In Case 62, there are many problems concerning compensation. State Bank, one of four large banks in a large southwestern town is struggling with compensation issues, and has issues concerning their overpaid bank tellers. Russell Duncan, the President of State Bank, is responsible for the implementation of the results-pay system, cost of living raises, and other progressive resource practices. However, with all of the positives that Duncan has created, his policies have created troubling issues in his bank that could possibly affect the future status and morale of his employees.
The main issue affecting the bank is the overpaid bank tellers. According to a study conducted by another bank in town, 23 tellers at State Bank are being paid on average $22 per week more than tellers at other banks in town. While this is not a bad statistic, it contradicts what other positions in State Bank are making in comparison to the competition. The study showed that employees holding other positions in the bank such as loan officers, file clerks, and branch managers were being paid wages similar to those paid by other banks.
As a result of this statistic, further issues may arise. If this information were released to the employees within the organization, it could cause problems for management and HR. Long-term problems such as decreased employee morale could occur as well, which could lead to performance problems for the bank. This problem could further escalate, in which the bank risks losing employees in certain departments. However, before the bank takes action on this situation, they need to research where statistics came from, and if it is reliable.
If the statistics are reliable, then the bank can implement a plan; if the statistics are not reliable, they bank should still be prepared to discuss the issue with the employees within the bank if the information were to leak. In the case, the HR committee met and discussed the issues regarding the bank tellers and realized that the bank was suffering an extra cost of $26,000 dollars a year to pay bank teller employees. Consequently, they want to cut the raises granted to their teller employees. According to the case, the tellers have not been told how much their raises would be, but are expecting both the merit and cost-of-living raises.
As a result of this, the bank may try to lie to their employees and cut the raises based on a excuse such as “poor performance. ” However, it would be very unethical of the bank to secretly cut raises of the employees if the employees were performing their job well. Another issue that can occur is the loss of employees. If State Bank comes out and takes the raises away from their tellers, they risk losing highly competent employees or affecting the work performance of their tellers in the future.
The bank needs to think of a way to implement a plan to satisfy the needs of the employees, or notify the tellers about cutting their raise without losing or upsetting them. Another issue that exists within the bank is the performance compensation plan. The case states that employees can earn raises from 0 to 12% each year depending on job performance. Job performance raises are good for a company, and can enhance the performance of the employees. However, the job evaluations of these performances need to be contract specific for each employee and agreed upon before raises are granted within the company.
In the case, it stated that the raises are typically determined by the HR Committee during February, and are granted to employees on March 1 of each year. This way of determining raises is a big problem surrounding State Bank. The HR Committee may not know the actual performance of each employee, therefore not compensating each employee fairly. If there is no uniform system in place, HR can also play favors on some employees compared to others. (This could possibly be the problem regarding the raises of the tellers) This way of evaluating performance also raises questions regarding cost-of-living raises.
While cost-of-living raises are good to have within a company, they need to be accurate and fair for all the employees to avoid problems. These raises need to correspond with inflation and the cost-of-living within the area as well. The HR department needs to have a detailed and structured policy on how they give these raises to each employee. It is good for companies to issue these raises because employees may have a hard time supporting themselves and their families if the cost of living increases, while their salary stays the same.
After looking at the case, I came up with a solution for the bank to follow for their compensation plan. This solution will also eliminate the inconsistent performance raises granted by HR. In order to figure out how other institutions deal with compensating their tellers as well as other employees in their financial centers, I interviewed a Personal Banker from Fifth Third Bank. This individual also happens to be my brother, Joe. He explained to me that there is a hierarchy in the Bank. This hierarchy is structured based on pay scale.
It goes bank Tellers, Personal Bankers, Licensed Personal Bankers, Customer Service Manager, and the Financial Center Manager. All of these positions will also work with an Investment specialist as well as a Mortgage Loan Originator. All of the employees agree to their compensation plan at contract signing, or whenever the bank decides to change it if they do decide to. The tellers are one of the most valuable assets to the bank. Generally most of the traffic in the financial center and in the drive thru are deposits and withdraws.
The tellers generally know the customers by name and they develop relationships with them. This is important because the customers begin developing trust in the Tellers and will listen to any recommendations that they may have. Everyone at Fifth Third Bank is on a compensation plan that is based on points. Because the tellers are seeing the most people on a daily basis, they help create opportunities for sales in the bank. The Managers and Personal Bankers are generally in an office because they are either making phone calls or having meetings with other people.
A full time teller needs to achieve 1000 points a month to hit 100% of their goal. They need to always maintain a minimum of 500 points a month. There are a few ways that a Teller can gain points for themselves. One way is based on them, and the other is based on whether or not there is any new business that results from a conversation. If a teller refers a customer over to a personal banker they will get the amount of points that are associated with the product. The points go as followed: – Checking Account: 40 points Savings Account: 20 points – Credit Card: 20 points – Identity Alert: 15 points – Home Refinance: 85-105 points. (Based on amount) – Equity line: 40 points. – Turning on account feature, Early Access: $10. 00 a customer o Early Access earns the Bank approximately $18 million in revenue a year. It is a cash advance on a direct deposit, charging 10% of amount advanced. Amount advanced plus 10% is taken out of the account when the direct deposit hits. – Setting a qualified investment appointment.
Regardless of whether there is business closed or not, the Teller will earn $25. 00. The Personal Banker is also on a point goal, needing to achieve 3100 points a month to hit goal. They need to hit a minimum of 1200 points a month. The personal banker gets incentives on how many products he opens per customer. Three or more products will get another 50-point bonus. Four or more products will get a 100-point bonus, and five or more 150 points. For instance, a checking account, savings account, and credit card will get the Personal Banker 130 points instead of 80 points.
The idea is that the more products a customer has at an institution, the better the relationship, and the less likely they are to leave the bank. Personal Bankers do not get paid when opening early access or setting investment appointments, they will get the points associated with these products. In order to hit bonus quarterly, a personal banker must achieve 85% of goal. If they reach this they will get $. 22 a point. 95% and up will achieve $. 33 a point, and 105% and above will receive $. 40 a point.
A licensed Personal Banker has the same goals to hit, but they are allowed to close and talk about investments. They will receive commissions and residual income for these investments. Investments are a great revenue maker for the bank. The Customer Service Manager and the Financial Center Manager are compensated on a goal for the financial center. Having this particular structure helps the bank get the most out of every customer relationship. Because it is set up on a point system, the bank works together in order for all of its employees to earn compensation.
This particular system is designed to give the tellers incentive to sell on the line and give themselves a raise. This also allows personal bankers and managers to gain additional business from existing customers while they make phone calls attempting to bring in outside business. State Bank can use this system and implement it in their bank by adjusting the point system to fit there budget and needs. A uniform structure such as this will keep employees across every department pleased. This will also help the bank avoid problems in the future.
Cite this Human Resources Case 62
Human Resources Case 62. (2017, Jan 29). Retrieved from https://graduateway.com/human-resources-case-62/