UICCU Pay for Performance Philosophy

Compensation Practices…

The continued success of the University of Iowa Community Credit Union (UICCU) is dependent upon its ability to recruit and retain talented individuals within the cooperative. To that end, compensation decisions for all staff are based on:

Performance as reflected in the financial performance of the cooperative
Competitive compensation within peer financial institutions

The compensation package for each employee consists of a base salary, an incentive compensation plan, comprehensive benefits plan, retirement savings, and additional items as deemed appropriate by the applicable supervisor.

After careful review of known compensation levels in peer credit unions and banks of comparable size, review of the each staff member’s compensation history, review of the aggregated evaluations of the staff member done by applicable supervisor, and review of the general financial performance of the cooperative in the current year, the supervisor determines the appropriate total base salary, taking into consideration the incentive program if necessary for comparability to peer institutions.

The continuing success and growth of the UICCU depends on its ability to effectively serve its members with profitable financial products and services and to grow its market share in both existing and new markets within the greater eastern Iowa area. Our compensation packages have been developed to support the mission of UICCU and to drive its strategic objectives. The UICCU is committed to the continuing improvement and growth of services to its members and to rewarding the many staff that help the Credit Union attain these goals.

UICCU staff are committed to achieving annual operating results at or above the 75th percentile performance relative to nationwide Credit Unions of similar size. This 75th percentile target will also serve as the basis for total compensation planning purposes for staff members who perform at this level in fulfilling their job functions for UICCU.

	Performance Relative to Peers ¹
Loan Growth	94th percentile
Deposit Growth	83th percentile
Asset Growth	92th percentile
Return to the Member ²	99th percentile

¹ For credit unions between $600M and $1B in assets as of June 30th, 2010

² Return to the Member is a composite index of how competitive a credit union’s rates and fees are coupled with product utilization. It is compiled on a quarterly basis for every credit union in the United State by Callahan & Associates

Staff compensation packages are designed to retain and motivate performance excellence within the UICCU. It is designed to provide staff with a higher level of total compensation opportunity based on meeting or exceeding certain key performance measures selected for the year ahead. These performance measures may be changed and the benchmarks adjusted from year to year dependent upon the annual strategic objectives of UICCU.

The key principles of the UICCU’s compensation plans are:

To clearly identify performance objectives and the keys to success
To link compensation to performance in areas that the staff member can influence; and
To reward the staff member for performance that supports the business objectives of UICCU.

Pay for Performance Philosophy…

The credit union adopted a “pay for performance” philosophy in 1999. Pay for performance is a system in which employees attain increased levels of compensation if their team, department, or company reaches specified targets. It has been implemented as a motivational tactic and with an eye to persuade employees to work harder and benefit the cooperative while at the same time providing an added benefit for themselves.

Pay for performance compensation structures not only account for individual, but also account for the working environment and performance of the team as well. This can be a valuable benefit, as knowing that compensation increases can be based in part on the performance of the team which will often encourage employees to operate as a cohesive unit in order to reach a common goal.

Pay-for-performance plans are a method of compensation where employees are paid based on productivity, as opposed to hours spent on the job or at a set salary. They are often used in fields such as sales, where employees rely on commissions and/or bonuses for their income. While this can result in less of a sense of financial security for the employee, there are several advantages for both the employee and employer.

Increased Motivation. The opportunity to earn additional income can lead to increased motivation. Since employees are compensated based on performance, they may be more likely to work harder and longer in order to reach income goals.
Greater Flexibility. Employees who are paid based on their performance are typically judged by results rather than more subjective methods, resulting in increased flexibility autonomy.
Increased Compensation. A talented staff member who works strictly on commission may be able to earn more money than a salaried salesperson since he is paid based on the volume of sales, for example.
Increased Productivity. From the employer's standpoint, productivity may increase due to the employee's desire to earn a high income. The result can be greater productivity from fewer employees, reducing the employer's labor cost and transferring the financial risk from the employer to the employee. This has clearly been the case at the UICCU, as its spending on total compensation costs is currently a full 26% lower than its nationwide peer group…

And for Credit Unions in Iowa…
Better Retention. High-achieving performers who are happy with their income and work environment may be more likely to stay instead of exploring other opportunities. They can also attain a certain level of prestige and respect in the company due to their achievements.

We are proud of the results stemming from the shift to pay for performance. The following table indicates member-driven outcomes for the 11 years prior to the change as compared results from the 11 years since the change.