How To Take The Emotion Out Of Salary Negotiations And Still Keep Employees Engaged

Transparency and an objective salary scale encourages top performance from staff at Local Government FCU.

Employees are an integral resource for credit unions, but finding ways to engage them can prove challenging. Institutions that typically succeed at building an engaged and therefore happy, productive, and loyal workforce typically view employee engagement as an operational cornerstone, something without which the institution cannot be successful, says Don Larsen, senior vice president human resources at Local Government Federal Credit Union($1.5B, Raleigh, NC).

In this QA, Larsen discusses how Local Government keeps talent, determines the market value of employee performance, and links cooperative philosophy to employee engagement.

Don Larsen, SVP Human Resources, Local Government Federal Credit Union

How does LGFCU retain talent?

Don Larsen: Our employees are our greatest asset, and we aspire to hire the best and brightest. That might sound clich; however, the sentiment is ingrained in our processes.

We provide an environment that fosters collaboration, freethinking, and an entrepreneurial spirit. That is not to suggest that staff members are not expected to perform the requirements of their jobs, but we encourage open communication and provide an open door policy that enables staff to freely present ideas and feedback. By listening to employees, providing development opportunities, and promoting from within, we deliver on our mission of improving the lives of our members.

When did this philosophy take hold?

DL: This philosophy began with president Maurice Smith’s leadership at LGFCU and has continued ever since. It was a philosophical pinnacle of Mr. Smith’s leadership, one he believed was paramount in our continued success. The result has proven to be beneficial to LGFCU and has made us a desirable place to work.


local government federal Credit Union
Data as of 03.31.15

  • HQ: Raleigh, NC
  • ASSETS: $1.5B
  • MEMBERS: 240,969
  • 12-MO SHARE GROWTH: 6.73%
  • 12-MO LOAN GROWTH: 12.17%

How do you communicate it to employees, especially during the interview process?

DL: Mr. Smith personally interviews all new hires. He engages with new employees to establish a sense of confidence in the organization’s core values. To quote Mr. Smith, Hiring smart folks with the right credentials is important; making sure they share our core values is vital.’

As an organization, we try to provide transparency to the staff members and strongly encourage open discussion between them and their manager. We also encourage staff to discuss where they are with human resources and share any concerns or questions with leadership, up to and including with Mr. Smith directly.

LGFCU aims to have employees perform at market within three years of the initial hire. What does this mean? How do you do that?

DL: We employ a time to climb theory based on the foundational belief that a fully functioning and successful employee should be at market within their first three to five years of employment. We target our salary ranges at the 75th percentile and believe that, because we hire the best people, their compensation should be commensurate with the market for that position. Time to Climb provides movement within the salary range to get the employee to the market or midpoint of the established salary range.

We establish all salaries by comparing a candidate’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. We review the market data for every position no less frequently than every other year, and we give employees the opportunity to understand where they stand.

How do reviews factor in?

DL: We use a 90-day informal review to discuss with the staff member not only how they are performing but also how we are doing as an employer and if we are living up to the ideals and standards we communicated to them during the interview process.

Additionally, we use annual reviews to measure not just their performance but also where the staff member is in relation to our Time to Climb theory.

During the annual process, we provide salary information for the managers to discuss with their team members.

Talk more about salaries with Time to Climb.

DL: Because we target our ranges at the 75th percentile, we typically begin new hires in the first quartile of their range and provide them the opportunity to receive well-earned merit increases in their first few years to bring them to the market. If the employee is performing well, we adjust their compensation as appropriate. That adjustment can come in the form of a merit increase; it can also come as a market adjustment if the data indicates the market has improved.

Hiring smart folks with the right credentials is important. Making sure they share our core values is vital.

But we don’t stop there. We also have a spot bonus program that allows managers to provide a one-time bonus to an employee that recognizes extraordinary performance, either over the course of the review period or for a specific project or accomplishment.

What is the average tenure of an LGFCU employee?

DL: The average tenure at LGFCU presently is four years. However, 43% of staff tenure is greater than three years, with several staff members exceeding 10 years of service.

Is there a link between LGFCU’s philosophy and employee engagement?

DL: Yes, the link is demonstrated in our turnover and other employee behavior. Turnover in any given year is significantly lower than the industry average, according to multiple annual surveys. In fact, the current turnover rate is 2% through June 2015. Continued low turnover demonstrates the success of LGFCU’s talent management and employee engagement strategies.

Aside to seeing a link in our tenure, we also believe employee engagement is shown through a variety of other numbers:

We receive frequent referrals from current employees for open positions, averaging at least one per advertised opening. LGFCU has a culture that promotes and embraces work-life balance as well as putting family first. Further, LGFCU is community-focused and encourages volunteerism on the part of our staff, even providing paid time off from work for such endeavors. Employees enjoy this and believe their friends and family will as well.

Employees frequently take advantage of our tuition reimbursement and certification bonus programs. Over 10% of employees work towards or complete a new degree or certification each year, rather than looking for another position to stay fresh and challenged.

Employees show their engagement with their benefits by flocking to events and participating in activities, even typically less-interesting ones like voluntary open enrollment education sessions. Over 50% of employees came to the most recent open enrollment meetings, and many events, like our annual wellness fair, boast participation in excess of 75%.

How do you track employee engagement?

DL: Our employees are by nature both creative and inquisitive. We look for an entrepreneurial spirit that makes a lot of the standard best practices in employee engagement surveys ineffective in assessing employees’ thoughts or providing feedback to make LGFCU a better place to work.

Instead, we maintain an environment of open communication in which we both welcome and act upon direct feedback. We rely on how our employees show their engagement, for example, by showing up to events where they ask the hard questions about our benefits and policies, providing feedback, seeking to better themselves within the organization, and recruiting their friends, family, and contacts to join them in our work here at LGFCU.

What are the qualities employees look for that LGFCU aims to fulfill?

DL: Employees look for an environment that not only provides opportunity for career and professional development but also provides a culture of respect. They seek employment in an organization that provides inclusion and work-life balance, and LGFCU excels in providing an environment that meets all those requirements.

LGFCU operates with the intention of being an employer of choice. We have built our compensation and benefit plans with that in mind, and we have built a culture of trust and opportunity. We recognize and reward success.

What other best practices or programs/solutions does LGFCU use to keep talent?

DL: LGFCU fosters an environment where personal and professional development are important. We demonstrate our commitment through the availability of training opportunities, reimbursement for education above and beyond training opportunities, and a bonus program for major achievements. LGFCU encourages continued education, and we prove that commitment with awards for the achievement.

July 20, 2015

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