Employee Incentives and Credit Union Results (part 2)

In Part 2 of this series we explore the performance of credit unions with incentive programs. Is there a correlation between staff incentives and operational results?

 
 

In last week’s article, we discussed the fact that the four credit unions listed as “Best Companies to Work for in America” by The Great Place To Work ® Institute all utilize employee incentive programs to motivate and reward staff for performance. This week we examine the data to see if there is a correlation between staff incentives and financial results. Do staff incentives contribute to superior financial performance?

The credit unions named “Best Companies to Work for in America” by The Great Place To Work Institute not only have staff incentive programs in common; they also have achieved strong financial results. Digital FCU, for example, ranks number one in its peer group according to Callahan’s Return Of The Member (ROM) score. Spokane Teachers has achieved outstanding growth in loans, shares, and assets.

While these financial measures are important, productivity measures are equally useful to assess the effectiveness of credit union staff and the overall performance of the organization.

Incentives To Enhance Productivity

Pacific Service Credit Union has distinguished itself among its peers along virtually every measure of productivity. The $1 billion credit union employs approximately 100 staff which results in the organization generating over $10 million for every employee. This is over two and a half times the average for credit unions over $1 billion in assets (see graph).

As the chart below indicates, PSCU also outperforms its peers in every other measure of productivity.

Productivity Ratios - Pacific Service Credit Union (Q2, 2005)
 
 
 
 
 
 
PSCU
$1B Peer Average
Times Greater
Members per Employee
687
423
1.6
Net Income per Employee
$57,803
$27,740
2.1
Shares per Employee ($M)
9.1
3.8
2.4
Loans per Employee ($M)
6.4
3.0
2.1

Noelle Fischer-Herbet, vice president of corporate development at PSCU, attributes the credit union’s outstanding productivity to two key initiatives: PSCU’s ability to attract and motivate staff and its success at utilizing technology.

According to Fischer-Herbet, PSCU’s success is a result of the quality and caliber of the staff. PSCU seeks quality candidates in the recruiting process and is willing to reward them. In fact, the average salary and benefits will make you want to send them your resume—an unprecedented $88,000 per employee! PSCU’s compensation structure and its incentive program help to motivate staff and achieve success.

Fischer-Herbet acknowledges that PSCU’s investment in technology is another key driver of productivity. PSCU’s purchase of an automated loan program, for example, reduced the manpower required to review loan applications. By automating its loan process, PSCU staff are more productive because they can spend more time on those loans that were not approved and work directly with those members.

Staff incentive programs in and of themselves will not lead to superior financial results. There are several credit unions (e.g. North Carolina State Employees Credit Union) that do not have staff incentive programs and are top performers. Likewise, there are many credit unions that do have programs in place but are not achieving the results desired. Nonetheless, as the credit unions discussed here illustrate, staff incentives can serve as a contributing factor to strong performance. By seeking to influence a credit union’s most important asset: its people, well designed incentive programs can help motivate and reward the behavior desired which in turn can lead to positive results.

 

 

 

Aug. 22, 2005


Comments

 
 
 
  • Well put! Everyone on a CUs management team can understand how their efforts to improve the Member Experience helps every employee be well compensated, every dept obtaint he resources they desire, as well as the member's financial situation. Carolyn Warden, CCUE (former bean counter converted to a Service-is-the-only-advantage believer)
    Anonymous