Management Minute

Q: We are a $144-million credit union seeking an incentives policy or practice to encourage selling of products and services. Do you have one to share?

A: I do not recommend implementing an incentive program. Instead I suggest you make efforts to improve processes, enhance teamwork and communications, improve pride in workmanship and eliminate barriers between departments and teams. Dr. W. Edwards Deming outlined in his theory of management how these and other change efforts are the keys to improving productivity, quality service and morale.

Many managers and leaders believe that productivity improvements and/or enhanced profits must be achieved by motivating the employees to work harder through incentives and other rewards. Results of many studies, however, support Dr. Deming's writings and have shown that incentives/rewards are ineffective in improving behavior or attitudes. For example, if management wants to improve teller overages and shortages, studying the process and working with the tellers to enhance procedures would be far more effective than offering them incentives or rewards to have fewer differences. The incentive approach would most likely lead to tellers setting up their own "kitty" to put and take from when they were over or short. Achieving the incentive pay becomes more important than improving the process.

Dr. Deming states, "Pay is not a motivator." This opinion has been supported by many studies that found when people were asked, "What do you care about most at work?" pay usually ranked fifth or sixth.

In addition to not improving behavior or attitudes in the long run, incentives often have negative side effects such as, lack of strong teamwork and reduced risk taking. The quickest way to reduce cooperation is to force employees to compete for rewards. While everyone is striving to improve their incentive pay, no one is improving the process to achieve the collective gain. Reduced risk taking and creativity are also are major causalities of incentives/rewards. Studies have shown that people working for rewards try to minimize challenges and creativity suffers.

In summary, I suggest you study the writings of Dr. Deming to learn how to improve productivity, lower costs and enhance quality of service. Introducing incentives would not be effective and would probably cause damage to teamwork and productivity.

Chuck Cockburn is president of Credit Union Strategic Planning, and formerly was a credit union CEO for more than 25 years. Mr. Cockburn's coaching led to eight prior direct reports also becoming CU CEOs.

Editor's Note: A new feature, "Management Minute" gives readers the opportunity to submit a management question to Chuck Cockburn of CU Strategic Planning. To submit a question, go to the Letters to the Editor tab at cujournal.com. Be sure to indicate in your message that it is a question for "Management Minute."