CUES Compensation Philosophy Development Toolkit
Within this toolkit are the following documents:
I. Illustrative Compensation Philosophy Questions. The answers to these sample questions will help you determine your
organization’s compensation objectives and general compensation program direction. Keep in mind that they are illustrative in
nature and may be supplemented by additional questions that your credit union believes are relevant.
II. Compensation Philosophy — How Competitive are Current Pay Practices and How Competitive Should Pay Practices Be?
This simple matrix allows you to assess perceived levels of current and desired competitiveness for different employee groups (we
have limited the sample to executives and managers to be consistent with our survey population, but you may expand this group to
your credit union’s entire population). Going through this process will help you define the desired level of competitiveness and
understand current perceptions. When coupled with an accurate market analysis, you will gain a better understanding of the gap
between current and desired compensation competitiveness.
III. Compensation Philosophy — Defining the Labor Market. This matrix will help you define the typical labor markets for
different employee groups within your credit union, recognizing that these labor markets may differ by industry and geography.
This is a critical step in the development of an effective compensation philosophy for the organization. The process entails simply
checking the boxes that represent the labor market (the industry or geography in which you typically lose or attract employees)
applicable to a particular employee group.
IV. Total Compensation Components — Assessment. The purpose of this document is to help you answer the question, “How well
do our current total compensation elements support the organization’s objectives?” Once an organization has defined its peoplerelated objectives and its compensation philosophy, the logical next step is to question how well the compensation program
achieves these objectives and, consequently, to what extent a redesign effort may be necessary. To complete this exercise, review
the footnote instructions. Place a “++” in a box if a compensation element fully supports a particular objective; a “+” if it partially
supports; a “0” if it does not support; and a “—“ if it detracts.
Page 1
CUES Compensation Philosophy Toolkit
I. Illustrative Compensation Philosophy Questions

What kind of people do we need to hire? What types of behaviors do we want them to exhibit (human
resources philosophy)?

What do we want to reward people for?

What do we want our compensation systems to deliver/support (goals/deliverables)?

What should the focus of pay be: team, individual, function, organization, or some combination?

What is the role, if any, of variable pay?

What is the desired mix of compensation (allocation of salary and incentive dollars)?
How much risk do we want to build into the compensation packages?

What is our desired competitive position in our targeted markets?

What are our targeted markets? Does this change for different positions and levels in the organization?

How will pay delivery decisions be made and by whom?

Page 2
What’s the definition of performance: results only, or inclusive of behaviors/competencies as part of the
individual performance equation?
CUES Compensation Philosophy Toolkit
IIa. Compensation Philosophy — How Competitive are Current Pay Practices?
10% Below Market
5% Below Market
Equal
5% Above Market
10% Above Market
Total Package
 CEO
 Other Executives










Base Pay
 CEO
 Other Executives










Incentives
 CEO
 Other Executives










Benefits
 CEO
 Other Executives










Check one box for each item.
IIb. Compensation Philosophy — How Competitive Should Pay Practices Be?
Check one box for each item.
10% Below Market
5% Below Market
Equal
5% Above Market
10% Above Market
Total Package
 CEO
 Other Executives










Base Pay
 CEO
 Other Executives










Incentives
 CEO
 Other Executives










Benefits
 CEO
 Other Executives










Page 3
CUES Compensation Philosophy Toolkit
III. Compensation Philosophy — Defining the Labor Market
Credit
Unions
Credit
Unions &
Banks
CU, Banks &
Insurance
All
Financial
Services
Other
Industries
National
Regional
Local
Other
 Chief Executive
Officer
 Executive Vice
President
 Second Executive
Officer
 Chief Operations
Officer
 Chief Financial
Officer
 Chief Lending
Officer
 Branch/Member
Services Executive
 Marketing
Executive
 Human Resources
Executive
Page 4
CUES Compensation Philosophy Toolkit
III. Compensation Philosophy — Defining the Labor Market continued
Credit
Unions
Credit
Unions &
Banks
CU, Banks &
Insurance
All
Financial
Services
Other
Industries
National
Regional
Local
Other
 Information
Systems Executive
 E-Commerce
Executive
 Senior CUSO
Executive
Page 5
CUES Compensation Philosophy Toolkit
IV. Total Compensation Components — Assessment
“How well do today’s total compensation elements support the organization’s objectives?”
Base Pay
Incentives
Benefits
Recognition
Performance
Management
Other
Rewards
Objectives

Internal equity

External competitiveness

Pay for performance

Drive member service

Align labor costs

Sustainable competitive advantage
through people

Other objectives (to be defined)
Mark the boxes as follows:
++
+
0
—
(Fully Supports)
(Partially Supports)
(Does Not Support)
(Detracts)
Page 6
CUES Compensation Philosophy Toolkit