5 keys to making your monetary incentives payoff

If your credit union has a monetary incentive program in place, how do you think your employees would score the following question: “Our incentive program motivates me to want to produce more.” A fundamental principle of monetary incentives is that they should encourage production that’s greater than if there was no incentive in place. This is true for individuals as well as teams – their production needs to increase as a result of the incentive.

We’ve asked that question in most of our culture surveys for the past 6 years and the response has been consistently alarming. Overall, only 45% of employees agreed with the statement. The worst credit unions had scores of 14%, 23%, and 25%; the best score was 71%. We did not include this question at credit unions that did not have a monetary incentive program so, these were genuine assessments of the effectiveness of the incentives.

Looking at the responses by job role, we often find large groups of employees who answer this question from a strongly negative standpoint. For instance, one recent credit union that pays out a significant amount in incentives each month, found that 67% of Branch Managers and Tellers were negative; as were 58% of Loan Officers and 26% of FSRs. This credit union should have serious concerns about the payoff of their monetary incentives … are they getting more production as a result?

Some of these results could be reflecting a feeling that the employees would like to be motivated by the incentives but the credit union’s program is missing the mark. They could also reflect that the credit union has a good incentive structure but the majority of employees are simply not motivated by it. And, of course, there could be other reflections baked into the results. On the surface, it’s unclear so further assessment is needed.

The design of a monetary incentive program, for many credit unions, is a primary driver of employee engagement, retention, and performance. Get it right, and employees and culture will likely flourish. Get it wrong, however, and the credit union will likely struggle. Further, credit unions that have assessed their incentive program and made the necessary modifications, as a result, have experienced palpable improvements in their overall performance culture.

While every credit union culture is unique in some manner, a highly emotional subject like incentives can be addressed with some basic design principles in mind. Here are five that we’ve seen in the most successful programs:

  1. The structure is tightly aligned with culture goals – keep your priorities consistent – don’t say something is important and then incentive something different
  2. It’s adjusted to the expectations of each role – the structure looks different for competitive sellers, relationship-builders, managers, support staff, etc.
  3. There is recognition for both teams and individuals – depending on the objective and environment, one is likely more appropriate than the other
  4. The credit union shows staff “how” to earn incentive – staff needs to know and hone the skills and behaviors that’ll make them successful and position them to earn incentives
  5. The program is one part of an integrated system of recognition – there are various ways to recognize and motivate employees and money may not always be at the top of the list

A bonus principle would be the program needs to be simple (the KISS principle!) – that is, there’s a clear connection between production and payout. When we conduct focus groups with credit union employees, those that have effective incentive programs can readily explain what they did to earn the monetary incentive they recently received. In contrast, for example, an employee at a credit union with an ineffective program once told us, “I don’t know what I did but I got a great bonus check last quarter!”

Monetary incentives may have a place in your credit union’s culture however, like so many other aspects of your culture enhancement, it must not be developed in a vacuum – monetary incentives need to be created and deployed in relation to the other important forms of primary motivation as well as other cultural components (i.e., effective coaching, accountability measures, skill development, efficient processes, etc.)

Many credit unions don’t know where to start when they want to assess their current incentive program or performance culture. Others can’t get their executives to agree that it even needs to be addressed. And still some know it needs to be fixed but they don’t know if they need a tweak or blow-it-up solution. Our consultants have seen the good, the bad, and the ugly with incentives and cultures and will provide the unbiased, outside perspective you need to properly position your credit union for optimal success. Please reach out to www.fi-strategies.com/contact-us/ or 636-578-3280 and “let’s talk!”

Paul Robert

Paul Robert

Paul Robert has been helping financial institutions drive their retail growth strategies for over 25 years. Paul is the Chief Executive Officer for FI Strategies, LLC, a small but mighty ... Web: fi-strategies.com Details