Developing Compensation Plans for Business Loan Growth: Onsite at CUBG

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Judy Clark of HR Answers discusses compensation strategy with attendees at CUBG’s 2018 National Conference.

SAVANNAH, GA – When developing a compensation plan for employees in the commercial lending department of a credit union, human resources managers should consider the institution’s lending goals and ensure that the plan encourages employees to reach them, according to Judy Clark, owner and founder of HR. Answers to Tigard, Ore.

Clark led a session on Tuesday at the CUBG 2018 National Business Conference, where she discussed compensation theory and philosophy, as well as considerations for human resources professionals developing compensation programs and incentive for lending positions in credit unions.

She pointed out that the biggest question compensation plan developers should ask themselves is, “What do we want the plan to do for the credit union?” So, for example, if the credit union is looking to enter into larger loan agreements, loan officer incentive payments should be based on the size of the agreement.

And the plan must be clearly communicated to the lending employees in advance. “One of the biggest problems a compensation plan can have is when it doesn’t allow employees to understand how they can earn,” said Clark, adding that plan developers should consider whether the plan is captivating. attention, and whether it focuses them on the goals their managers want them to have.

All compensation plans should include a sunset clause, she said, so employees are not tricked into believing that they will be entitled to compensation throughout their tenure. A sunset clause also allows credit unions to make changes to their plans as their lending goals change.

When selecting pay scales for employee lenders, HR managers should first research relevant salary and wage surveys, Clark said, noting that for a survey to be relevant, it must represent the credit union region, reflect other peer group credit union organizations, and contain no data older than two years. Before looking at the polls, it’s really important for executives to determine all facets of their compensation philosophy, Clark said. “How much do I want to give in base and how much do I want to risk for the incentive?” Will the decisions be made by the leaders, or will they be based on articles and research? ” she asked.

The compensation philosophy should also include such things as the credit union’s position in the market (whether it will be ahead, behind or equal to the market), the cash / benefits mix, the role of compensation based on the performance, the performance appraisal process, the compensation communication plan, and reviewing and modifying the plan’s processes, she explained.

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