Determining how much to pay an employee is an important decision for employers. Many organizations agree on salaries by negotiating the pay package with employees. For one North Carolina credit union, it declines to haggle over wages. This credit union refuses to negotiate salaries with job candidates and its staff.
Local Government Federal Credit Union does not quibble with its employees and job applicants over salary. When an employee candidate is offered a position, the salary is presented as a first and final offer.
At first, LGFCU's stance on compensation might appear off-putting. After all, unilaterally dictating salary terms does not seem to be very open. This approach is not an effort at playing hardball. Rather, this approach is part of a deliberate philosophical strategy.
One reason the credit union declines to negotiate salaries with job candidates is a matter of trust. A negotiation, by its definition, creates opponents. When parties negotiate, they compete for bargaining power. We maintain that when the first official exchange between a new employee and the credit union is to compete against one another, loss of trust can be a consequence. It is vital to LGFCU's culture that employees know that the credit union can be trusted.
Trust begins by being transparent with employees on how their salaries are set. All salaries are established by comparing one's qualifications, experience and performance to an objective salary scale. The salary scale comes from exhaustive research on market pay. The process is quantitative and independent; no smoke and mirrors here. The compensation formula for each position is available for employees to review and understand.
Another reason the credit union does not negotiate salaries is to avoid unintentional bias. It is widely reported that some classes of people face disadvantages for equal pay. For instance, gender pay inequity is often attributed to women's predisposition to not negotiate salaries during the hiring process. Some folks are just shy when it comes to talking about compensation issues. LGFCU believes every employee should have an equal opportunity to fair compensation. The burden of ensuring fairness is not on the employees. It is up to the credit union to make sure fairness is open to all.
Local Government FCU does not try to prevent employees from discussing compensation issues among themselves. We are not delusional enough to believe that these sorts of discussions are not occurring. The fact is, we think watercooler conversations are good for transparency and equality.
Some job applicants are suspicious at first when the hiring rules are explained. After all, most college graduates are taught to negotiate a competitive compensation package when hired. But I only recall one incident where a new candidate declined a job offer because the credit union refused to negotiate. Overall, the staff seems to appreciate the refreshing approach.
Local Government FCU prides itself on being open to its employees. I personally interview all new hires. This engagement from the top with new employees helps establish a sense of confidence in the organization’s core values. Hiring smart folks with the right credentials is important. Making sure they share our core values is vital.
Avoiding negotiations also has a practical benefit as well. LGFCU employment strategy is to make its work environment attractive to new talent. This begins by creating a culture that nurtures high performers in a nonthreatening way. Ensuring fair compensation for all is a strategic step to these objectives.
Maurice R. Smith is president of Local Government FCU, Raleigh, N.C. and is also an attorney whose bar admissions include North Carolina, District of Columbia and the U.S. Supreme Court. He can be reached at Maurice.firstname.lastname@example.org.