Use of Employee Incentives Has Increased in Recent Years as Credit Unions Seek to Overcome Operational Challenges

By Chad Thiele
Senior Research Analyst
Credit Union National Assn.

In CUNA’s 2005/2006 Credit Union Environmental Scan (E-Scan), CUNA economists predict that credit union loan growth will slow to around 8% in 2006 because of rising interest rates, high levels of consumer debt, high oil prices, and low pent-up demand for autos and home purchases.

Decreased demand combined with increased competition means that credit unions are going to have to work harder to get their members’ loans. Competition now comes from traditional lenders (e.g., banks, savings & loans, etc.), and also from stores, insurance companies, and payday lenders. Credit unions are also competing with various sources for their members’ savings dollars and use of convenience services.

When the imminent shortage of skilled labor is added into the mix, we find that credit unions are going to have to be creative if they want to achieve all their financial goals. Although not the cure- all, one thing credit unions can do to help meet these challenges is to offer incentives to employees.

According to the 2006-2007 Incentives Survey from CUNA’s Center for Research & Advice, 82% of credit unions with $1 million or more in assets that offered employee incentives feel that their incentive programs have helped to improve the credit union’s financial performance. A majority of credit unions that offer employee incentives also feel that their incentive plans have increased employee satisfaction levels and/or improved employee retention.

Therefore, it is not surprising that the use of monetary incentives has increased dramatically in recent years. As of year-end 2004, nearly 40 percent of credit unions with $1 million or more in assets offered some of their full-time employees monetary incentive payments.

However, as experts point out, there are many things that credit unions should consider before offering employee incentives. If implemented incorrectly, employee incentives might not only fall short of accomplishing their desired goals, but they can also have negative effects on employee morale and the credit union’s bottom line. However, if done correctly, incentives can be a win-win for the employee and the employer.

CUNA’s 2006-2007 Incentives Survey is designed to give credit unions an overview of the key points they should consider before implementing any employee incentive plan, including some of the potential pitfalls. The incentive survey also provides current trends regarding the use of incentives in corporations nationwide. It also includes information on the employee incentives other credit unions are offering based on a survey of over 350 credit unions nationwide. For more information please visit http://advice.cuna.org and click on "Reports".

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