Incentive Compensation
for HR Professionals
Michael Dougal, SPHR
HRValue Group, LLC
HRValue Group
• Human resource consulting company
• Owned by a consortium of State Credit Union
Leagues and CUNA Mutual Group
• Dedicated exclusively to providing HR support
to the credit union industry
HRValue Group’s
Products and Services
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Executive Search
Staff Recruiting
Virtual HR
Compensation System
Design
• Benefits Analysis
• Human Resource
Policy Development
• Background Checks
• Employee Handbook
Development
• Performance
Management Programs
• Organizational Structure
Analysis
• HR Assessments/Audits
• Employee Opinion
Surveys
• Training Programs
Presentation Objectives
• Discuss the importance of reward systems
and how they can help your credit union
• Revisit what motivates employees
• Discuss organization culture as it relates
to reward systems
• Present, identify and discuss tried and
true, as well as new reward ideas
• Explore the “ins and outs” of cash
incentive plans
Why Be Concerned About
Rewarding Employees?
• Turnover costs money: What does it cost to
replace a Teller? MSR? Loan officer?
• Rewards can “sweeten the pot” and allow you
to attract and retain the “best of the best”.
• Good employees are a key competitive
weapon: Where will your members go if they
feel they are not treated well?
Fifty percent of employees are
doing just enough to keep their
jobs!
Dean R. Spitzer, Ph.D.
Credit Union Management
Eighty-four percent of
employees surveyed could
perform significantly better if
they wanted to!
Dean R. Spitzer, Ph.D.
Credit Union Management
What Factors Motivate
Employees Most?
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High wages
Promotion in the company
Job security
Feeling of being in on things
Tactful discipline
Good working conditions
Interesting work
Personal loyalty of supervisor
Full appreciation of work being done
Help on personal problems
The Survey Results!
What supervisors think
1. High wages
2. Job security
3. Promotion in the company
4. Good working conditions
5. Interesting work
6. Personal loyalty of supervisor
7. Tactful discipline
8. Full appreciation of work being
done
9. Help on personal problems
10. Feeling of being in on things
What employees say they want
1. Full appreciation of work being
done
2. Feeling of being in on things
3. Help on personal problems
4. Job security
5. High wages
6. Interesting work
7. Promotion in the company
8. Personal loyalty of supervisor
9. Good working conditions
10. Tactful discipline
Cash is not the only answer!
Your Reward System Should
Match the Organization’s Culture
What is Your Culture?
Four Common Cultures:
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Clan Culture
Adhocracy Culture
Hierarchy Culture
Market Culture
Clan Culture
Characteristics:
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Focuses on internal issues, but values discretion
Manage environment through teamwork
Relationships and teamwork, rather than
hierarchy, are predominant
“Family business” feel
Example – Southwest Airlines
Adhocracy Culture
Characteristics:
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Focuses on external environment
Values flexibility and discretion
Key values are freedom, creativity and risk-taking
Entrepreneurial environment
Example – Apple Computer
Hierarchy Culture
Characteristics:
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Focuses more on internal than external issues
Values stability and control over flexibility
Formal structures, policies and procedures
Efficient, reliable operations
Management style – conformity
Example - McDonalds
Market Culture
Characteristics:
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Focuses on external issues, but values stability
and control
Strong sense of mission/customers
Productivity, consistency and results
“Best practices” and benchmarking very important
Example – General Electric
A Combination of Factors
Retain and Motivate
Tangible Rewards and Intangible Rewards
– Tangible: Cash, merchandise, gift certificate, trophy,
plaque, jewelry, trinkets
– Intangible: thank you’s, recognition, feeling in on
things, opinion valued
Elements of Effective
Tangible Rewards
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Fair: Reward matches the accomplishment
Rewards performers
Does not reward poor performers
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Combines individual, team and credit union
performance dimensions
Combines pay and non-pay rewards
Tied to success measurements that can be tracked
and communicated regularly
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Rewarding with Cash
Merit Pay
• With merit pay, employees receive different adjustments to
base pay according to their individual level of performance.
• Is it really merit pay if the difference between the highest and
lowest increase is only two percent?
• Lasting value?
Bonus/Incentive Pay
• Reward?
• Motivation?
• Become an expectation?
Examples of Non-Monetary,
Tangible Rewards
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Time Off
Gift Certificates
Gifts
Trinkets
Other?
Intangible Rewards
• Underutilized
• Under recognized
• Often forgotten
• Easy to administer
• Can be more powerful than the tangible reward
but not a substitute
Elements of Effective
Intangible Rewards
• Fair
• Don’t over do it
• Authentic
• Spontaneous, but not erratic
Examples of
Intangible Rewards
• Thank you’s
• Praise
• Outings and celebrations
• Training opportunities
• Project opportunities
Some Quotes on
Intangible Rewards
• “Many managers underestimate the power of
praise.” --Robert Flax, President, Motivational Systems
• “I’m open, honest and up front. As soon as I get
information, employees get information.”
--Nancy Singer, First of America Bank
• “People want to feel what they do makes a
difference.” --Frances Hesselbein, The Drucker Foundation
Signs Your Tangible/Intangible
Reward System is Not Working
• Good people leave
Of the last five people who quit at your credit union,
how many were good performers?
• Employees don’t go that extra mile to please
the members
• Other?
Some “No Cost” Ideas
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Write a thank you note and post it on someone’s door
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Broadcast e-mail or voice mail recognizing an employee
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Just say “thank you” without talking about anything else
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Use “pat on the back sheets” that go into an employee’s file
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Recognize employees in newsletters to members
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Interrupt business to say thank you to an employee in front of
everyone in the lobby
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Utilize electronic billboards to recognize employees, if you
have them
More “No Cost” Ideas
What are some no cost things you do at your
credit union?
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Some “Low Cost” Ideas
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Gift certificate: car wash, dinner, book store, Amazon.com, etc.
Lunch with CEO
Award pins and trinkets
Conference attendance
Tickets to events
Weekend getaway packages
Massage, facial
Flowers
“The way we see it, spending $1 on something clever is better than
spending $50 on something ordinary and forgettable.”
Richard File, Partner at Armigon
More “Low Cost” Ideas
What are some low cost things you do at your
credit union?
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Incentive Programs
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What do we expect the program to accomplish?
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Individual, team and/or global
How much $$ are you willing to commit to incentives?
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Award, motivate, attract, retain, instill teamwork, sell, crosssell, take ownership of strategic plan, etc.
Affordability
Market data
How much does it take to change/reinforce behavior?
Reward at different levels of performance
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Should not be an “all or nothing” approach
Incentive Programs
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Payout frequency
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Plan activation or trigger
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Positive net income, satisfactory exam results, etc.
Incentive program guidelines that outline:
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Annual/quarterly/monthly/pay period
Who is eligible, who is not
The minimal expected performance required to provide an
incentive pay out
Impact on overtime pay
Communication, communication, communication
Incentive Programs
Plan Level
Reward
Senior Management
20%
Supervisors/
Technical
15%
Clerical and
Administrative
5%
Incentive Programs
Plan Level
Threshold
Target
Superior
Senior Management
15%
20%
25%
Supervisors/
Technical
10%
15%
20%
Clerical and
Administrative
3%
5%
10%
Incentive Programs
Plan Level
Senior
Management
Level
Threshold
Target
Superior
Global
8%
10%
12%
Team
4%
5%
8%
Individual
3%
5%
5%
15%
20%
25%
Global
3%
5%
6%
Team
4%
5%
8%
Individual
3%
5%
6%
10%
15%
20%
Global
.5%
1%
2%
Team
1%
2%
3%
Individual
1.5%
2%
5%
3%
5%
10%
Total
Supervisors/
Technical
Total
Clerical/
Admin
Total
Questions?
HRValue Group, LLC
15800 Haggerty Rd.
Plymouth, MI 48170
Phone: 888-272-4598
www.hrvaluegroup.com