Case Study: Doing the Right Thing for the Sake of Doing the Right Thing

Michigan State University FCU has happy members and a familial employee atmosphere – but no bonuses or sales incentives.

 
 

Michigan State University FCU has happy members and a familial employee atmosphere – but has resisted the trend of bonuses and sales incentives.

One drawback of sales driven employee incentive programs sometimes appeal only to a person’s wallet. At the end of the day, they can look and smell just like sales goals. Employees who sell a pre-determined amount of a certain product or service during an allotted time period are rewarded. Sometimes the reward is cash; sometimes, it’s a prize. The set-up is a doppelganger of the standard sales commission structure found in stores, auto-dealerships, brokerage firms, and banks across the country.

But many believe the nature of the credit union is significantly different from the aforementioned stores, auto-dealerships, brokerage firms and banks. With a foundation akin more to social justice and entrepreneurship, does it make sense to operate using the same techniques of the institutions from which credit unions are trying to differentiate themselves?

For the management and staff at Michigan State University Federal Credit Union ($1.29 billion in East Lansing, MI), the answer to that would be a resounding no.

Zero At-Risk Compensation
While many credit unions offer incentive and bonus programs, MSU FCU has shied away from relying on that kind of compensation from the start.

“It all boils down to culture,” said Todd Surline, MSU’s VP of human resources. “Our corporate philosophy is putting the member first. Our CEO Pat McPharlin believes that the way we treat our staff will have a direct impact on how they treat our members.”

Treating their staff well translates into competitive salaries and a generous benefits package that includes paid health insurance for employees and their families, 200% employer-match of employee contributions to the pension plan, and paid health insurance for retired employees and their spouses.

But sales incentives do not make a significant portion of staff salaries. No year-end bonuses based on organization performance goals are paid to the management staff. It bucks the popular industry philosophy that employee incentives are the only way to drive productivity.

“We want employees who can make an educated recommendation on appropriate product,” said Surline. “And we want employees who will tell a member ‘don’t do this’ if something is not in the member’s best interest.

“Strict incentive programs can cause staff members to work against one another as opposed to with each other,” continued Surline. “It can cause employees to focus on meeting their own needs and not those of the members.”

Success Against the Grain
MSU FCU’s system is an example of an employer capitalizing on employees’ intrinsic motivation – engaging in the activity for its own sake and not for any kind of reward. And it appears to be working on all fronts. After years of double-digit asset growth, MSU FCU is working on a new headquarters. And earlier this year, they were named one of the "Best Small & Medium Companies to Work for in America" by the Society for Human Resource Management. But those are not necessarily the measures of success that management has in mind.

“Our people genuinely care about each other and our members,” said Surline. “We have a family atmosphere from top to bottom.”

Are your employees intrinsically motivated like those at MSU FSU? Or are they extrinsically motivated by traditional bonuses and incentives? Find out what the difference can mean at Finding the "Why?" - Employee Motivations and Successful Incentive Programs, a webinar brought to you by Callahan & Associates.

 

 

 

Oct. 30, 2006


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