Credit Union Compensation
Credit Unions are a significant force, providing a valuable resource for savings, loans and home mortgages to a large group of Americans. Although they are typically not as large as the community and regional banks with whom they compete, there are a number of similarities. Even in recruiting staff, they often compete for the same platform talent. Recent changes have allowed credit unions to provide services to a far wider audience. As the Credit Unions continue to grow in size and complexity, they need to continue to attract qualified talent from other financial institutions and banks.
Compensation Resources, Inc. (CRI) has extensive experience working with state and federally charted Credit Unions, as well as Corporate Credit Unions, to develop effective compensation programs that are aligned with organizational goals and objectives while recognizing their unique NFP characteristics.
Today, our Credit Union clients are focusing on reducing their troubled and non-performing assets, while trying to grow core deposits and provide loans to their members. The economic situation has forced many to postpone increases, and even reduce compensation in some cases. As a result, there seems to be a growing frustration at the employee level. CRI is working with many of these Credit Unions to re-evaluate their link between pay and performance and to evaluate the merits of variable compensation going forward (See Case Study #1 below). If you find your organization is facing these issues, please contact us so we may evaluate your compensation programs, and develop a new, more meaningful way to motivate and reward your staff.
Specifically, CRI specializes in the design, development, and implementation of compensation and human resource programs in the following areas:
- Credit Union Market Data
- Competitive benchmarking studies
- Salary Administration Programs
- Executive Compensation Programs
- Performance Management Programs
- Incentive Compensation Plans
- Sales Compensation Programs
- Deferred Compensation arrangements
- Employment and Change of Control Agreements
Case Study #1: Changing the Compensation Mix - A move to Variable Pay
- Senior Management wanted a better link between pay and performance
- Staff was perceived to have an entitlement mentality to pay increases
- The Credit Union instituted a pay freeze in 2009
- Revised the Compensation Philosophy to emphasize variable compensation and pay for performance
- Determined appropriate mix of pay for all positions
- Implemented a new Performance Management Program and Goal Setting Workshop to align individual, departmental, and Credit Union Goals
- Created a new Variable Compensation Plan for all levels, utilizing incentive compensation and bonus compensation, as well as a new model for handling COLA adjustments and merit based increases.
Case Study #2: Need for a Competitive Compensation and Benefit Study
- The Board wanted a new consulting perspective
- There was a general concern regarding credibility of the compensation process
- Turnover was on the upswing, and pay was identified as the issue
- The staff were on an automatic step rate pay system with increases and grade assignments tied to seniority, not performance
- The Board wanted to move to a Pay-for-Performance program
- There was a concern that their pay and benefits were not competitive with the market, but didn’t know for sure
- They lacked comprehensive procedures for handling compensation issues
- Adopted a Total Reward Philosophy that emphasized a market driven approach and Pay for Performance
- Developed appropriate Total Reward levels for all positions, covering pay and benefits consistent with the Compensation Philosophy
- Compensated employees at the competitive market levels
- Instituted a new Performance Evaluation System (PES) that would support the move to a Pay for Performance Salary Administration Program (SAP)
- Implemented the new SAP and PES programs, including communication to staff, and training form managers
- Provided a detailed Benefit Practices Study with recommendations for changes
Case Study #3: Executive Compensation that appeared to "break all the rules"
- The state Banking Commission had raised concerns about the amount of the CEO’s compensation
- The Credit Union had experienced a great deal of growth and profitability in recent years and Board of Directors wanted to reward the CEO for turning around a failing organization
- The Board had provided an incentive tied to Net Income, as a means of motivating the Credit Union financial performance
- Board had provided a large no interest loan to the CEO for purchase of a house
- CEO had been given a long-term Employment Agreement which included large severance and loan forgiveness
- CEO’s compensation package was not aligned with the competitive market
- No formal policies and procedures existed to handle compensation issues
- No “paper trail” of Compensation Committee pay determinations
- In conjunction with the Compensation Committee and their outside legal counsel, we developed a formal Compensation Philosophy that set forth a realistic market driven approach to the pay package.
- Provided recommendations to the Board regarding base salary, annual incentives, and related issues
- Develop a new Management Incentive Plan that was consistent with IRS regulations and emphasized setting and attainment of business objectives
- Drafted a revised Employment Agreement that would meet all necessary rules and requirements
- Established a guide for use by the Compensation Committee and Board of Directors for conducting pay determination activities and maintaining appropriate minutes and records
CRI is available to assist your Credit Union to become an Employer of Choice through the development of sound compensation programs. We also can audit your organization’s Executive Compensation Program to ensure that it complies with all necessary rules and regulations, and provides a program that helps to make a difference. To see how CRI can help, please contact Diana Neelman at 877-934-0505 x 105, firstname.lastname@example.org.