As credit unions move into the digital age and examine long-term strategies for growth, it’s become increasingly vital to tackle an issue that threatens to hold them back:
Outdated executive compensation plans.
A standard salary and standard retirement plan is no longer enough to recruit the leaders of the future and satisfy them in the long run. Credit unions must get up to speed and pay their executives the way the market demands.
Why Change Your Compensation Plan?
Hoping that visionaries will flock to you because of shared community values is no longer a viable recruitment or retention strategy. It’s a dog-eat-dog world in the financial industry and the marketplace is growing increasingly competitive by the day. Credit unions constantly battle other credit unions, big banks, and fintechs for a small pool of top talent.
Getting and keeping skilled, dynamic leaders is crucial as the credit industry undergoes a revolution. It’s not just about getting people in key positions—it’s about getting the right people in those positions (and keeping them there) to lead your organization into the future.
Undercutting compensation will most likely result in loss or necessary replacement down the road. Offering incentives is critical to keep your key players from getting poached by other institutions.
Plus, if your leaders are underpaid, it’s likely that the rest of the team is as well. Compensation rates trickle down through the organizational structure and below-market compensation leaves institutions at risk of high turnover and less-than-optimal performance.
The New Deal for Credit Union Execs
In today’s market, a typical compensation plan for a credit union executive is made up of a balance of four key components:
- Base salary
- Annual bonus
- Long-term incentive (typically for credit unions with assets over $1b)
- Retirement plan (typically either a 457f or a Supplemental Executive Retirement Plan, or SERP)
The parameters of each of those variables are individual to your credit union, based on the local market and the potential long-term value a candidate could provide to your organization.
These are just the foundational aspects of a compensation plan. Offering additional benefits, though not as essential as the four key compensatory components, may help you stand out and compete in especially aggressive markets…
But only if the basic benchmarks are met first.
Other attractive benefits could include travel benefits, insurance benefits, and exclusive memberships or vehicular benefits.
Finding Your Magic Numbers
To find an attractive, sustainable formula for the credit union to win top C-level talent, you need data. Unfortunately, there’s no such thing as free compensation data, and there’s no free meaningful data that offers enough insight to help you come up with a competitive ompensation plan.
Publicly accessible reports usually offer outdated information that won’t stand up to today’s market pricing because of the rapidly shifting nature of compensation in the industry. Even free data from 2–3 years ago is considered antiquated and inaccurate to the current going rates.
I recommend hiring a consulting firm to tackle compensation data. Consulting isn’t cheap—upwards of $20k—but that’s a drop in the bucket compared to the cost of getting your compensation plan wrong.
Accurate data that can be used for several years, and the ability to recruit innovative talent that will stick with the organization to provide long-term growth. I’d be happy to discuss the best options and consultants for your credit union in a call.