Why Most Bonus Plans Fail – And How to Get Them Right in Your Mortgage Broking Business
At Recludo Group, our mission is to help Australian mortgage brokers build prosperous, valuable, and enduring businesses. We work closely with brokers to enhance business performance, drive value creation, and craft succession plans that align with both personal and financial goals.
One of the most common pitfallsi see in mortgage broking businesses is the failure of bonus and incentive plans. Many brokers and business owners introduce performance-based bonuses with the best of intentions—hoping to drive productivity, improve retention, and align employees with business growth. Yet, most of these plans fall flat or even backfire.
Why? Because they’re often built on the wrong premise.
Let’s break it down and explore what goes wrong and how brokers can design bonus structures that actually contribute to sustainable business success.
The Wrong Premise: Why Most Bonus Plans Don’t Work
The common approach to designing bonus plans is based on the belief that employees should be rewarded for achieving specific performance metrics, often tied to key performance indicators (KPIs).
On the surface, this sounds logical. If brokers want their loan writers or support staff to increase efficiency, submit applications with fewer errors, or convert leads more effectively, they assume the answer is to attach financial incentives to these outcomes. But this approach is flawed for several reasons:
Trying to Change Behaviour Can Backfire – Employees often end up “gaming the system” to hit KPI targets rather than focusing on the real objective: delivering value to clients and growing the business sustainably. For instance, if a broker ties bonuses to the number of loan applications submitted, quality may decline as employees rush to lodge deals without ensuring they are the right fit for the client.
Overcomplicated KPIs Reduce Motivation – The more KPIs an incentive plan includes, the harder it is for employees to keep track, leading to confusion and disengagement. A plan loaded with 10-15 metrics ends up being seen as just another layer of bureaucracy rather than a meaningful reward system.
Bonuses Can Undermine Intrinsic Motivation – Many brokers don’t realise that external financial incentives can actually reduce intrinsic motivation. If an employee’s natural drive is to provide great client service, but their bonus is tied to hitting a sales target, their focus may shift from delivering the best outcomes for clients to simply ‘closing deals’—which may not always be in the client's best interest.
Metrics Are Often Arbitrary or Unfair – It’s nearly impossible to design KPIs that are perfectly fair and applicable across different roles. For instance, a support staff member may have fewer measurable outcomes than a loan writer, leading to imbalanced or inequitable bonuses.
Unintended Consequences Emerge – Incentive plans can inadvertently encourage bad practices. We’ve seen mortgage businesses where brokers push clients towards higher-margin products just to hit bonus thresholds, leading to compliance risks and potential reputational damage.
Creating the ‘Perfect’ Bonus Plan Is a Time Waster – Many brokerage owners spend countless hours designing complex bonus plans, only to see them fail in execution. Worse, employees often don’t fully understand them, leading to confusion and frustration.
The Right Premise: A Better Approach to Incentives
So, what’s the alternative? Rather than micromanaging employee behaviour through granular KPIs, bonus structures should be designed around value creation.
A well-structured incentive plan should reinforce a partnership relationship with employees—one where financial value is shared with those who help create it. In the context of mortgage broking, this means:
Tying rewards to business success – Instead of paying bonuses for arbitrary KPIs, brokers should structure incentives around overall business performance. If the brokerage achieves sustainable growth in revenue and profit, employees should share in that success.
Creating a clear value-sharing structure – Instead of a traditional “bonus plan,” consider a Value-Sharing Plan (VSP), where the incentive pool is based on overall business results rather than individual metrics.
Setting a baseline profit threshold – No bonuses should be paid unless a minimum profit level is reached. This ensures that incentives are only awarded when the business is financially healthy.
Fostering a culture of ownership – Employees should feel like partners in the brokerage’s success. Instead of micromanaging how they achieve their results, give them autonomy and trust them to contribute in meaningful ways.
Communicating Clearly – Employees should always understand how the incentive structure works, why it exists, and how their contributions impact overall business performance.
Applying This to the Australian Mortgage Broking Industry
In mortgage broking, an effective incentive plan must balance business sustainability, client outcomes, and compliance requirements. Here’s how:
Shift the Focus to Business-Level Performance – Incentives should be tied to sustainable revenue growth and client satisfaction rather than short-term volume-based sales metrics. This prevents brokers from prioritising quick wins over long-term client relationships.
Encourage Client-Centric Behaviour – Instead of rewarding loan volumes alone, brokers should incorporate qualitative measures such as client retention, referral generation, and compliance ratings. This ensures employees are focused on delivering real value rather than just hitting sales numbers.
Share Profits, Not Just Bonuses – Consider implementing a profit-sharing model where employees benefit from overall business success. This encourages a long-term mindset and helps align employee goals with business growth.
Avoid ‘Guaranteed’ Bonuses – A true incentive plan should be performance-based, not an expectation. If employees receive the same bonus regardless of business performance, it becomes an entitlement rather than a reward for value creation.
Promote a Culture of Continuous Improvement – Incentives should support ongoing professional development and innovation. Employees should be encouraged to contribute ideas that improve processes, enhance client experiences, and drive efficiencies.
The Takeaway
A poorly designed bonus plan can do more harm than good, leading to misaligned priorities, unintended consequences, and reduced motivation. In mortgage broking, where client trust and business sustainability are paramount, traditional KPI-driven bonuses often fail to deliver the desired outcomes.
Instead, mortgage brokers should focus on creating a Value-Sharing-Plan that aligns employee incentives with business success. By rewarding overall value creation, rather than micromanaging individual behaviours, brokers can build high-performing, engaged teams that contribute to long-term business growth.
At Recludo Group, we believe in helping mortgage brokers create businesses that thrive—not just for today, but for the future. A well-structured incentive plan is a critical piece of that puzzle. If you’d like to explore how to implement a value-sharing approach in your brokerage, let’s start the conversation.
About the Author - Ash Playsted
As General Manager of Broker Performance at Recludo Group, i help mortgage brokers navigate growth, value creation, and succession planning. With nearly three decades in the industry, my focus is on empowering brokers to build businesses that deliver financial success, professional excellence, and long-term sustainability. If you’re looking to transform your brokerage into a high-value, future-proof business, let’s talk.
