Yes, you read the title correctly.

That was the first step the Pembroke Pines, Fla.-based, $575 million Power Financial Credit Union recently took to create a team-based culture that is truly people-centric versus product-centric.

Power Financial President/CEO Allan Prindle has years of experience specializing in turning around troubled financial institutions as well as building high-performing teams. During his 30-plus-year financial career, he has spent significant time researching the area of incentives, including much of his MBA program at Boston University.

After a large merger in the late 2000s and successfully weathering one of the worst economic downturns in our country's history at ground zero of a sand state, states in which homes lost more than half of their value, Prindle (pictured at left) recognized then was the right time to focus on growth. So he embarked on creating a business model that included a long-term goal of eliminating incentives and becoming fee-free.

He shared this research with his executive team, including me, to aid in planning and implementing a new compensation structure. The evolution away from incentives was, at first, difficult for me. Like many in our industry, I spent the first half of my career in commission-based sales or in positions where the majority of my income was driven by variable compensation.

However, as in most cases, when you put the facts on the table, rational minds come to the same conclusion. In this case, Power Financial started its pivot and, after a few months of planning and preparation, on Jan. 1, 2015, transitioned from individual incentives to a team-based, gain-sharing plan. That plan provided quarterly payouts based upon the success of the entire Power Financial team.

The change posed a daunting challenge as our organization's leadership teams also needed to evolve. They had to move from the command and control nature of incentives and embrace the insights required to attain sustainable business advantages in a hypercompetitive marketplace.

A review of the business issues and strategy we employed helped to shape the situation facing our team. Power Financial was the result of the merger of two credit unions just before the Great Recession. We underwent a process of streamlining and consolidation of overlapping duties, which reduced the combined branch footprint by more than 50% and its FTE headcount from more than 200 to 125.

Our organization underwent some cultural disruption during this period that severely affected its financial performance. For example: The credit union experienced negative membership growth of 15%, negative organic loan growth and a forecast ROA of just 0.15%.

Turning the company around involved a four-pronged strategy:

Transitioning from a “hunker down” mode to re-igniting our organic growth engine;
Strategically aligning the organization while retaining our “high touch” legacy;
Uniting a group of individuals into a cohesive, high-performing team; and
Growing revenue through added value, a.k.a. “good profit,” rather than increasing or creating new fees – “bad profit.”*

Any one or even two of these initiatives would have been a significant challenge, let alone all four. With that said, this is the sort of challenge high-performing teams get excited about!

Our action plan included a return to what makes credit unions a better option than other financial institutions. Power Financial focused on fundamentals, primarily leveraging its core competency of real estate lending. Our credit union also removed all individual incentives.

Next, we created and continuously communicated the family concept, celebrating actions by team members that demonstrated these values.

The results of our teams' efforts have been nothing short of astonishing. The credit union now has net promoter scores above 80% – as high as 90% some months – and members enjoy a much more robust experience with us operating at the fiduciary level as a trusted adviser offering a planning approach, rather than a product-centric approach. Employee engagement also has improved more than 20%.

The results are summarized in the following table.

Other benefits of the change included a significant reduction in reliance on indirect loans. The credit union was also able to reduce or eliminate several fees.

We see other non-measurable results as well during our staff meetings, conversations, and employee interactions with both internal and external customers.

While this has been an interesting experiment, this case study is not intended to label incentives as inappropriate, but to provide an alternate path to traditional methodologies in compensation and performance management.

*“Bad Profit, Good Profit, and the Ultimate Question: How 'Net Promoter' Companies Thrive in a Customer Driven World,” The European Business Review, by Fred Reichheld, Rob Markey and Andreas Dullweber

Dr. David L. Tuyo is senior EVP, CFO and COO at Power Financial Credit Union. He can be reached at 954-538-4400 or dtuyo@powerfi.org.

Instant Insights /

Achieving Growth: First, Remove All Incentives

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