THE WOODLANDS, Texas - Whether David Hilton cares to admit it ornot, many in the industry view him as sort of a "king maker" forhis ability to place people in executive level credit union jobs.It's the ultimate compliment for Hilton and his firm D. HiltonAssociates, which has made its mark in executive recruitment in thecredit union industry. But today's D. Hilton Associates is muchmore diverse than just recruitment. It consults on mergers,compensation, provides market research (including mysteryshopping), offers retirement and retention services and more. Sohow did this now venerable firm get its start? It all began withHilton and his idea that credit union management structures had tochange. "When I started out in credit unions, the typicalorganizational structure of a $50 million credit union and up wasvery flat. It was a president and then you had VPs ofeverything-marketing, operations, branches, data processing. Whatmade sense to me was all those VPs were the people who were goingto become CEOs in the future," said Hilton, and they would needhelp finding those jobs. He also foresaw the organizationalhierarchy morphing, and it has. Today's sophisticated CUs oftenhave another layer between the CEO and the VPs. "The large creditunions over $500 million in assets have more of a pyramidstructure. You have a president, two EVPs and the VPs reporting tothe EVPs. A credit union of that size can't have a CEO with 15direct reports and expect to give them enough attention and time,"said Hilton. Hilton understands what it means to be a CEO. He isthe former CEO of Fort Monmouth FCU (now First Atlantic FCU) in NewJersey, which has made headlines of late for making bad indirectlending decisions and seeing its capital plummet. Hilton led FortMonmouth FCU for three years. Prior to that he worked for BethpageFCU in New York in a position equivalent to an EVP today. His firstjob out of college was actually with a savings bank. In 1985,Hilton decided he wanted to start his own business, and D. HiltonAssociates was born. In addition to executive recruitment, thefledgling firm also helped credit unions with their monthlynewsletter. They had success offering a template product that CUscould brand as their own. Hilton also recognized changes incompensation as an opportunity for the future. "We saw asignificant situation in compensation. It was an area where therewas not enough information for boards to make decisions on whatkind of compensation their management team needed," he said. Thefirm began doing customized surveys to give boards data oncompensation so they could pay the market rate and limit theirturnover. Fast forward to today and D. Hilton offers compensationdata on approximately 85% of the credit unions with $250 million inassets and higher. Hilton sees clear trends in compensation thatboards need to be cognizant of. For one, paying for performance isthe order of the day. "We're starting to see, and we're starting torecommend bonus plans that put a much greater percentage of anexecutive's salary at risk. We've worked with credit unions toimplement plans that are 100% of salary. So if a CEO makes$200,000, they have the potential to earn another $200,000 in abonus." This 100% bonus level is much higher than the typical 30%ceiling most CUs put on CEO bonuses. It may seem outlandish tosome, but Hilton said credit unions are a business, and every otherbusiness provides large incentives to retain executives. Thealternative is losing quality talent. Not paying the market rate isanother error some boards make in CEO compensation, said Hilton."When we talk to boards about compensation, we give them a rangethey should be paying. Some boards are uncomfortable jumping in atthe high end. They would rather get the new CEO to the top of therange over a period of three years say. The problem is by the timethree years is up, the range has jumped again and they're alwaysbehind the curve." Hilton said there are approximately a dozen CUsthat have CEOs with compensation packages of a million dollars ormore. This may come to light during NCUA's data collection pilot,which will include salary data. "It could be eye opening for somecredit unions." Retirement and retention services are now one of D.Hilton's largest areas of business. "With the whole baby boomersituation, so many people are retiring. Boards that want to retainmanagement have to put golden handcuffs on them. For a creditunion, as a nonprofit, the only way to really do that is aSupplemental Executive Retirement Plan," said Hilton. These planscan be designed to give CEOs more money in retirement based on howlong they stay on the job, thus trying to handcuff them for a fewmore years. "They can be very lucrative, giving a CEO say 65% oftheir salary at retirement. That's significant." These retentionstrategies are particularly important today with half of creditunion CEOs at CUs over $100 million expected to retire in the nextfive years. Hilton said when a CEO of a large CU leaves, itactually affects four credit unions and four individuals. "There'sa domino effect. When a billion dollar credit union loses theirCEO, someone from a $500 million credit union goes to the billiondollar one. The exec from the $250 million credit union goes to the$500 million and down the line." Merger Mania D. Hilton hasconsulted on approximately 50 mergers, and Hilton expects manymore. "It's one of those things that even if there aren't a lotmore mergers, there has been a lot more discussion and explorationof mergers. It's for a number of reasons. It's really difficult tocompete with the large regional and national banks if you don'thave the branch network or marketing dollars." The firm hasconsulted on mergers of CUs with just a few million dollars inassets all the way up to a deal that was over $2 billion. Thebiggest issue is the integration of the two credit unions from anemployee and cultural point of view. If we spend 100 hours with thetwo boards, 50 of that has to be on the need to understand yourcounterpart at the board level. If it doesn't work from a socialand philosophical point of view from the board level, it's notgoing to work." Hilton said unfortunately many mergers fall apartbecause of board politics. He believes CEOs need to lead the chargein mergers. "We suggest that one CEO talks to another CEO and findsout what the plans are. But I'm not suggesting they do it withoutboard approval." D. Hilton will also play the broker role andexplore potential merger partners for a CU. If a deal gets done, itcan handle the balloting as well as the marketing andcommunications aspect, something Hilton believes is huge. "This isa small industry, you have to communicate. It's not going to takelong for the employees to know what discussions are going on behindclosed doors," he said. A Mature Business D. Hilton Associatesisn't the mom and pop firm it was when it started in 1985. Today ithas over 50 employees and has 1,200 clients, with 70% repeatbusiness. It's just shy of being a $10 million business. "I neverenvisioned this to be as big as this is, and never thought we'dhave anywhere near the number of clients," he said. "Our originalbusiness plan didn't have any real numbers to it. We never thoughtof numbers, we just thought of creating a service for creditunions." For Hilton, the business is a family affair. He has beenworking side by side with his wife Debbie for the last 12 years.They have been married 22 years. The two actually met in theexhibit hall at a credit union conference in Phoenix in 1982 andgot married in Reno in 1985 during a credit union conference. "Weinvited about 15 of our friends from the industry and got marriedin one of those chapels for $50, the best $50 I spent." The couplehas two children, Sarah, 19, who is in college, and Matthew, 14.Their passion outside of the office revolves around family andtravel. "We both do so much traveling for work, but oddly enoughwhat we like to do as a family is travel. We've been to numerouscountries and islands. We're so close to Mexico, so we venturethere a lot," he said. Hilton logs about 250,000 miles of travel ayear. It's not the glamorous life people think, he said. Herecalled being stuck in a hotel in South Dakota for two days duringa hostage standoff. "I missed my credit union appointments becauseof it. When I finally got to check out, the attendee tried tocharge me for the two nights of the hostage standoff. I said youhave be kidding me." The clerk of course conceded. Hilton also hasa book collection, mostly mystery novels, numbering close to 1,000."Most are first edition, many are signed." He is an exercise buff,working out daily, and has run a few marathons. His most excitingupcoming sports outing is playing in a Michael Jordan tournament inLas Vegas. The four-day event, for charity, exposes participants tolegends like Jordan, Bill Walton and professional and collegebasketball coaches. Looking forward, Hilton expects the creditunion industry to stay strong, but go through heavy consolidation."I think we'll be half of where we are today with about 5,000credit unions. Credit unions are still a minor player in thefinancial services market." [email protected]