, & Gil Pechuán, 2011). Mostly theories define
manager roles and problem faced on regular basis. The manager roles have been evolved in
different direction some of the major duties of managers are supervising, training decision
making and monitoring the business environment for new adaptations (Anne-Wil Harzing,
2014). To improve individual behavior companies are introducing various reward bases
which aim in improving the results as well as retention of talented employees in the company.
In this report, the Management Incentive Program (Here and after referred to as MIP) of
Toronto-Dominion Bank (Here and after referred to as TD bank) is discussed in relation to
organizational behavior and theories

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Overview
TD Bank has introduced MIP in year 1989 which is cash-based reward program to
acknowledge and reward junior and middle management employees who have performed
extraordinary. MIP was ranged from 3 per cent to 13 per cent of the base salary with the
increasing pay-out ratios with changing position levels.
The MIP program is based on ROA and ROE thresholds which were set each year by
board of directors. The MIP is based on annual merit raises based on the performance
evaluations. It is a separate and long term level of incentive program to distinguish from short
incentive programs. The aim is to make the junior management feel valued. The TD bank
salary is really competitive and they do not provide any visible plans for bonuses. The MIP
can boost the employees to stay in the organization for longer period of time. These MIP
programs are introduced to create competition to grow and to motivate employees.
Issues in MIP
The program introduced in TD bank has various issues and loopholes which are not
only reason to revamp the whole program; Firstly, the major issue is that the plan is not
communicated in proper way. Many employees did not know about the program and the
criteria on the basis of which a person is awarded incentives. The employees do not have
knowledge of reasons why and how they are selected for the management incentive program.
The goal of TD bank is to provide motivation to employees who can lead to achieve
competitive edge as well as improving the productivity as well as performance. The MIP of
TD bank is leaning more towards creating stress which can lead to minimizing the
performance. The plan implemented by TD bank is too ambitious as the measurement set by
the management is really difficult. The eligibility is decided on the basis of Performance

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which is consistently exceptional, beyond job expectations, and fulfils job expectations. The
employees who are consistently performing are eligible for MIP and it is important to note
that several other factors are also taken into consideration while deciding employees potential
for example past performance. The ratings are mostly given by human resource department.
This is another factor which can lead to unethical behavior of employees. The MIP has led to
lose the creativity required by the employees. The major points which are need to cater in
management incentive plan are based on management is awareness and regulation towards
employees it is important that manager empathize with the employees (Price, 2011). With
this, it can be clearly inferred that employee’s motivation is based on the decisions made by
the manager. Maslow’s Hierarchy of need is the most accepted theory of motivation
introduced by Abraham Maslow in 1943 (Noltemeyer, 2012). This theory explains that
individual achieve one need then it try to reach to the higher level. Alderfer’s ERG Theory is
the extension of Maslow’s theory which is being adopted and accepted in modern
management It is introduced by an American psychologist Clayton Paul Alderfer; he had
proposed the theory on the basis that each need carries quality value which can lead to
motivation. The major categories of Alderfer are:

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(
Source by Author)
The first and lowest are Existence needs which relate to the basic needs of survival
and safety needs which impact the employee most (Jones & George, 2016). The Relatedness
needs refers to the social need of an employee which involves friendly work environment.
These needs studies social behavior of an employee. It is important that the employee should
feel important and accepted in a team. The motivation of the employees enhances with
mostly with Growth needs as this involves personal growth of an employee (Tomkins, 1991).
The MIP is the result of growth needs which defines reward and recognition in the company.
It also includes monetary benefits which help an employee motivated towards productivity
and performance. It is the highest level of needs which is to achieve full potential by growing
and using creative extent (Saini, 2013). The hierarchy of need s move with the corporate
hierarchy. The employees feel motivated when they grow in their field, it is important that the
training and development should be provided to the employees to achieve growth of
themselves as well as organization (Smith, 2016). It is evident that needs of the employees
can be used an important tool in conceptualizing the programs for employee motivation.
Growth Needs
Relatedness Needs
Existance needs

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McClelland’s Need Theory was introduced by David Mcclelland with same basis. He
suggested that every individual has three needs which are need for achievement, need for
affiliation and need for power. Different characteristics employee define the dominant
motivator. The dominant motivator varies from culture to culture as well as life experiences.
The basic characteristics which can relate to achievement factors includes strong personality,
prefer working alone, calculate risk to plan and achieve goal. And Affiliation is opposite to
achievement as the employee believes in collaboration and loves working in group. The need
for power can be characterized by wants of influencing others and the employees also enjoy
status as well as recognition in the company. This theory helps managers to observe and plan
the incentives accordingly. It is important that incentive program should have the features
which can motivate all the employees.
In 1950 Herzberg’s factors were introduced by Frederick Herzberg; these factors are
align with Maslow factors. The first three factors of the hierarchy are similar to hygiene
factors of Herzberg which are mostly related to environment provided to an employee rather
than the work itself (Aral, 2012). The most important hygiene factors are salary, working
condition, status, security and relationship with peers and subordinates. Another element of
Herzberg is motivational factors which are job satisfaction, achievement, reward and
recognition which are mostly related to esteem and self-actualization needs in Maslow’s
hierarchy of needs (Gready, 2013). As it is discussed in earlier theories that needs can boost
up is Motivation, Learning and Job Satisfaction. McGregor’s Theory X and Theory Y focus
less on needs and more on the nature of management (Austin, 2015)t. Theory x assumes that
all the employees are indiscipline and managers should take control and be strict to improve
performance. Theory Y assumes all the employees are ready to work effectively and with
higher responsibilities. In these theories, the motivation is decided on the basis of perception

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of the employee’s focus. This theory has given birth to Theory Z. it emerged in 1980 and it
focuses on the concept that if workers participate more in decision making it will make the
employees feel more appreciated (Vivares-Vergara, 2016).
In TD bank the major loopholes of MIP program can be inferred through above
theories as it can be seen that the account managers have 70 to 100 borrowing customers
whose daily portfolio of borrowing is managed. The account manager duties also involves
sales, marketing, Customer service, monitoring, and profitability. The MIP should be linked
to all the roles of an account manager this will help in driving the organizational behavior in
right direction. The Expectancy theory of organization behaviors explains the same concept;
that the quality of work is influenced by the rewards received for achieving the results. The
degree of motivation depends on the salary provided to employees (Robert N. Lussier, 2014).
The MIP is based on the criteria that performance should be consistent but the clarity
to the roles is not informed. It is important that the feedback should also be shared to the
employees and reward s are communicated clearly. The company has introduced MIP early
as it is planned properly but it was not communicated properly to employees as well as
managers. The design and implementation of the program is the important aspect of its
success. The selection criteria is based on the pay for performance which means the
employees who have performed their basic accountability task consistently are eligible for
MIP. However, it is important to note that ratings were subjective and was assigned by the
human resource department which impact the concept of Equity theory which states that the
compensation received should be fair as inequity will affect the motivation (Bowen, 2019).
The majority of account managers do not know about the potential ratings of MIP program. It
is also came in evidence that review and discussion are varied from department to
department. This shows that the implementation of MIP is not done properly. The company
provides competitive training to the employees to improve the performance but the TD bank

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is failing in making the employees feel valued. Various meeting are arranged to introduce the
plan but due to rushed procedures to match the need of competitor’s plan. The selection
criteria of the MIP is not clearly explained to the managers.
The concept of learning can be the deciding factor in organizational behavior. It is
seen in many organizations Performance management is based on principles of self-
management. It is important that the employees set their personal goals to reach to the
achievement of organizational goals (Jr., 2014). It is assumed that selection and training can
lead to the good performance management. Self-management is the alternative to the
traditional hierarchy method to improve the performance of the employee (Burney &
Widener, 2013). The major drawback is that the MIP that it has not involved employees in
decision making.
Revamped Incentive Plan
Various issues are discussed above in MIP program to improve the performance of
the incentive plan following detailed plan with relating to issues is discussed below there are
various steps need to be understood while planning the revamped plan. This report is
discussing the following three important phases: Planning, Implementation, and
Administration.
Planning and Feasibility Phase
The Planning is the first foremost step in any incentive plan. While planning the
assignment it is important to note that the goals of the incentive plan. As far as TD bank’s
MIP program is concerned the objective of reducing the high turnover of the junior and
intermediate account managers. It is important to measure the retention rate as the company
invest huge in credit analysis training. TD Bank has been observing the trend where
employees who get good experience leave the organization for competitors whoa repaying

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high profits to the employees. The second important objective is motivation to the employees
to improve the performance. It will provide the outcomes to the manager which they desire.
The next important step is to check the feasibility of the plan which is being implemented.
The competitors of TD bank are providing higher packages as well as the incentive
percentage are also higher than the current plan. The MIP should increase the profit margin
from 5 to 20 % of raise. An it should be executed halfyearly that means twice a year which
lead the employees to review the work and improve in six month’s time. When incentives are
attractive it is important to note that the target should also be competitive in nature. The
managers should make sure that the targets of the account managers are reviewed monthly
and feedback should be shared on quarterly basis. The plan should be feasible and clear. To
achieve the desired plan it is very important the managers should provide authority to the
managers to work they want. Flexible working conditions are the major tool in competitive
environments (Heckhausen & Heckhausen, 2018). The good work-life balance has become
the biggest motivator for employees. The second important thing need to be considered is
decision making. The goals of the junior and intermediate should be discussed with
individual employees as the employee involvement programs seek to motivate employees by
increasing their responsibility. There are several type of involvement programs like job
rotation, worker empowerment and open-book management (Brooks, 2018). In open-book
management, the employer educate the employees regarding their key performance measures.
It is evident that if the employees are empowered they can perform better as the employees
get the direct decision power to themselves. The MIP can give better results if proper survey
is accomplished to update the plan accordingly. The feedback of employees can be achieved
through interviews, be, or through specific questionnaire, The two suggested surveys are
Minnesota satisfaction questionnaire and job descriptive index (Noel Capon, 2016). Both the
methods of organization behavior provide useful inputs relating to employee satisfaction. The

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following surveys cover important employee aspects like working conditions rewards and
relationship ethics with coworkers (Burney & Widener, 2013). The overall funding of the
plan need to be taken in consideration. The revamped management incentive plan major
changes planned are:
 It should be calculated halfyearly to improve the employee’s performance
 It should involve employee consideration for major decision making.
 It should motivate the employees to compete and grow with organization.
 The ratings should be analyzed on the basis of objective data rather than subjective.
 It should be linked to monthly goals and the metrics should be decided and
communicated to all the department.
 The length of the performance metrics should be related to major KPI’s which are
marketing, customer service should be taken in consideration
Implementation phase
In this phase, the company draft the plan into small steps. Communication to the
employees is part of implementation phase (Kehoe, 2017). After revamping selection criteria
the major change provided in implementation phase is communication. Proper meetings
should be conducted to discuss new MIP plan. The company can make attendance
compulsory which lead to the clarity for the employees. Once a suitable incentive plan is
catered it can be revised in implementation stage in order to achieve the fuller utilization of
resources. The revamped incentive plan is mostly focused on change of implementation as
the major loopholes are identified are relation to implementation of the plan. The rules of the
plan ais to identify and to improve the designing of the plan. As it is evident that the plan is
tax-advantaged, the employee declaration should be provided. In this phase employee
communication is key to success of plan (Kitchin, 2017). It is important to understand the
performance conditions required to gain incentives by employees. In Revamped MIP plan the

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following changes should be implemented; Firstly TD bank should hold a session which
describes company’s financial and goals to achieve the target or mission statement and then
the MIP plan which is linked to it. The goal of implementation is to achieve competitive edge
which can be achieved through improved performance (Duckjung, 2017).
Administration Phase
To administrate the plan it is important to register the plan as well as documents
should be properly written and saved by board of directors (Ordoñez de Pablos, 2014). The
important element which should not be missed in uniformity in all the departments as this is
important to achieve positive work environment in the organization. The bank should take
care that the employees should not diminish performance due to the difficult targets. This can
lead to extinguish fundamental motivation and can impact creativity. Tf the plan is not taken
in good aspect it can also encourage cheating, shortcuts & unethical behavior. The employees
can also become addictive. The employees should be provided proper training and guidance
to achieve good results (Smith, 2016), Because if the employee do not feel secured; It can
move to another organization.
The company can achieve better results by implementing performance while
recruiting (Hartley, 2018). The selection of an employee is the crucial step in meeting the job
requirements, disclosing the basic KPI’s and the reward associated can lead to attracting
talented employees (Ployhart, 2017). This will lead in reducing recruitment cost, as satisfied
employee retain organizations for the longer period of time (Anderson, 2010). The
administration phase also involves the implementation of healthy environment. As it is
evident that employees cannot get motivated if the hygiene need as well basic social needs
are not fulfilled. The employee should feel safe working in an organization. The environment
is created by proper management governance. The company’s management should take
sessions for the interaction as well as discussion to implement new policies and plans. The

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Successful plan is executed when it is measured time to time to track the results and
corrective actions are taken accordingly (Wynn-Williams, 2016).
Conclusion
The report has tried to understand the issues in Management Incentive Program of
Toronto-Dominion Bank which was implemented in 1989. However, in 1991, the company
observed that the MIP program has not received the expected results. The company major
issues are described with light to organization behavior theories.
The bank has faced lots of implementation and administration issues which were the
reason for the failure of the Management Incentive program is that the metrics is not planned
to control the results, Also it was not communicated to the employees. The company also
failed in providing proper guidance and training to managers to execute the plan. The junior
and intermediate account managers have huge responsibilities which are not divided properly
to improve the performance.
To improve the performance of the account managers the company should provide
short term incentive plans which can help them in boosting and retaining in the organization
for longer period of time. It is important to conclude that recognition is also important aspect
of monetary plans. The employee reward system should also include recognition which
makes the employee feel valued in the organization.

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