"Sales results are the product of management and process, not incentives," Graham said.

Clinton Koker, CEO of Wichita, Kan.-based Koker Goodwin & Associates, joined Graham in providing incentive strategies for the group. Koker is the creator of Compease, a Windows-based employee compensation management system customized for credit unions. About half of those at the workshop indicated they use Compease.

Koker agreed with Graham that management, not incentives, drives sales employees.

"Having managers who lead, inspire, focus, coach, and counsel, those managers, I guarantee, get the best results on their incentive program without regard to the incentive," Koker said.

Still, both gentlemen agreed that if good management and systems are in place, sales incentives can be motivating.

Incentive plans follow a basic psychological theory called the law of effect. Law of effect states that if behavior has a positive consequence, it will be repeated. Expectancy theory is also crucial to an incentive plan, and determines whether or not the employee believes he or she can reach the goal.

Koker said many organizations go wrong in not providing a "line of sight" that supports an employee's expectancy. Employees need to believe that they have the skills and ability to affect the organization's results, and must be able to visualize success in reaching incentive goals.

If incentives are unrealistic, if goals change too often, if there is distrust between employees and management, or if a sales incentive plan is new, employees may not be able to establish a line of sight, Koker said.

Graham discussed incentive plan structure, saying that in order for a plan to be effective, it must be linked to the credit union's overall sales strategy.

"All credit unions say they want improved relationships with their members, and yet they pay for product sales. Most of you are misaligning with your strategy," Graham said.

Too often, Graham said, credit unions try to create sales compensation programs that are fair and reward all employees equally. That is not much of an incentive to star employees, he said.

"The unfortunate reality of incentives is that they are not fair by design. If you try to make your incentive plan fair for everybody, you'll drive yourself crazy," he said.

Both gentlemen agreed that incentive plans for non-selling roles, like operational back office departments and IT, are a bad idea.

"Back office people get jealous when it appears to them that the front office isn't working any harder than before, just getting incentives for doing their job. If you tie the incentives to extra work, that jealousy will go away," Koker said.

If a credit union wants to develop a plan for back office staff, team-based goals emphasizing service to front office staff work best.

Scorecard measurements work best for both front and back office plans. Scorecards assign a weight to each goal, and allow employees to earn at least some compensation for meeting some goals. Graham recommended limiting goals to five or fewer to keep the team focused.

Both HR pros also agreed that most credit unions spend too little on compensation plans, particularly for management and executives.

"Social scientists believe that a potential of at least 10% of base pay is the minimum needed to be motivational. I think the more a person makes, the higher the percentage has to be to be motivational. In credit unions, the biggest mistake I see is the amount is too low," Graham said.

However, in some cases, credit unions pay too much to front-end employees, and should transfer more of the incentive budget to managers, Graham said.

"I see credit unions setting pay too high at the non-exempt level, and not enough for exempt employees. If you're already paying 100 percent of market for tellers, and then you throw in a 15 percent incentive, you're paying 115 percent of market, and that's a recipe for going out of business," he said.

Compensation plans for front-line workers should include a competitive base salary with the opportunity to earn extra incentives. Managers and executives, however, should have a larger percentage of their pay tied to goals, Koker said. –[email protected]