IMPLEMENTATION OF PERFORMANCE COMPENSATION Housing Works is committed to introducing a new approach to compensation that more closely links every

employees compensation to the overall performance of the business: rewarding everyone when the business does well and sharing restraint when the business is performing poorly. The Housing Works Executive and Senior Staff have designed a performance compensation structure to incorporate:

y y y

achievement of Housing Works financial plan our values of teamwork, customer service and advocacy; and the practice of Open Book Management.

The new approach will begin on July 1, 2011. This paper outlines key features of the structure for all staff, and to assist in discussions about it. Between now and July 1 2012, Charles King will brief all staff on the new scheme as part of briefings on the budget, Vice-Presidents will be briefing their teams as well as developing divisional performance metrics (see point 4. below). The key features of the new performance compensation scheme are:

1. Annual raises are replaced with quarterly performance based payments from a bonus pool of 5% of salaries (~$1.1 million in 2012). This increases the total amount of money available to employees (the old annual raise system allowed ~3% of salaries) but requires Housing Works and employees to meet performance benchmarks before any additional money is paid. Moving towards performance pay and a pool of this size gives effect to one of the cornerstones of Open Book Management: that every employee has a real stake in success of the business. There will be no decrease in salary for anyone, and existing bonus and commission type payments will remain in place. 2. There is a threshold that Housing Works meets its quarterly Net Income from Operations before Bonus target in the budget before the bonus pool can be accessed. This is designed to link everyones compensation increases to the performance of the overall business and whether it is performing well or below plan. If the Net Income target is met then the other criteria (below) come into play. If the Net Income target is not met then the bonus is not available that quarter. 3. 2% of the 5% pool is tied to an individual employees demonstration of Housing Works values. Housing Works values of teamwork, customer service and advocacy are captured in the proposal and there will be performance metrics each quarter. These may change over time, but as a guide the metrics for Q2 are: y Teamwork: participate in a training in teamwork y Customer Service: submit three Code Greens or Code Reds y Advocacy: participate in one action or phone zap

These metrics were chosen to encourage participating in new initiatives (teamwork and customer service) and because they are currently measured or will be by Q2 2012. As these initiatives and our performance system are developed, better measures that capture the depth and quality of teamwork, customer service and advocacy can be included. In Q1 only, teamwork, customer service and advocacy will not be part of the bonus assessment. Instead employees will need to participate in training on the new performance compensation structure and how to operate it to qualify for a bonus.

4. 3% of the 5% bonus is tied to the employees meeting a performance target set at the divisional level (and the conditions in 2&3 above being met). Divisional targets will be set by the relevant VP and approved by the relevant SVP. They will be discussed at the Senior Staff retreat on June 21. 5. Payments would be made each quarter. They vary by quarter and are cumulative so there is an incentive to improve, and also to make up for a bad quarter y The distribution of the bonus pool is different each quarter, and greater towards the end of the year. 15% will be available in Q1, 20% in Q2, 25% in Q3 and 40% in Q4. y If Housing Works or a division misses bonus one quarter, the money remains in the pool and there is the opportunity to make it up in the next quarter and receive a bonus if the YTD targets are met. 6. All full time staff will be eligible for the new compensation structure. y New staff will be eligible for bonus payments in the first full quarter they are employed. For example, a person employed on Sep 1 2012 will be eligible for a bonus for the Oct-Dec 2012 quarter but not the Jul-Sep 2012 quarter. y Staff moving between positions within Housing Works (i.e. promotions), or working across two divisions will have their bonuses calculated on a pro-rata basis. y Part time staff will be eligible for a bonus if they work more than 20 hours per week (on average through the quarter). 7. Administration of the new structure will build on existing systems for financial reporting and reporting participation in training, advocacy and Code Greens/ Reds. Each quarter Human Resources will bring together this information from its systems, and VPs will notify Human Resources that divisional performance metrics have been met.

The following pages give an example of how the structure would work for an employee, in this case of the Thrift Stores Example: Thrift Store employee, $35,000 salary This table sets out the bonus available to the employee each quarter. Potential Bonus Quarterly Bonus Potential Annual Bonus Potential 1st Quarter $262.50 $262.50 2nd Qter $350.00 $612.50 3rd Qter $437.50 $1050.00 4th Qter $700.00 $1750.00

This table gives an example of performance standards that are used in the worked example below. HW Plan, Teamwork, Customer Service and Advocacy (and Preparation in Q1) trigger the 2% portion of the bonus pool. The Thrifts Plan (the divisional plan) must be met to access the remaining 3% of the bonus pool. Bonus Criteria HW Plan: surplus/quarter HW Plan: cumulative Teamwork Customer Service Advocacy Preparation Thrifts Plan: surplus/quarter Thrifts Plan: cumulative Attend Training $200,273 $200,273 $851,127 $1,051,400 $348,960 $1,400,360 $595,223 $1,995,583 1st Quarter $364,874 $364,874 2nd Quarter $1,338,775 $1,703,649 Attend training 3 Code Greens/Reds 1 action or phone zap 3rd Quarter $ 987,695 $2,691,344 TBC TBC TBC 4th Quarter $1,365,635 $4,056,979 TBC TBC TBC

The numbers in the table above are hypothetical for simplicity in the example. Housing Works actual targets are:

First Quarter: all conditions met, bonus paid 1st Quarter HW performance/quarter HW perf. cumulative Teamwork Customer Service Advocacy Preparation Thrifts Plan: surplus/quarter Thrifts Plan: cumulative Result $500,000 $500,000 2nd Quarter 3rd Quarter 4th Quarter Comment HW Inc. makes plan, bonus pool open Employee meets criteria Divisional targets met Full bonus (15% of 5%) paid this quarter

$300,000 $300,000 $262.50 Bonus Paid

Second Quarter: Housing Works plan not met, bonus not paid 1st Quarter HW performance/quarter HW perf. cumulative Teamwork Customer Service Advocacy Preparation Thrifts Plan: surplus/quarter Thrifts Plan: cumulative Result $500,000 $500,000 2nd Quarter $1,100,000 $1,600,000 $900,000 $1,200,00 No Bonus 3rd Quarter 4th Quarter Comment HW Inc. doesnt make plan, bonus pool not activated. No bonus paid in Q2

$300,000 $300,000 $262.50 Bonus Paid

Third Quarter: Housing Works quarterly plan met, divisional plan met, bonus paid 1st Quarter HW performance/quarter HW perf. cumulative Teamwork Customer Service Advocacy Preparation Thrifts Plan: surplus/quarter Thrifts Plan: cumulative Result $500,000 $500,000 2nd Quarter $1,100,000 $1,600,000 $900,000 $1,200,00 No Bonus 3rd Quarter $1,000,000 $2,600,000 $400,000 $1,600,000 $437.50 Bonus Paid 4th Quarter Comment HW Inc. makes Q3 plan, Q3 bonus pool activated Divisional targets met Full Q3 bonus (25% of 5%) paid this quarter

$300,000 $300,000 $262.50 Bonus Paid

Third Quarter (alternate): Great performance means Housing Works Q3 and TYD plan met. Poor Q2 performance is made up and Q2 bonus back paid 1st Quarter HW performance/quarter HW perf. cumulative Teamwork Customer Service Advocacy Preparation Thrifts Plan: surplus/quarter Thrifts Plan: cumulative Result $500,000 $500,000 2nd Quarter $1,100,000 $1,600,000 $900,000 $1,200,00 No Bonus 3rd Quarter $1,100,000 $2,700,000 $400,000 $1,600,000 $787.50 Bonus Paid 4th Quarter Comment HW Inc. makes Q3 plan AND YTD, activating Q3 AND Q2 bonus pool Divisional targets met Full Q3 bonus (25% of 5%) and back pay of Q2 (20% of 5%) paid

$300,000 $300,000 $262.50 Bonus Paid

Fourth Quarter: Housing Works quarterly plan met, divisional plan not met, first 2% bonus paid 1st Quarter HW performance/quarter HW perf. cumulative Teamwork Customer Service Advocacy Preparation Thrifts performance/quarter Thrifts perf. cumulative Result $500,000 $500,000 2nd Quarter $1,100,000 $1,600,000 $900,000 $1,200,00 No Bonus 3rd Quarter $1,100,000 $2,700,000 $400,000 $1,600,000 $437.50 Bonus Paid 4th Quarter $1,400,000 $4,100,000 $500,000 $2,100,000 $280 (2%) Bonus Paid Comment HW Inc. makes Q4 plan, bonus pool Open Divisional targets not met First part of bonus only paid (40% of 2%) for Q4

$300,000 $300,000 $262.50 Bonus Paid