Time to Get Our Houses in Order and Define Ourselves

Recently I came across the following excerpt from an article I had read years ago when a friend had emailed it to me. The article starts with the following point, “Many people do not believe that serious recession will ever come again. Feeling secure in their expectations of continuing employment and a steady flow of wages and salaries, they obligate their future income without thought of what they would do if they should lose their jobs or if their incomes were stopped for some other reason. But the best authorities have repeatedly said that we are not yet smart enough to control our economy without downward adjustments. Sooner or later these adjustments will come.”

In the light of 2010 this article seems boring as if it was only stating the obvious, but the writer of the article wrote this piece back in 1987. The soundness of this counsel is something that all of us in financial services have seen firsthand as we continue to push past one of the sharpest downturns in many of our careers.

The aftermath of the 2008 recession is that there are fewer banks and fewer credit unions in the industry. Lending has changed for many of us. No longer can we supply an unlimited supply of 500 dollar unsecured loans to our members at acceptable rates.  We all share a new reality in which credit has tightened as delinquencies have climbed in both consumer and commercial lending portfolios.

Small credit union collections shops have been hard pressed to keep up with the volume. Good members have become hard pressed as overtime has been eliminated or spouses have been laid off.  Sadly one of the most common job postings I have seen on the credit union job boards over the last year have been for newly created positions of “Collections Manager” or “Part Time Collector”.

Not surprisingly given these challenging times the reaction of most banks and credit unions has been to bunker down and to try and grow their loan portfolios with top tier credit members. This strategy has been adopted by Big Banks, Community Banks, and Credit Unions.  In today’s market everyone seems to be following this same type of strategy. So who is meeting the needs of our credit bruised members who are looking for someone to meet their lending needs?

Sadly, we have created a void in the market that is now being filled by payday lenders who are now starting to sound and act like credit unions in that they are meeting the needs of the under-served. This morning as I was reading the paper one headline that caught my attention was Pay Day Lenders Go Hunting.  

Emboldened by their competitive advantages and the banking industry's retrenchment, payday lenders are aggressively pitching debit cards and online bill payment. Some companies are opening payday-loan branches next door to banks and designed to look like them, even hiring former bank-branch managers

This problem that was on my morning paper had been brought to my attention earlier in the year when I attended a conference in which session moderator Lois Kitsch, REAL Solutions Program Director, asked us, “How many people in the audience have credit union members that use payday lenders?" Now many of us smiled because we figured Lois was experiencing jet lag and simply did not realize what state she was in. If she had she would have realized that our state had outlawed payday lenders and basically pushed them out of the state. Lois she added, “Oh, I know it is not legal here but do any of you have members in another state or members who would drive across the state line?”

Suddenly I realized that the fine people I had lived, worked, and worshiped with would not even think twice about driving across the state line to get a payday loan. For decades people had done work office pools and had someone drive to the state border to buy a lotto ticket. If they would drive for one then they would drive for the other.

Lois then continued and confirmed what I had already been thinking and then added a new twist, “An estimated 7% to 15% of credit union members use payday loan products.” Kitsch paused then added, “So do some credit union employees. Providing alternatives to payday loans is a good business decision, a good social decision, and a good advocacy decision.”

So what are the alternatives that are still prudent and not just “charitable social lending” to save the world? Some in the industry are working to help identify what those options are. In my opinion they have a difficult road as both ends of the credit union spectrum have to be satisfied.

You have to be able to offer solutions that pay for the service.Unsecured debt in low amounts to troubled borrowers is not an easy sell to any lender. The immediate reaction to such a proposal is to charge a rate that compensates for the risk involved which upsets credit union purists. 

Those that would have us give members loans regardless of risk and cost simply do not live in the real world.  There are scores of well intentioned purists who at times simply choose to ignore the balance sheet and do not try to consider the risk involved with their good intentions.  While their passion is commendable they have to help bottom line focused credit union leaders see past the charity element and help build a real business case for meeting these member and employee needs.

I realize that for many of you reading this blog the concept of payday lending is an old and tired topic. While there might be “gold in the mines” the cost of business and the public relations nightmare make it an easy issue to put on the back burner. However, there is still a need to be meet and most credit unions will see noninterest income from interchange shrink by some estimates by as much as 70 percent with newly proposed Fed limits.

So we have an unmet member need with the potential to move back into a space we should have never left to payday lenders. How do we take some prudent steps back? That is the billion dollar question isn’t? While I do not have the answers I do know we as an industry need to tackle these questions below:

• What are appropriate products to add to our menu of services
•  How do we determine if our members are caught in the short term loan cycle trap
• We all know our members want a low cost short term loan option
• What is a product we can offer to help them move up a wealth path
• How do we price our products as low as possible to generate revenue the programs will need to make to see a return to all member owners
• How do you encourage your members to save and to become savvy borrowers

As we look at a new year I am suggesting that the time has come for us as an industry to get our houses in order and define ourselves to our members. While we are at it we need to help our members do the same. 

If we are in the business of improving our members’ financial well being then surely we have to help them with self-reliance. Self reliance simply cannot be obtained when there is serious debt hanging over a members’ household. One has neither independence nor freedom from bondage when he is obligated to others. If we as an industry can’t figure it out then we have left our members in the hands of payday lenders to define the solution.

Many of you reading this blog are industry thought leaders at your credit unions who understand the issues in much greater depth. Leave a comment and share your insight. Help educate those of us in the industry that want to make a difference but are not sure where to start. As always thanks for reading. 

What Are Your Success Rituals: Are You Wasting the Moment ??

One of my all time favorite movies is The Expendables. Really, I am thinking “Movie of the Year”! The movie follows the typical action packed movie plot of “shoot, strut, and sneer” at the camera.  In the midst of all the one line jokes and shoot outs one element that could be easily overlooked in the movie is when the leader of the group has a huddle to talk about the upcoming assignment, challenges, and goals for the task. This was not just a funny scene in the movie it was something that this group did before they went to work. For them this was a vital part of their routine in making sure everyone was on the same page. It allowed for them to get on the same page and to understand how they would each contribute to the success of the mission. For them it was a vital ritual to enable success.

Most of us have daily or weekly rituals we attend to. I listen to “Good to Great” by Jim Collins every morning on my commute to work. All jokes aside of me not having a decent music collection. I have probably listened to the audio book a hundred times over the last three years and still I find that it is a perfect catalyst for a new thought. As I listen to Jim Collins talk about some core concept I find that my mind travels to what I need to accomplish for the day. It is not long before his voice and my own thoughts merge on some new thought.  This morning ritual is a way for me to consider my day in an abstract manner and not just go through a mental checklist of fires I need to put out.

This concept of rituals is something that was recently addressed by Peter Bregman in his blog article The Value of Ritual in Your Workday in which he described the following, “Rituals are about paying attention. They're about stopping for a moment and noticing what you're about to do, what you've just done, or both. They're about making the most of a particular moment. And that's something we could use a lot more of in the business world.”

Consider the possibilities of every branch manager in your branch network pulling their staff together every morning for ten minutes prior to the branch opening.  They started each morning with recognition of prior top contributors for the branch goals.  In these huddles they were able to connect your staff’s collective attention on collaborating and to dedicate themselves, without distraction, to achieving the goals of that the group has to meet. What possibilities could happen if that branch manager acted more like a branch leader that acknowledges that each person's views, goals, and priorities are important and need to be heard in order for the group to be successful?  Only you can look at your own organization and consider what the possibilities might be if your front line community leaders developed these types of rituals or activities.

Make no mistake- everyone comes up with some type of morning ritual. It might be you have team members who read a dozen emails and drink their morning coffee. Other people like to be quite and gather their thoughts while others are social butterflies that go from one person to another to see what is new with them for the morning. The question you have to address,  “are these defaults rituals helping you or your team tackle the day as a group?”  Are they focused on the right things and do they know what your thoughts are on what you need the group to accomplish? 

As fans we watch our favorite sports teams huddle before big plays. As parents we have seen our sons and daughters in huddles as they work with their teams. We watch pro fighters huddle in their corners between every round getting advice and encouragement. Yet, in business the concept of a huddle seems silly to some. Somehow in business we are supposed to be able to convey our thoughts without sharing them, excite people without talking to them, and recognize people without interacting with them. It simply doesn't make sense. 

One step in changing this mindset would be to simply start with just yourself and your team.

• Write down who were your top contributors for yesterday
• Write down what the group needs to accomplish for the day
• Write down the pace they need to set to reach the groups goals

Now put it all together and send it out to your group. Congratulations, you have just had a virtual huddle!

The next step is to ask them later if the email was helpful and what they would like added. Then change it and repeat. Once you have your structure you can play with the setting by having the huddle in person. Then you can have others lead the huddle and have each person make their own behavioral commitments on how they will contribute. 

As leaders we know our people look where we look. Each time we pause, notice, and offer respect for their efforts, it reminds you and them to appreciate and focus on what each of us has committed to do. By elevating each activity and the contribution it makes to the team success each person on the team takes it more seriously. Each person gets more satisfaction from it. Our teams with whom we work will feel more respected and as leaders we'll feel more self-respect.

The Masks Big Banks Hide Behind: Debating Credit Union Versus Big Banks

In two years one of my favorite TV specials will come back to TV screens across the nation as people tune into televised political debates. The mindless rhetoric, the endless spin, the back and forth as statistics are used like right crosses and left hooks throwing the unprepared participant back onto the ropes. During this time the participants paint themselves one way then turn around and put on another mask and paint themselves another way. 

It would be interesting if we could finally talk through the issues that both credit unions and Big Banks face and take off the masks that Big Banks where as they testify in front of Congress or take to the airwaves downplaying another corporate scandal. 

Picture in the left hand side of the stage the Big Banker who represents the Giants of finance, the largest bank (Citigroup) has more assets, 2.2 trillion, than all US credit unions combined, with a blue suit, coordinated tie, flag lapel pin, and perfect hair standing at his podium. His is the perfect face is but a mask to represent the perfectly masked industry. In the other side of the stage looking much smaller is the credit union member looking like… well most of us.

Big Banker : “The nation’s credit unions get to have their tax-exempt status even as Federal regulators gave billions to the credit union industry due to risky bets on subprime mortgages. “ Then turning to his mask so that the profile side is to the TV camera he continues, “Regulators will supervise $50 billion in troubled assets and issue approximately $35 billion in taxpayer-issued bonds!”

Then pausing for dramatic silence he then adds, “To put it bluntly the credit union industry that has never paid a one red cent in federal taxes is swimming in a butter keg of a taxpayer-funded rescue because of their shoddy lending practices. Now is the time to raise taxes by taxing every one of them.”

Credit Union Member: “By bailout you must be referring to the five corporate credit unions. I want to make sure we are not talking about the 196 banks and all five Wall Street investment houses that have failed during the same time. I know it is hard to remember with all the banks that lined up for government money with open hands. 

We also should set the perspective on market share with total credit union market share in 2007 being around 6%, while total bank market share was around 81%.

On the issue of criticism it is fair that the credit union industry take a hard look at itself. We certainly need to do a better job of understand risk with member business lending with participation loans in sand states. In hindsight we could have been more conservative in some of our investment choices. Like the rest of the nation we believed Wall Street when they were peddling poison to their investors. Yet, during this recession we have continued to lend to small businesses and our local members while you have sat idle and starved the communities in which you operate of the credit they need."

Big Banker: “So you admit it? You did mess up. You are to blame… at last a credit union advocate who sees clearly!

Credit Union Member: "Well, actually I do appreciate your comment because I do think I have a pretty clear picture of the landscape. You mentioned that a taxpayer bailout that should cause everyone to reconsider the tax status of my credit union. This is where we might have to agree to disagree as the last time I looked at the paper it was filled with headlines about the various 190 banks that have failed…of course this doesn’t count the TARP money …170 billion give or take.

My understanding is that credit unions are taking care of their own as each natural person credit union is funding the corporate through share assessments. Credit unions are paying for credit unions. The billion dollar credit union, with hundreds of employees, and small credit unions, with only 3 employees, are all pitching in. As economic cooperatives each is helping to fund and replenish the corporate credit unions.

I am sure you would do the same thing right? I mean you are probably willing to write a check to the Megabanks to help them out. Right?"

Big Banker: “Don’t be idiotic of course we are not wasting stockholder capital giving it to another company. That would be ludicrous!”

Credit Union Member: “No, it would be cooperative. You probably are not aware of the model.”

Big Banker: “We give by paying taxes which is more than you can say.”

Credit Union Member: “Glad you brought that back up. I appreciate that about you. You are very good at bringing this issue up…almost like clockwork. So let’s talk about taxes. The purpose of taxes is to provide value to the citizens of the communities in which we live, work, and worship.

As we all know tax dollars help fund public services and to generate a safety net over which the financial marketplace performs its magical mystery act in which one dollar comes in and hundreds of dollars come out, all the while balancing consumer needs and of course stockholder returns. So let’s talk about value to the citizens of the communities in which we live, work, and worship.

As community based cooperatives credit unions provide value to the communities they serve through the provision of low cost loans, higher dividends on savings, and a cooperative economic profit sharing model that works without the government as middleman. This is a model that both political parties should love- people helping to bootstrap other people.”

As you are probably aware all members of credit unions benefit when a credit union prospers. Now on the issue of taxes some things to consider:

• Our members are taxed on the employment income they deposit into their credit union. 
• Our members are taxed on the dividends they earn on those deposits 
• Our members pay sales taxes on the items they buy with money from their credit union share draft account. 
• Our members pay property taxes on the vehicles and homes that they purchase with proceeds from loans granted by their credit unions. 
• The funds that are pooled by the member-owners of credit unions are taxed. 

The communities in which credit unions operate are beneficiaries of the increased spending power and financial well-being of credit union members."

Big Banker: “Those are your customers not you."

Credit Union Member: “That is not correct…see we don’t have customers we only have members. The members are the credit union. However, I do have some good news for both you and your fellow bankers.”

Big Banker: “This nation does not need good news it needs for credit unions to stop using an unfair advantage by going after our customers and driving down our loan rates. It needs for you to stop paying higher rates on deposits. It needs you to give back by paying your share!”

Credit Union Member: As I was saying the good news is that you are always welcome to join a credit union and feel what we are talking about.

Now on the issue of our tax-exempt status if you feel that is such a game changer for community banks you are welcome to convert to a credit union. That would require a few changes which I am sure you would not mind. First you would need to limit your commercial lending and do more lending in under served communities. Be aware this could impact the number of “business lunches” on the golf course. Then there is the stock. You would not have private stock option deals in which you under price your stock so that it is lower for you than what your stockholders can get it. Oh, those cushy board jobs with all the perks and nice salary would probably disappear as well. Lastly, you would need to retain more capital. Four to five percent for bank may fly but as a credit union you need to think about doubling that. Safety and soundness you know. Like you mentioned earlier we don’t want any taxpayer bailouts.

Big Banker: “Silence..." Fade to black as the Big Bank mask continues to smile at the camera. 

Ready To Rumble - Guess Who's Back For Round Two ???

One of my favorite sports is that of mixed martial arts. To the people that know me this is often a surprise as I am not really a blood thirsty type of person.  Yet, put mixed martial arts in front of me and suddenly I am intensely focused on the action. I know that people have a wide and differing views on the sport. To fans it can be seen as the ultimate expression of competition and to its detractors it is simply blood sport that grinds up the talent of its participants. I am Sweden on this issue – neither agreeing or disagreeing.

 I remember the first match I ever watched. A very slender quite man entered the circle wearing a traditional white jujitsu gi. His opponent was a boxer that packed an additional twenty pounds of heavy bone crunching muscle.  As they went through the introductions I could not believe how calm this skinny guy in white pajamas from Brazil appeared.  Didn’t he know he was about to get pulverized? The other guy was fresh off of 15 straight victories and looked liked he could punch through concrete. In fact, he was so confident in his punching ability and his power to knock out his opponent he wore only one glove to the match thinking he only needed one punch to win the victory. In his mind he was the only real game in town. Two minutes later the boxer was defeated and the world of mixed martial arts was wondering who the skinny kid from Brazil was.

Fast forward to our current environment and we still see opponents that think that they can beat the competition with only one hand and that they are the only real game in town. Big Banks with somber faces and hats in hand have been claiming that, because of a Federal Reserve rule change and the financial reform bill, they now have to create new fees to make up for the ones the government banned as unfair.  The money that they take with one hand is then passed on to stockholders via dividends  and cooperate executives who collect fat bonus checks. That whooshing sound is the sound of money leaving your members wallet and your  local community.

So how do we as cooperatives face this challenge?  When I look at the page hits for the blog by far the most popular pages are those in which the concept of matching member needs are the central topics. The topics also tend to generate the most comments. A recent and very unscientific poll on the blog revealed that fifty percent of you do offer sales but only as “needs based solutions”.  Twenty percent do not offer sales at all. While the poll is entertaining and extremely unscientific  is does allow us to look at each other and consider our next steps as cooperatives and what exactly that means from a  cultural perspective.

I think before we look forward we need to look back and also look across the table.  As each of us gaze at our competitive landscape it is easy to focus on the credit union across town. Many of you have pulled the call reports and you can see that you have not suffered the losses that your local competition has (turns out participation loans are trickier than people thought) and your opt in campaign back in the spring for courtesy pay has maintained the non interest income stream for another year.  Thanks to some fast and innovative promotions consumer lending is holding steady. People in the community are slightly less worried about losing their jobs so your new and used auto is beginning to trend back towards 2007 levels. 

Before we all congratulate ourselves on a job well done we need to consider that many credit unions were successful in the past in spite of themselves. The margins were such that you did not have to be overly efficient and your staff could just get by using credit union charm and acting as order takers for members.  The past two years have seen many credit unions grapple with hard decisions and forced efficiency gains. For many credit unions the last two years have been crucible moments in which core cultural values have been dusted off and people inside the organization have had to dig deeper to help members in distress.

Now that you have made hard decisions where are you going to take your operation? More importantly where is that Big Bank in your town taking its operation?  Just as credit unions have made hard decisions so have BigBanks. The fall out on both sides has been much like a no holds barred tournament as the weaker have fallen prey to stronger.  In the third quarter alone 41 banks have thrown in the towel for a total of 127 so far this year. The closing of the doors were often no more than changes in the signage as they were quickly taken over by the FDIC (Federal Deposit Insurance Corp.), who  changed the name on the front door (but kept the FDIC sticker) over a weekend. Make no mistake more will evaporate. Last time I did a Google search (again another very unscientific  method )there were 860 banks on the FDIC's list of problem institutions as of September 30. That is up from 829 at the end of June.

Before we all rejoice we should consider that like many of us the BigBanks are again finding their feet and are up for another round. For the third quarter, banking industry profits leaped higher as revenues increased and loan loss reserves subsided. For the group of about 7700 banks and thrifts net income was $14.5 billion. That's up around 12 billion from last year in the third period.

More good news is that the percentage of banks losing money at the end of the quarter was the lowest level since June 2008, when the economy was about to plunge over the cliff. If you were to look back a year ago, almost 33% of all U.S. banks were bleeding red ink. Fast forward today and now, it's less than one in five.

Make no mistake we are all in for a tough round two. Unlike that fight I watched so long ago this time BigBanks are taking off the gloves all together as they work to challenge us in our local markets and in our legislative arenas. Tax exempt status is back on the table as The Independent Community Bankers Association (ICBA) argues bad investments by credit unions have led to the takeover of five corporate credit unions by the National Credit Union Administration (NCUA) during the past 18 months. Big Bank are hiring top talent in your ranks as they again rev up their profit centers. This time around they are focused on gaining back bread and butter consumer relationships from your members. Are you Ready to Rumble ?

Practical Application:

As you look to next year who do you see as your competition for your members attention and in meeting their financial needs?

How are you adjusting your hiring strategies to make sure you bring in the talent you need to take your organization to the next level?

Do your top performers share best practices or are they quite so as to not upset their peers?

How skilled are your staff members at articulating the points of differentiation for your institution?

As Big Banks are flooded with money and are again hiring what is your strategy to retain top talent in your organization?

The Elephants in the Room- Changing Our Culture To Our Landscape

Who Are We Exactly ?

The credit union movement is one of the most dynamic and diverse movements in business today. If you were to attend a credit union chapter meeting you would find leaders from multibillion dollar credit unions sitting at the table with credit unions with just three to four people. The challenges for each of them are very unique. The billion plus dollar credit unions have to deal with scale and increased complexity that comes from having so many members and assets. The small credit union struggles with equally daunting challenges but on the opposite side of the equation as they struggle with little money and tight budgets. For them the question of the day is how they can get an extra printer or a new desk to replace the equipment that is on its last legs.

What Keeps Us Up At Night ? Our Members ???

If you were to poll the group of leaders in a local chapter meeting on what keeps them up at night some would say credit unions need to be focused on small business lending and raising the cap, others might say we need to be talking to lawmakers about alternative capital or the state of corporate credit unions and their need to consolidate and create economies of scales. As fascinating as those topics are a central issue for credit unions is learning to really listen and talk to their members about the value of their services and products. A silent credit union who masters the business of “order taking” is only as good at serving their members as the member is in understanding their own unknown needs. Simply put- members are not financial service experts- they simply don’t know what they don’t know.

Part of the challenge of the debate on "sales" is that credit union’s foster incredible loyalty in their employees and leaders. When speaking to a leader of a large credit union about culture they stated, “We do not hire from the outside except of entry level positions.” You could  appreciate the sense of pride this person felt when he stated he was a branch manager and had been with the company twenty four years. This company was his first job out of college and was central to how he defined his career success. This type of talent pool strategy is not unique to this one credit union. There is undeniable strength in the strategy that the executive management team is able to make sure outside influences don’t change the core culture. On the flip side there are equally daunting drawbacks as the downside to this strategy is that change is a fact  and we all have to adapt to changing external business conditions and market forces.

Just in my short career I and many of you reading the blog have seen financial service industry grow more complex. Big Banks have not stopped in their relentless pursuit of market and wallet share. Twenty years ago there was no Citigroup or Bank of America as we know it today. The players on the field have changed and their tactics have improved in their ability in parting members from their wallets. What does it look like on the other side of the fence?  If you could be a fly on the wall in the Big Bank boiler room what would it look like? Here is my experience that I would like to share as a point of perspective.

A Peek At the Dark Side 

In 2004 a Big Bank opened a new call center two counties away from my home to handle one of their multiple billion dollar card portfolios. The building was a state of the art facility that would house over one thousand associates. Each entrance had an eye scanner that scanned each person’s pupil before allowing them into the building. I was hired as one of the first service and sales managers for the new operation. The day I walked into the building the leadership staff was non-existent except for a newly promoted site Director and one very overworked Human Resources officer. Walking into the empty building and seeing line after line of phone pods I could not help but wonder how we were going to get 600 people hired, trained and operational for Christmas shopping which was six weeks away.

The central task was to train associates to handle incoming calls and answer the typical questions that cardholders have regarding their credit card. This type of activity is typical of most large credit card providers in the industry. If you were to listen in on the call you would hear the associate use carefully selected care phrases (“Mr. Customer, I would be glad to take care of that for you.” or “Thank you for being a Big Bank card member”)  to let the customer know how much their business is valued. This is a standard in the industry as credit providers compete for the same customers that rotate in and out of the various credit card portfolios.

The real challenge comes at the pivot point in the conversation where you have handled the service request and the member is looking to exit the call. This is where some credit unions would end the conversation by thanking the member for being a member of the credit union. This is not where the Big Bank customer service agent is trained and incented to end the conversation. 

The Pivot Point 

The Big Bank associate is trained to continue and using verbal cues from the customer presents an additional product or service for the customer that they might not be aware of. For example, you might have an associate talking to the card holder about the company's card reward program. The associate answers all of the card holders questions and then reads a statement exactly word for word detailing the program and the terms and conditions. Once the card member has agreed the associate clicks the button and then marks down a sale. What the cardholder did not know was that sales associate just made four dollars on that call for adding the reward program.

This is an example of Big Bank “needs based selling” that many card providers are now doing in their call centers. This activity is not something that happens randomly. The associates involved are incented per sale and have desktop prompts that list the next most profitable sales opportunity for the company. The expectations are that associates in this operation would make an offer at least seventy percent of the time. This means your members who have any Big Bank relationship are being bombarded with sales presentations. This does not count television, radio, and web advertisement.

Why Our High Moral Ground Hurts Our Members 

You could have better rates on your credit card, you might even a better rewards program that does not rely on twenty or thirty percent of the users having their points expire. Yet, if your members are not asking you about it and you are not expecting your staff to educate members on it then what is the value of your program to your membership? Your cultural stance on not "selling" to your member has allowed them to remain with a Big Bank product or service that cost them more money. 

So how do you combat this stream of misinformation that is bombarding your members? You have to create a version of service that proactively educates and empowers your membership as they interact with your institution. You have to create an cultural intervention for your staff. The intervention needed is not one of organizational structure but is rather one of culture or operational environment. 

Cultural Change - One Bite At a Time 

This type of cultural change will require the initiative to tackle educational gaps and the definition of what your staff view as a collaborative culture. David Nadler, author of Champions of Change,  wrote about the subtly of the word culture, "In the 1970's and '80s, as U.S firms struggled desperately to figure out why Japanese companies were becoming global powerhouses, some observers seized upon 'culture' as the key ingredient in the Japanese recipe for success." Nadler continued, “The term took on outsized and ambiguous, almost mystical, connotations" The author then provided the substitute term of “operational environment”.

To create this operational change you must address three areas of the operating environment the first being artifacts. Artifacts are observable behaviors, these artifacts are in fact overt manifestations of your credit unions values and beliefs.  Stop and think about the visual experience your staff has when they walk into their work space.

• Are there posters on the walls, papers on the glass doors or windows of manager offices highlighting the member successes they have achieved?
• Does the space around them encourage them to educate and empower your members? For example, when a person walks into the sales offices of an automobile dealer it has a feeling of deals and negotiation in the air. No one is surprised to see someone purchase a car. In contrast, to walk into a law office one would not expect to hear the buzz of capitalism as people haggle over the price of a product.

This same type of change was needed when I walked into the Big Bank operations area. The site was intended to be a customer service and sales site. However, the sales portion was missing from the organizational artifacts. A sales force feeds on energy as each person competes with peers or with themselves to present with enthusiasm a product or service that a consumer is not aware they were initially in need of. Back in 2004 looking around the Big Bank operational floor there was nothing to make you think that people were expected to do any sales. This in turn provides an excuse for those who are not engaged in trying to sell.

Our first step was to change the artifacts on the floor. So we did the following things:

• Giant message boards were placed on the walls. These boards will list top sellers and publicly recognize those associates who are meeting the sales goals.
• Created an "atmosphere of urgency". To accomplish this, associates need to understand the site's performance in comparison with the other twelve Big Bank sites. To create this awareness management displayed where the site's performance was in comparison to other sites.

Values - The Bridge from Vision Statement to Agent Conversation 

Real change has to impact the values of the operation. This level of the operating environment is the organization's espoused values. These are public expressions of what people value as important in your organization. An example of this is our credit union vocabulary. We don’t have "customers" we have "members". We are not banks we are credit unions. To impact this level of the operating environment staff need to hear and learn to speak in context to what the values represent.

How do you change this? You have to start to interject into daily conversations the key metrics and drivers that you expect your staff to be aware of to reach the desired outcome for your department.  Staff need to be able to define in words what success will feel or sound like. A good starting point is to redefine the “key words”.  So going forward “sales” are a chance to “match member needs”. 

Give your staff defined principles to value and follow. The expectation when talking about credit union products and services are that conversation should be based on the context of the conversation in front of the staff member. The goal is to educate and empower members to make informed decisions on the level of economic participation they want with the credit union. 

Celebrate member success stories in which you made a difference to a member. Send them all the way to senior management. Put them on your intranet. Write a blog post about them with your membership and post it on that new Facebook page marketing talked you into. Promote and recognize the values you want to reinforce in the culture you are creating.

As you stop and consider the billions of dollars our members are paying to Big Banks for auto, mortgage, and revolving credit the question of sources for additional capital come into focus. Consider the billions of dollars parked in low interest Big Bank savings accounts and our members oblivious to the power of real economic cooperation. Those are the questions we have to answer. Those are the billion dollar elephants in the room that no one wants to talk about.

Each of us owes it to our membership to educate and empower member owners on the powerful principles of economic cooperatives.  We have to be able to move past credit union charm to real economic empowerment by educating that member in front of us on the value of being a member owner of a credit union.

Don’t just read the blog share your comments and opinions. This blog is meant to be a cooperative experience for us all. 

New Kings To Protest- The Kings of Wall Street

On this Veterans Day you can’t help but think of the personal freedoms we enjoy in the United States and in many parts of the world. When I think of inspiring documents that changed the course of history perhaps no document comes to mind more than that of The Declaration of Independence. It set forth the moral justification of a rebellion against a long-recognized political tradition—the divine right of kings. The central issue was the fundamental question of whether men’s rights were God-given or whether these rights were to be dispensed by governments to their subjects.

This document proudly proclaimed that all men have certain inalienable rights. In other words, these rights came from God. Therefore, the colonists were not rebels against political authority, but a free people only exercising their rights before an offending, usurping power. They were thus morally justified to do what they did. The power of this thought is incredible. 

Today in watching and reading the headlines it is easy to find ourselves pulled down into the petty arguments that are broadcast twenty four/seven by media to perpetuate ratings for advertisers. Big thoughts and soul stirring declarations seem to be buried and forgotten. At least that is what I thought till a few days ago.

This week I had the opportunity to spend a few days with some unbelievably talented people who had come together to understand seven fundamental principles. These principles are the very bedrock of where credit unions came from.  These principles were inspired by the Rochdale Principles, which were named after the first successful co-op, founded in Rochdale England in the 1840s by a group of weavers.These principles are:

1. Voluntary Membership
Credit unions are voluntary, cooperative organizations, offering services to people willing to accept the responsibilities and benefits of membership, without gender, social, racial, political or religious discrimination.

2. Democratic Member Control
Cooperatives are democratic organizations owned and controlled by their members, one member one vote, with equal opportunity for participation in setting policies and making decisions.

3. Members’ Economic Participation
Members are the owners. As such they contribute to, and democratically control, the capital of the cooperative. This benefits member owner in proportion to the transactions with the cooperative rather than on the capital invested.

4. Autonomy and Independence
Cooperatives are autonomous, self-help organizations controlled by their members.

5. Education, Training and Information
Cooperatives provide education and training for members, elected representatives, managers and employees so they can contribute effectively to the development of the cooperative.

6. Cooperation Among Cooperatives
Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, state, regional, national, and international structures.

7. Concern for Community
While focusing on member needs, cooperatives work for the sustainable development of communities, including people of modest means, through policies developed and accepted by the members.

As you think of these seven principles it is easy at first to dismiss them. Yet, the relevance of the seven fundamental concepts is so sorely needed in the world of financial services. Take the concept of voluntary membership.

Currently one of the biggest arguments on the airwaves is that about the size of government and the role of government. Last month riots were all over the news as France came to a standstill as people went on strike. Last week political futures were made and lost as voters in the United States took to the polls to vote to voice their discontent with the economy. This week students protested in England over the rise in tuition costs.

Now more than ever both sides of the political spectrum are looking for solutions that they can live with. This is where the concept of people having the right to voluntarily join together who are willing to accept the responsibility for the success of the group becomes so powerful. Achieving together what each person could not achieve alone. Achieving economic empowerment for all members regardless of gender, social, racial, political or religious status.

Now I know some of you are thinking I have suddenly drunk the Kool Aid and am going too far into the realm of “peace, love, and happiness.” To the contrary what excites me the most about this fundamental principle is that it is boundless. It crosses the political spectrum. It enables people to help people on a voluntary basis without the need for government handouts. It is bootstrap finance as each person contributes and receives benefit based on their economic contributions.

Take one dollar. We all probably have both lost and found one dollar on the street. What can you buy with a dollar? If you are a cooperative with voluntary membership you can create a foundation that charges one dollar per month for a checking account. What you accomplish with that dollar could be amazing. Imagine doing the following:

• Giving 10,000 dollar scholarships to the children of workers who were fatally injured on the job.
• Giving five million dollars as a grant to start a new cancer center.
• Giving a four year scholarship to every high school in the state (over 350 traditional public high schools) a total commitment of 4 million dollars a year.

All of this achieved by one foundation (www.ncsecufoundation.org) by a group of voluntary members who have joined together to empower one another based on economic participation.

These same types of activities happen in small credit unions with only three people who work to serve a thousand members to large multibillion dollar credit unions.

There should be no doubt what our task is today. If we truly cherish the heritage we have received, we must maintain the same virtues and the same character of our stalwart forebears—industry, frugality, self-reliance, and integrity. We have the obligation to maintain what those who came before us pledged with their time, hard work and their fortunes. The opportunity and obligation for doing so is clearly upon us.

It is up to each of you who read this blog and who work so diligently in the credit unions you work at to speak up and make sure that the principles of our past are written in the business plans of tomorrow. That we do not forget the very principles that set us apart from the people who would love to see us disappear.

Today there are new kings to protest. They hold tremendous power and like the days of old they are oblivious to the struggles of those around them. They are the Kings of Wall Street. Like those before us it is up to us to remind ourselves and those we care about that the Divine Right of Kings has passed.

iPhone App...Deal Makers... And Not Being the Next Big Fish

I want to start by sharing a story of two technology sales reps that after having landed a large contract with a credit union for a conversion were awarded to an Alaskan fishing trip. This had become almost a ritual for this sales team as year after year they were able to land the “big fish” contracts. The two friends excited about the upcoming week hired a bush pilot to fly them to a scenic lake for their Alaskan adventure.

Days later after having had both an enjoyable and successful outing the men radioed the pilot to return and retrieve them. On arrival the pilot quickly informed the two salesmen that his small plane would not support them, their equipment, and the added weight of all the “big fish” they had caught. A second flight would be required.

Now, the two sales pros were not interested in paying for a second round-trip. So after quickly conversing between themselves they promised to pack tightly and offered a bonus payment, against his better judgment the pilot reluctantly agreed to attempt the flight.

The sales reps leaned forward and grinned knowingly as the pilot struggled to force the aircraft into the air. Seconds later the plane stalled and crashed into a large, flat marsh at the end of the lake.

Fortunately there were no serious injuries, and after regaining their senses, one of the sales representatives shook his head to clear the cobwebs asked the other, “What happened?” The second also shaking his head replied, “We crashed on takeoff—about a hundred yards from where we ended up last year!”

Too often this same insane cycle of repeating past patterns of behavior, like the two sales reps, is followed by fast talking vendors as they look to create robust margins by selling that there is an easier way, a shortcut or modification that no one else knows about . They pitch a new flavor of Kool Aid that everyone will want to drink.

A recent example of this that comes to mind was when a colleague of mine described talking to a mobile vendor about getting an iPhone app for his financial institution. The institution had a fair amount of online banking penetration and was looking to expand its mobile offering. The price for the iPhone app was “free”. Now of course there would be monthly service fees but the installation would be at no cost.

What was the price of the monthly service fees? The cost was only 1.75 per user per month. The institution had around four to five thousand (paraphrasing here as I can’t remember the exact amount) online banking users hitting the web browser using an Apple product. Real cost of the “free” iPhone app was only 94,000 per year (4500 x 1.75= 7875 x 12 months) the cost for five years was only 470,000 dollars!

I realize everyone is excited about the buzz in new mobile technology. In fact in the first quarter of 2010 over thirty banks or credit unions launched new iPhone applications.

The value proposition for new mobile applications varies depending on who you are talking to. Early adaptors and tech centric advocates will swear it is worth any cost. On the other end of the spectrum those business line owners of brick and mortar branch networks will say it is a waste of capital. My opinion is that the value of the application is somewhere in between.

The real question is what do you need the application to do? Is the primary value for app the marketing buzz it will create? Are you simply looking for a cool factor that will resonate with a younger demographic? Maybe you simply need an iLobby application that links remote deposit capture and branch location to your existing mobile banking solution.

Knowing what you are trying to achieve helps you understand the value you expect for the initial investment and the ongoing variable cost. If the whole goal is to increase your mobile usage and to build up your member self access channels then you have to ask yourself does your basic mobile solution offer the features and benefits you need to accomplish that?

Much like the bush pilot who was lured with false claims and then crashed into the marsh we need to have a real understanding of what the sales reps are trying to bring onto the plane. For most credit unions a 500,000 dollar iPhone application that mimics their existing mobile solution is a weight that will only end with the plane crashing to the ground.


Practical Advice:


Do you see an advantage to be a first mover on expensive tech or is there an advantage to having a fast follower strategy that adopts tech after first movers pay for infrastructure build out ?

Paying Attention to the Things That Matter Most

Last night I ran into a friend and we started talking about life, kids, and of course work. Like many of my friends he works for a Big Bank (I know I seriously need to widen my social circle) and as we were talking about work he mentioned that many of the projects they had started where he worked were being shelved as the business lines tried to anticipate upcoming regulatory changes regarding non interest income.  While this was going on the bank was also starting to retain more capital as it build up reserves against potential downstream losses in its loan portfolio. As our conversation progressed we both reached the same conclusion that old fashioned thrift and lending were going to be back on the table for many financial institutions.

I realize at this point you are thinking, “This blog's has gone downhill…now it is just stating the obvious. “  Yet, we all know it is surprising how often organizations and leaders fail to recognize and implement strategy on the things that matter most.  As we are huddled together thinking about the next best thing for next year's business plan we also need to make room on the table for the things that matter the most. 

A recent article I came across mentioned nature as an example of this. The author wrote “…scientists can look at the rings of trees and make educated guesses about climate and growing conditions hundreds and even thousands of years ago. One of the things we learn from studying the growth of trees is that during seasons when conditions are ideal, trees grow at a normal rate. However, during seasons when growing conditions are not ideal, trees slow down their growth and devote their energy to the basic elements necessary for survival."  Wait, before you click away from the blog thinking this is insane – stop and consider what the author is telling us. The example is not about trees – it is about understanding adversity and how to push past it and survive.  

Consider another example for those of you who are less in tune with nature. Remember that last business trip you were on and you were wondering why you did not book ahead of time because now you were stuck in the middle seat between two men who had to have been professional wrestlers in their prior careers. Then right as you were finally getting to your tiny plastic glass of ice and coke the plane begins to dip and dive because it has hit turbulence.

Most of us if asked what we would do if we were the pilot would probably state that we should increase speed because it will get us through the turbulence faster. While that strategy might seem sound, especially if you are the lucky passenger on the plane stuck between the guy on the left (nicknamed “Rock”) and the other large fellow on the right (nicknamed “Hard Place”), that may be the wrong thing to do. The professional pilot with a different perspective and a keener understanding of what is ahead realizes that there is an optimum turbulence penetration speed that will minimize the negative effects of turbulence. Most of the time that would mean to reduce your speed. The same principle applies also to businesses as they encounter speed bumps on a road.

As credit unions we have such an advantage here. Many banks will have to retool and retrain as they build business plans around the basics of thrift and lending. High profile deal makers will chaff at the seemingly ordinary focus of helping one member- one family at a time. It is so much more fun and glamorous to trade invisible investments to invisible people.

In a world of global markets too many of the big players in the world of financial services have forgotten the needs of the people sitting in their local branch lobbies.

One of my favorite stories in the book Run to Win: Vince Lombardi on Coaching and Leadership by Donald T. Phillips is that of the legendary coach and the opening lesson he provided to each seasons team. Coach Lombardi had a ritual he performed on the first day of training every season.  He would have the players both new and experienced gather around him and then he would hold up a football, show it to the athletes who had been playing the sport for many years, and say, “Gentlemen, … this is a football!” He talked about its size and shape, how it can be kicked, carried, or passed. He took the team out onto the empty field and said, “This is a football field.” He walked them around, describing the dimensions, the shape, the rules, and how the game is played. Why would he do this? Every player had been playing the game for years and had been at the top of their peers in order to make his team. Yet, Coach Lombardi knew that even these experienced players, and indeed the team, could become great only by mastering the fundamentals. They could spend their time practicing intricate trick plays, but until they mastered the fundamentals of the game, they would never become a championship team.

Most of us intuitively understand how important the fundamentals are. It is that we sometimes get distracted by so many "good" things that seem more enticing. Some would argue that such simple focus does not really translate into bottom line results. I challenge that presumption.

I would ask you to consider in the last two week how many Big Banks now wish they had focused on fundamentals like mortgage paperwork- you know those very boring little details that are now potentially going to cost them billions of dollars. You can’t get more fundamental than knowing who owns the mortgage.

This is an important lesson for every credit union that has even thought of following in the wake of Big Banks…strength comes not from frantic activity but from being settled on a firm foundation of thrift and lending. It comes from placing our attention and efforts on the basics of member service and mastering those expectations. It comes from paying attention to the things that matter most… meeting the needs of our members.