It seems simple: reward staff for performance that in turn raises member satisfaction levels.
But, in fact, the process of creating service incentives can be fiendishly complex, as many credit unions have discovered, and can even be counter-productive if not structured properly.
Credit unions across the country have a range of incentive plans in place, some developed by trial and error, others with the assistance of experts. One of those experts, along with two credit unions that have incentive programs in place, shared their insights with those attending the CUNA Operations, Sales and Service Council's annual conference here.
Dennis Guida, partner in consultancy Mike Higgins Associates, cautioned that rewards and recognition only are successful if they improve performance throughout the entire credit union. He said total compensation must be competitive-CUs that spend too much on these programs put themselves at a disadvantage-and a portion of improved performance should be shared with employees.
"A good program creates a less subjective series of measurements, and it eliminates entitlements," he said. "Too often, employees want a bonus because, well, they've been there a year, and it's Christmas, and they want money to buy presents."
Incentives are all about stimulating untapped human potential, Guida continued. He said in every credit union there are under-challenged employees and under-utilized talent.
"Mining this lode is the key to long-term enhanced member service and satisfaction. Create an environment where people can thrive," he counseled.
Of course, there will be resistance whenever a CU changes traditional performance methods, Guida said. "What do people say when someone questions why something is done in a particular way: 'That's the way we've always done it.' But remember, the definition of insanity is doing the same thing over and over, but expecting different results."
On average, Guida recommends incentives that are 3% to 6% of base salaries. He said rewards should be linked to a quantifiable contribution. Management should determine what factors are important to the CU's success, gather frequent feedback and communicate regularly with employees.
A good first step to a reward plan is to set a baseline of minimum acceptable performance -"surplus is victory," he said. Performance hurdles should be set above the baseline. The steps, in increasing difficulty of accomplishment, could be: "optimistic," "change of behavior," "out of the box," and "home run."
"The increments should be evenly spaced, and the weight should be relative to contribution," he said. "Too often, financial institutions pay people for low-margin products as if they are high-margin products. Reward is created from surplus. If performance improvement is not created, if dollars are not created, then there is no payout. Everyone should be in it together, because it is amazing what we can accomplish together."
In Palo Alto, Calif., Stanford FCU offers recognition, rewards and incentives, according to Tina McMinn, assistant vice president of branch services. Employees are recognized at their five-, 10-, 15- and 20-year anniversaries with a cash reward of $100 for each year of service. On their birthdays, people receive $25 gift cards from Borders, Barnes & Noble or Target. The credit union also offers quarterly barbecues, sports teams, naturalized citizen parties and "breakfast bandits," where departments arrive at work to find a hot breakfast waiting for them for a job or project well done.
Gift Cards To Staff
"We also offer gift cards to employees who catch a fraud or a scam," she said. "If they save a member or the credit union money, they get $25 to $100-though it could be more if it is a larger scam."
Managers offer walk-around bonuses of $100 and up for a job done above and beyond, money-making or money-saving ideas, and project team participation.
Each department at Stanford Federal has an incentive plan, McMinn said. "Each plan is different, and is designed specifically for the department."
For example, McMinn's department, branch services, initiated its incentive program in July. Branch services staff members are rewarded for improving quality of service (as measured by Quality Loop), pitching additional products or services to 80% of members, reaching monthly goals for consumer loans, and hitting team goals for relationships per new member. Some items are paid quarterly, while others are paid annually.
"The department has the potential to earn 10% of their pay through incentives," she explained. "The employees are excited at the chance to earn more money."
'Apple A Day'
At the $100-million Spectrum FCU in San Francisco, Karen Intracaso, vice president of lending and operations, said its incentive plan is not quite as generous as the larger Stanford FCU's. Anniversary awards are paid at five, 10 and 15 years, with $50 given to the employee for every five years of service. Spectrum also recognizes a "Star of the Quarter," which pays $100 and includes an award for the person's desk. If someone has perfect attendance for a year, he or she gets an "Apple A Day" award: $50 plus an apple.
A big part of the Spectrum recognition program is its "good job notes." Each quarter, each employee is given 15 good job notes. They are distributed on a peer-to-peer basis for a job well done.
In addition, getting a compliment letter from a member earns three good job notes, and submitting an idea to improve the CU gets 10 notes (and if the idea is implemented, a cash reward of $10 to $50). On their birthday, staff members are given the choice of 10 good job notes or a box of See's Candy.
If enough good job notes are accumulated, employees can earn up to five consecutive days off and a cash bonus.
Spectrum gives cash rewards for career advancement: $250 for six Merit/Star classes taken; $150 for 10 CUES University classes completed. Employees get up to 12 matching hours off for performing community service.
As for incentives: "We have corporate bonus goals and branch goals," said Intracaso. "The Level 1 corporate bonuses are paid to all staff members based on new member growth, net worth ratio, loan growth and member satisfaction surveys. The Level 2 bonuses come from a pool of funds from over-budget net worth-also paid to all staff."
Branch goals include monthly deposit and loan growth, new member goals, individual sales and service goals, sales of mechanical breakdown and GAP insurance, and results of the Quality Loop satisfaction survey.
"All of these have minimum service stands which must be met, and it affects their merit raises," noted Intracaso.