Incentive Pay Expectations During the Down Times
Credit union employees work hard, and incentive programs allow credit unions to remain competitive with other financial institutions. However, these programs need to be properly directed.
Insurance giant AIG has become the poster child for corporate greed for our present economic crisis. After receiving billions of taxpayer bailout funds, the company made headlines for paying millions in bonuses or "retention payments." Angry taxpayers responded with death threats to bonus recipients. AIG management then requested employees voluntarily return the bonuses. A distinguished senator suggested those employees should perform ritual suicide for expecting and accepting the money. Congress has begun steps to specifically tax those employees – essentially negating the bonuses.
In response, one AIG employee and bonus recipient decided to quit in a very public manner – he sent a copy of his resignation letter to the New York Times. He lamented the hard times that have fallen on the country and his company. However, he also angrily defended his retention bonus while chastising management for allowing public vitriol and political opportunists to punish innocent, hardworking employees:
"As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house."
Is it righteous anger or poorly disguised greed?
It is easy to stand from afar, pointing in judgment of others' greed and selfishness. However, we must take a look within our house to make sure that we are not recycling those same issues.
Credit unions use a variety of different incentive programs to compliment base employee salary. Some use individual rewards; some have group rewards. They can be designed to capitalize on either intrinsic or extrinsic motivation. In some programs, employees can check their progress toward goals on a daily basis, while in others, incentives are calculated upon the year-end closing of the books.
When the issue of incentive pay comes up, one key element is employee line-of-sight – the point-to-point relationship from behavior and any resulting reward. And in the credit union world, that behavior is often directly tied to some kind of member service.
Sometimes member service will not immediately benefit the bottom line. Sometimes, an employee will have to be the one to point out a course of action that is in the member's best interest – but maybe not what that member wants at that moment. Maybe the loan product a member needs will not be the product that will help an employee reach an incentive goal.
For many years, this type of service has been the hallmark of the credit union industry. The people on the other side of the counter are not simply customers (or worse yet, just account numbers) – they are members and integral part of the cooperative spirit. As credit unions, we serve them and their interests first; by design, everyone will benefit.
A well-designed, closely maintained, and properly executed incentive program rewards individual effort and service without sacrificing the spirit of service. Growth is encouraged, but not at the expense of "doing the right thing" for the member.
Credit union employees work hard, and incentive programs allow credit unions to remain competitive with other financial institutions. However, these programs need to be properly directed. Let loose of the reins, and we can see our efforts to be competitive bring us too close to our banking brethren – and candidates to be painted with the same shades of “greed” and “ruthlessness” that color them today.