Don’t waste money on monetary incentives

In a recent client survey, only 14% of employees said their incentive program was “effective in producing positive performance” and only 18% said the incentives were “highly motivating to me.” When these results were shared with the credit union’s executives, the CLO blurted out “then why am I paying  them $43,000 a month?!”

Is this a familiar scenario at your credit union? It’s becoming more and more true at many financial institutions who have assumed over the years that the best way to get production staff to produce more is to simply tie a monetary incentive to that production. A big incentive will lead to big production, right?

Yet study after study and focus group after focus group has revealed that most of your employees are not motivated by monetary incentives, even big ones. The key driver varies widely by individual and everyone appreciates a few extra dollars in their pocket but the money itself doesn’t motivate most people to do more than they would have produced without it.

A core, fundamental principle in incentives is that they should inspire someone to produce more than if there was no incentive. Yet that same survey said that only 28% of frontline staff said their incentive program “motivates me to want to produce more”. And before you think they simply need a more lucrative monetary incentive, only 26% said “If our incentives paid more, I’d be more motivated to produce more than I do today.”

It’s become very clear to this credit union that, generally speaking, they are not getting their money’s worth with their incentive payouts. They’d be far better off redirecting those funds to other motivational and engaging efforts to make most employees more happy, motivated, and productive.

So what are some of those “other” ways to spur greater employee production? Here are just a few:

  • Coaching – if employees leave bad bosses, not companies then good employees often stay because of good bosses. Give employees good, consistent, sincere coaching and they’ll feel like they have a much greater chance of producing more.
  • Development – invest in your employees’ skills and behaviors. Give them the tools and opportunities they need to be successful and they’ll likely make a maximum effort to be maximally successful.
  • Member feedback – everyone likes to hear positive feedback, especially from the people they’re trying to please. Measure member satisfaction consistently and share that feedback promptly and your employees will be motivated to continue to do a good job.
  • Celebrate success – when individuals and teams succeed, acknowledge the accomplishment. It doesn’t take much effort to say, “Way to go!” or write a congrats email or include a shout-out in the employee newsletter. Success can bread more success, especially if you celebrate it.

It’s key to recognize that there needs to be significant flexibility in your cultural motivation efforts. Not everyone is motivated by the same thing. Some employees will be highly motivated by money but more will be primarily motivated by the items noted above. And some will be motivated by something completely different. Your challenge is to find out what the primary motivators are and create a culture that allows for a variety of motivators.

In our experience working with clients of all shapes and sizes, most incentive programs are designed by executives who are highly motivated by money. They assume their employees are equally motivated by money and therefore design a program with a big financial carrot at the end. Unfortunately, in too many instances, those executives later lament the fact that their team’s production is underwhelming, goals are not met, and incentives are, for the most part, wasted.

Instead, those monetary-based incentive programs should’ve been centered around an organizational culture of appreciation, coaching, and recognition. Reallocating those incentive dollars to dedicated programs and efforts to encourage employees to be the best they can be and go above and beyond to serve their members would’ve likely resulted in far greater and longer-lasting production results.

Our client survey also revealed that only 20% of employees agreed that “the monetary incentives I receive are the primary type of recognition I desire”. Therefore, create a culture that engages and inflames the heart and minds of your employees and monetary incentives will largely become insignificant for 80% of your employees.

One final outcome from the survey: the question, “If our incentive program went away my production would decrease” produced only 13% agreement. In other words, this client’s incentive program is not producing increased production. In short, they’re wasting their money because the majority of employees would still produce the same amount even if monetary incentives weren’t paid.

The credit union that reapplies those monetary incentive funds often finds it more likely that their employees stand a better chance of becoming enraptured in the organizational mission, engrained in the desire to passionately serve members, and elevate growth productions to levels financial statements have rarely ever experienced.

If your credit union is unsure about the effectiveness of your incentive program or wanting to identify the most appropriate motivation culture for your organization, we should talk. Please contact me at Probert@fi-strategies.com or 636-578-3280 for a conversation about how we can help.

Paul Robert

Paul Robert

Paul Robert has been helping financial institutions drive their retail growth strategies for over 20 years. Paul is the Chief Consulting Officer for FI Strategies, LLC, a private consulting company ... Web: fi-strategies.com Details

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