Incentive pay, when used within the context of a reward system, should help motivate your credit union staff to achieve or exceed the desired results. Psychologists and compensation professionals often explain motivation to perform in terms of the Expectancy Theory which states that motivation is the product of three perceptions: expectance, instrumentality and valence.· Expectance - The employee’s assessment of their ability to perform the required job tasks. The employee must believe he/she can achieve/affect the end results.
Line-of-sight is typically used to describe this ability, which basically means how much control someone has over achieving a specific goal. Incentive programs with a strong line-of-sight for each employee have the greatest motivational impact and, hence, the greatest potential to be effective.
Also related to expectance is how difficult the performance levels (targets) are to achieve. Targets that are set too high or two low usually have little or no motivational value.
Line-of-sight is typically used to describe this ability, which basically means how much control someone has over achieving a specific goal. Incentive programs with a strong line-of-sight for each employee have the greatest motivational impact and, hence, the greatest potential to be effective.
Also related to expectance is how difficult the performance levels (targets) are to achieve. Targets that are set too high or two low usually have little or no motivational value.
· Instrumentality - The employee’s belief that requisite job performance will be rewarded by the credit union. Employees must believe that if they meet the objective, they will be rewarded.
Instrumentality becomes lower when subjective measures are utilized. We recommend building your incentive plan around concrete, objective measures. And be prepared to follow through with your plan, even if financial conditions change. Failing to do so will reduce instrumentality of future plans.
Instrumentality becomes lower when subjective measures are utilized. We recommend building your incentive plan around concrete, objective measures. And be prepared to follow through with your plan, even if financial conditions change. Failing to do so will reduce instrumentality of future plans.
· Valence – The value employees attach to the organizational rewards offered. The employee has to value the reward or it will have little motivational value.
Rewards must be significant enough to motivate effort (physical and/or mental) beyond what would be the norm or status quo. Providing superior member service or reducing operational costs are a few examples of behaviors that can be encouraged with an incentive program for beyond the status quo.
Rewards must be significant enough to motivate effort (physical and/or mental) beyond what would be the norm or status quo. Providing superior member service or reducing operational costs are a few examples of behaviors that can be encouraged with an incentive program for beyond the status quo.
Creating an incentive program around employees referring family and friends to apply for home or auto loans at your credit union is a good example of a lending incentive. Credit unions can typically have a loan referral fee of $5-$10 for consumer loans and $25-$50 for mortgage loans.
Your credit union could also benefit from creating an incentive program around staff selling auxiliary products such as payment protection, GAP protection or extended warranty products. A common structure uses a “pay per sale” method where the employee is paid a certain dollar amount for each sale ranging from $10-$25 per policy.
Loan growth goals can be cascaded down throughout the credit union with senior managers and back office staff being incented for the overall credit union loan growth goal. Incentives may include branch managers being rewarded for achieving their branch loan goal; loan officers and processers incented on personal loan production; and tellers or other front line staff rewarded for loan referrals.
In conclusion, it is possible to structure a plan that pays for itself and offers higher opportunities to all employees. Incentive plans are designed to share organizational gains with all stakeholders. One last tip – when developing your plan we recommend developing a cost/benefit analysis. This will provide the template needed to set up a successful incentive plan at your credit union.
Related Services: Incentease, Compease, Performance Pro
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