Let me pick up from where I left off from my column in February.
When I arrived at Patelco Credit Union in the 1980s, I saw room for improvement. For one, it seemed to me that the employees werenot particularly well motivated. This was true even though they are very highly paid compared to their peers. After some checking around, I thought I had learned the cause.
The employees were paid according to telephone company scale. There were only five levels of pay, and after six months an employee could rather easily move into a higher scale. Consequently, most of the employees had reached the top scales; all they couldlook forward to was an annual COLA increase – they had no motivation to improve themselves or to work harder as employees.
I set about changing this, and I think by doing so, I did a lot of good for Patelco – not only the credit union and the employees but also the members. I call my plan Pay for Knowledge.
The old way of paying employees might have been called Pay for Longevity. The longer employees were at Patelco, the more they rose in pay scale. There were other problems withthe old system as well. A serious one dealt with employee evaluations.
An employee could move up a pay scale after a good evaluation from a supervisor. On the surface, this sounds all right, but in practice undesirable results were an effect. The supervisors could have their favorites and bring them along despite the employee’smerit. Office politics often wormed its way into the process. The supervisors, who could be branch managers, were removed enough from the top management that the top management could not scrutinize or understand why certain persons were being promotedto new scales and new responsibilities. Efficiency at the credit union was not particularly enhanced by the promotions.
A Better Way
My new method changed this. We had notebooks made up (now all of this is computerized) that contained job responsibilities and requirements, along with testing materials. An employee who wanted toraise a pay scale had to rise in job description and responsibility. This person had to master the knowledge for that rank and prove it by taking a test. The employee could study the materials at any time, and then take the test at any time.
In other words, the employee was back in the driver’s seat. The employee could decide how much and how quickly he or she wanted to learn and to advance. Then he or she could take the test. If the employee passed the test then that person got the newtitle and was put on the higher pay scale whether or not there was a position open. If the person demonstrated mastery of that position, the employee was paid as though in that position. We felt that if we couldn’t find a position tomatch the employee’s skills, then that was our problem as top managers, not the employee’s problem.
Favoritism and office politics were, of course, eliminated.
Certain persons did not like this kind of promotion. Persons who believed that pay and responsibility should come with years on the job were not so pleased. Persons who did not like tests were not so pleased.
But persons who liked to have more control over their professional lives, persons who believed that it was good both for them and the credit union members to be more knowledgeable and more skilled, liked this new system.
There have been quite a number of benefits to the program. The harder the employees work and the more they know, the more they earn and the more efficient the credit union. The welfare and advancementof the employee and that of the credit union are thus linked. You might say the employees are vested in the credit union’s advancement.
In addition, the credit union got the kind of motivated, efficient employee it wanted. Unmotivated ones departed. As I told everyone very early on: This is not a great place if all you want is a job; this is a great place if what you want isa career.
There were other benefits. Information about products was standardized, especially after the system was moved from notebooks to computers. Thus everyone had the same information about a product, and information passed on to members was consistent branchto branch. Additionally, that information was available instantly on screen so that an employee could inform a member accurately to any question a member had.
Pay for Knowledge made the credit union a more exciting and dynamic place to work. It made it a more efficient place to work, too, thus enhancing value to all the credit union members. And that is what credit unions are all about.