HERSHEY, Penn.-Credit unions often make a big mistake when hiring talented front-line staff-they train them well only to have them scooped up a few years later by local competitors.
The loss of key personnel in that scenario is due to a flaw in many credit unions' compensation structures, asserted Michael Dougal, director of HR consulting at HRN Performance Solutions in Chambersburg, Penn. He said credit unions provide new hires that show potential with a lot of training but make the mistake of not giving them sufficient annual raises in their early years to keep them.
"Credit unions do a great job of training new tellers," said Dougal. "They give them all the tools and coaching they need in their first two years to get them to become highly skilled quickly. They even send them to courses and conferences."
That approach is on the mark, but what happens on the comp side is not, said Dougal. He told attendees at the Pennsylvania CU Association's annual meeting that these new hires tend to receive 2% to maybe 3% performance increases in their initial years, which keeps them barely above the minimum pay level for their role across the industry. "Then local banks or credit unions that want to pick up highly skilled and talented staff and pay mid-market range steals them away."
What To Do?
What CUs need to do more of, said Dougal, is give promising front-line staff higher annual percentage raises earlier in their careers, and then ratchet back the percentages when the employees reach mid-level salary for their role. "You need to be more aggressive with pay adjustments when good employees are at the low range of their job."
Dougal acknowledged that the CU will someday have to openly address the lower percentage pay increases occurring later in the employees' career, and should do so openly, telling them that they are in the middle to high range of their jobs and are getting more than many other folks who do the same thing.
Other tips and observations from Dougal:
- 50% of employees are doing just enough to keep their jobs.
- 84% of employees believe they could perform significantly better if they wanted to-more than three-fourths of the staff are not giving their best effort.
- The common reason for employees not giving their best effort is because they are not seeing a strong correlation between what they do and how they are rewarded.
- Merit pay, i.e. cash incentives, work well to increase employee performance. However, the program should be structured: either as an individual program to boost individual performance, as a department program to build teamwork and/or a a corporate program to boost understanding and engagement in the CU's vision and mission. (A true, comprehensive merit pay program encompasses all three.)
- It is acceptable, if not preferable, to give higher percentage merit pay based on the impact the employee's role has on the organization-so senior management 20%, supervisors 15%, and clerical and administration 5%.
