Does Your Credit Union Understand Its True North ??

Understanding True North
I was reading an article recently that described a lesson that a young fighter pilot learned in his flight school training. The writer recalled that as a new untested pilot he and his fellow classmates were given strict instruction by his flight instructor to avoid flying acrobatic patterns at night. The reason was that they were all beginning pilots without instrument flight training. 

While the pilot who recalled this advice executed the training strategy he had been given, another promising pilot and a close friend chose to disobey those instructions. As this new pilot flew loops and barrel rolls through the night sky over Texas, he looked through the cockpit canopy and thought he saw stars above him, but he was really seeing the lights of oil rigs below. He was experiencing vertigo: the g-forces on his plane made it seem he was right side up, yet he was upside down. As he pulled up on the stick to climb higher into the night sky, he dove toward the earth and crashed into the twinkling lights of the oil field below.

The author then explained, “When you are flying an airplane, if you change your position by just one degree at a time, your inner ear cannot detect the change." The same concept is true for us as leaders, either new or seasoned, when we practice selective visioning and change our position relative to our core values —even if we only do it one degree at a time. Just as the concept is applicable to us as leaders so to are the dangers. As our own self deception clouds our ability to understand changing market and economic conditions we can experience our own corporate vertigo. While it may seem like we are moving in a safe direction, we are in fact headed for disaster.

A clear example of this is when Wachovia purchased Golden West in a 25 billion dollar deal that moved the company culture away from the core principles that had enabled the company to grow. This same blindness to understanding it mission and values steered the company towards disaster as it incented it’s loan officers to push option adjustable rate mortgages. Even as the mortgage market began to deteriorate the company continued to promote and drive its “Pick a Payment” loan product.  In the end the company become focused on a  myopic and relentless pursuit of size that spelled its downfall. Shareholder value was destroyed, employee retirement plans in company stock vanished.


What is Our Mandate 

There is a fundamental lesson for all of us in financial services to consider. What is our mandate?  As management teams meet in the next couple of weeks and months new business plans will be developed. People will focus on tactics, growth and on net worth. Metrics will be created to measure progress. Sub committees will be formed to identify tactics. It is important that all of us in the credit union industry not forget or ignore the lessons that many Big Banks have learned at a dear cost.


In world of “Too Big To Fail” credit unions have to be vocal about the value they bring to the financial services spectrum. As Big Banks look to augment interchange and courtesy pay revenue with new and elaborate fee structures (say goodbye to free checking) credit unions have an opportunity to prove that local community financial institutions can succeed by focusing on the member owner and following the mission statements printed on the inside of the cover on their annual board packets.

Some of the most committed and passionate leaders in financial services lead small credit unions and firmly believe they can go up against Big Banks who employ tens of thousands of employees. Not only do they go up against them in the same markets – they dare to think they can grow shares, loans, membership, and net worth! To me that is one of the most admirable traits of being a credit union leader. I honestly believe that the only way to beat a Big Bank in your market is embrace that you are not a Big Bank. That you offer a clear cut difference and alternative to business as normal with “Too Big To Fail” institutions.

Practical Application:

• How do you stay centered on your “True North” and not get distracted by all the hype and “false stars” that surround you and your organization?
• How do you focus on your circle of influence and not get lost chasing wrong initiatives down a wrong direction?
• How do your staff articulate the services you can offer your membership so they understand they don’t need a Big Bank?

Sales: A Five Letter Word for Banks

Small acts of service…do they matter to you? Yesterday I ordered pizza and set the order for later in the day so that everyone in the family would be home and could eat together. Well an hour before the pizza was scheduled to arrive everyone was looking at the clock (apparently I had overestimated the time on when everyone would be home) and commenting on when the pizza would arrive. My small act of service was not being very appreciated (bunch of ingrates !!)

Finally the telltale sign of a car driving through our cul-de-sac looking lost. I watched from the stoop as the driver pulled up to every house and just stopped in the middle of the cul-de-sac and called someone on his cell phone. The driver was clearly lost and clearly frustrated. Seeing me he yelled out, “Did you order pizza?” I replied that I had and soon he was handing me 4 fresh pies.

As I was signing the slip the driver stated that he was the new manager of the store and that he had made the pizzas himself and wanted to make sure they had arrived on time. Now the cynic in me just smiled but then the driver said, “My name is Shane, this is my card and I really want to earn your business. Please let me know if there is anything else you need on your next order.”

I have to tell you it impressed me. The man was courteous, professional (once he was on stage) and asked for my business and extending himself by offering further assistance. I have worked in service and sales management positions for more years than I want to count and each time I experience someone who understands the nuance of service and sales I just get chills. Why? Because it is so rare. More importantly because it works.

I believe we all work on commission- everyone of us. No matter what your official pay structure is. Consider your own salary and where you are on your salary ladder. Like all of us you probably have someone above you and someone below you. How was your piece of the pie determined? It has been my experience that it is based on the value of your service or the value or size of the contribution you bring to the organization. This same principle holds true for credit unions as a whole. How much your credit union makes is proportionate to the value it provides to your  owners-the members. Fail to provide great service and services then your membership will simply move on.

The opposite is also true. Focus and become obsessed with service to your members, in providing “value for value” then momentum picks up and you start to attract people who are hard wired to provide great service, who want to be part of something that makes a difference. People like the pizza driver who get it. Soon your membership becomes advocates of the credit union and bring in more people. Growth.

Who wouldn’t want to be part of that, to feel that kind of excitement every day? This is the opportunity credit unions have in front of them. A chance to be the other road for members who have only been a number at a Big Bank. Unfortunately, too many credit unions fail to make the investments needed into core competencies such as service AND sales. For many credit union employees “sales” is a five letter word that is equal to “banks”. I do not understand this approach or line of logic. If you really have better rates, lower fees, and member’s best interest at heart why would you keep that to yourself ?

Over the course of my career when I have challenged employees or leaders on this topic I have found that it comes down to personal preference. The person does not like someone “selling” to them. So they do the golden rule, “Do onto others as you would have done onto you”. The flaw is that we are not focused on the right question. If I asked that same person, “would you like me to show you how to make more money on your deposits and pay less interest on your loans so you can save more money for your family?” Often the answer is different. Suddenly that is not sales but great service.

It has been my experience that often the lack of enthusiasm for service and sales has to do with having the wrong person in the wrong position. You can’t excite your membership with order takers. That is why you have online banking or an IVR (interactive voice response) service- to be order takers. For staff the job is to provide energy to your service culture.

Practical Application:

How can you help staff move past personal bias on what they would define as service?

How do you raise the bar to help them see what is possible instead of what is in front of them?

How can you get people to engage the membership, to become excited about the new product or service that is going to add value to your membership?

Ask your front line what types of issues are the members they deal with facing? Get your product managers and delivery managers engaged in solving that problem.

Don’t be content to simply mirror the latest and greatest thing from a Big Bank and say we will simply offer the same thing with credit union charm. Your membership deserves people who are excited and engaged in being their financial advocates. The Big Banks will incent their front line staff to pitch fee based products – you can’t let that be the only advice your members hear.

New Members: Investing in Core Competencies

Do you remember your first time you stepped into a credit union? For me it was about ten years ago when my wife had asked me to visit the “bank” with her. We went to this small branch office stuck on the end cap of a strip mall.  I had never even heard of a bank in a strip mall. Inside as we were filling out the deposit slip I saw that the  savings account was not called a savings account but was a “share account” .  I  held up the deposit slip and asked my wife, “What kind of weird bank is this place?” to which she replied it was a credit union. To her that explained everything.

Since that time not much has changed as I have seen many people search for understanding of what is the difference between a credit union and a bank.  This task has become more difficult at times because credit unions themselves seem unable to clearly articulate the difference to their membership. Even during the Wall Street melt down of Big Banks I have seen credit unions  advertise with slogans extolling how they are some type of better “bank” or that they offer “better banking”.

This loss of message is a sad reflection of some of our own internal  understanding of what makes us different from banks.  A deep seated understanding of what separates member owned credit unions from stock owned banks is a mission critical item. Let me explain before you dismiss this as sentimental propaganda.  From a practical business perspective one of the first steps to attracting and retaining members is to identify the value proposition we offer the member.  Then once you have indentified the value proposition you have to invest in the core competencies needed to meet that need. For many of our members there is a real need to trust the financial institution they do business with. This is due to the high levels of mistrust people feel for Big Banks and Wall Street.

Yet, many of these new members who walk into a credit union experience the same type of welcome I did all those years ago. They pick up a  new member application and then get told they need to deposit five dollars into a “share” account.  They are herded through the process and soon find themselves new members of that  “weird bank” with the great auto rates.  All the difference in jargon simply gets lost in translation and the member walks away without a clear understand of the value you have to offer them.

The opportunity to educate the member has to start with making sure that new member service representative on your platform has a real understanding of what it is that their credit union has to offer that new member.  Not only should the member feel great about the auto rate you were able to get them but they should also walk away feeling different because of the experience itself.

Most credit unions will never have the deep pockets of a Big Bank. That means the investment in core competencies is at the person level. It is one person feeling excited that someone else has discovered the real value of being part of a cooperative financial institution. That excitement is something that people are not used to experiencing in large impersonal Big Banks. It is that excitement that turns a monetary transaction into emotional transaction that resonate with that person restoring their trust. 

Practical Application:

How well is your staff able to articulate what makes you different from the Big Banks?

Does your staff help new members understand the difference and help insure that terms and concepts are not simply lost in translation?

Can you quantify how you have invested in core competencies that push forward your value proposition to your membership ?    

Leadership Needed Not More Hand Grenades

Throwing Hand Grenades
One of the most important attributes about leadership is the ability to provide perspective and correction. Most of us are able to see problems. Some of us probably even know people who excel at throwing verbal “hand grenades” into meetings just to see things explode. Yet, these same people often are unable to articulate viable solutions. This is because they lack perspective more specifically leadership perspective. In my experience leaders have the ability to view the context of the surroundings around them. They are able to see the map from a leadership dynamic. Critics, the mob in the corner with all the hand grenades, no matter how well intentioned fail to provide the needed advice or perspective to correct a situation. This can be seen on both the level of member interactions and on the larger level when people talk about financial services and fiscal policy.

Looking At The Situation With An Experts Eye
For example on the micro level, take a situation in which a member comes into one of your branches to apply for a $500.00 personal line of credit for personal expenses. Let’s assume for the sake of the example the loan officer looks at the situation and based on the underwriting criteria they decline the loan. What was clear to the loan officer was that the last thing this person needed was more debt. This is the pivot point on the member level. Does your loan officer ease that person out the door eager to wait on the next person or do they look at it from a leadership perspective? Make no mistake in that situation your loan officer is the leader, the expert, who can offer criticism or they can look to see how the person can make critical adjustments to improve their situation.

Suppose that in looking at the member’s situation it was clear that the member did not need to add more debt but rather needed to restructure the debt they already had. After explaining what they could do your loan officer takes an application for an internal refinance on the member’s auto loan that they had with a BigBank and the member gets approved for the full value. This allows your member to pay off three credit cards and have $500.00 for personal expenses and some extra for personal use. The end of the story is that the member was so happy they wept and said that your credit union was a blessing to them. Sound farfetched? I know of situations just like this and I am sure some of you if you asked your front line staff would also find similar situations.

One of the ways credit unions can help is by offering financial leadership when looking at our members situation’s. We need to employ a perspective that enables others to accomplish things they could not accomplish themselves. This is critical to helping to provide services to our underserved membership.

It is for this reason that credit union members and leaders need to make sure they are expressing their opinion to community leaders on how we provide financial leadership to our members. Credit Unions face increasing pressure as new proposals in Washington have language that mentions ending the credit union income tax exemption as one way to reduce the federal deficit.

Ironically it also mentions the growth of Subchapter S corporation arrangements for banks — a way to organize bank ownership to reduce tax obligations. Subchapter S banks pass their earnings along to shareholders in the form of dividends, who are then taxed as individuals. Theoretically, this can reduce tax liabilities for the bank's owners, who can use other deductions to lower their exposure.

More than ever credit unions need to be seen as financial leaders who have the ability to provide perspective and correction to people who are struggling during these challenging economic times. This means helping people of modest means as well as being able to help small business owners who find themselves struggling to secure needed capital for growth.


Practical Application:

• Have you build in systemic behaviors into your delivery channels have enables front line staff to provide financial leadership to your members?
• Have you positioned yourself as a financial leader in your local markets? In some markets the local bank branch is the only game in town.
• How have local branch managers engaged local civic leaders letting them know how you are different?

Credit Unions "Too Important to Disappear"

Imagine that all of your personal financial needs were deemed undesirable by your financial institution. Imagine that getting a loan for a car, home, or student loan was not something that the senior management of your financial institution was really interested in. What if they saw those things as drains on the balance sheet.


Sounds farfetched, right? I mean in this economy with people struggling who would not want to support lending that moved the auto industry forward, or helped people get into homes with rates that have been some of the lowest in many people’s adult lives? Yet, this farfetched approach is exactly what one of the largest BigBanks has done. Yawn…so what right? What does that have to do with us in the credit union universe?


Nothing except that I find it odd that some of the world’s most complex financial institutions have grown so large that Congress had to reform financial service regulation to contain a prevision on how to break these giants apart in a way that does not pull down the world economy. Now while those laws are still drying on the books other bank lobbyist have proposed that large credit unions be forced into a mutual savings bank charter. So let’s break apart the logic on this.


• BigBank has grown so big it wants to sell off distraction divisions that provide financial services for auto lending, mortgage lending, student lending.
• BigBanks have become so large that Congress had to create a provision for “Too Big To Fail” and make that a law to protect the world economy.
• Banks want larger credit unions to convert and become larger banks


….and the reason for this stunning conclusion on the part of the banks is what exactly?


In a world of BigBanks deemed “Too Big To Fail” we need to have more local financial intuitions under the banner of “Too Important to Disappear .” Don’t be fooled by all the double talk being presented by BigBank lobbyist. The bottom line for every person in the local community is that members and non member benefit by having local credit unions in the community.


It is a basic principle that can be seen on the corner of most intersections. Gas Station A is selling gas for 2.50 a gallon while across the street Gas Station B wants to sell the gas for 3.50 a gallon. What stop them from selling at 3.50? Gas Station A. Local competition is always a plus for consumers. The same principles hold true in financial services as credit union competition helps consumers by keeping bank rates and fees lower.


For example, if your local credit union is charging a fixed rate of 10 percent on a credit card then all other lenders in the community have to compete with that rate. I don’t want to imagine how expensive BigBank would make credit cards (anyone with a BigBank paying 20-30 percent on their card??) if they didn’t have to compete with credit union rates.


Practical Application:
Are your employees able to articulate the benefit local credit unions bring to the community by providing lending for auto, housing, or education at rates that keep everyone competitive?
Are your local civic leaders aware of the difference credit unions make to their constituents?
Do they understand in a world of Wall Street and “Too Big to Fail” that having local credit unions in their communities is a must have.


Today more than ever member owned credit unions are “Too Important to Disappear”

Are You Securing Your Membership ?

Music and Books…Banking?
Actually those of us in the financial services world could learn a great deal by taking a closer look at what is going on in the music and book publishing industries. Like many of you I listen to music on my IPod. It is small, barely the size of a usb drive, and it can hold hundreds of songs. The same with the electronic reader I recently bought from my online book retailer.

What do both of these gadgets do for me? Your answer might sound like mine when I say, “they provide me the means of listening or reading when and where I want.” While that is true they also have another side benefit. They lock me in by building virtual castle walls around me…brick by brick..one great service, product, or convenience at a time.

A goal of every company should be to create a virtual castle walls around your customers or in the case of credit unions members.  Consider the IPod. The content of the IPod only works on the IPod. This means if I want to continue to access my content I have to continue to buy that content from Apple. The same with my electronic reader. The books I have purchased only work on that specific reader. In effect the companies have build into their products a switching cost I have to be willing to pay in order to leave the devices they have chosen. In other words I have been tied to company by the very convenience and service the companies offer me.

One challenge for many credit unions is that there is no inherent switching cost in leaving them. In fact, many credit unions are hurt because many members use them for that great auto rate or a “hot” certificate special but retain primary relationships with the BigBanks.Why would a person do that? Why would someone stay with a bank they do not like? The reason is that members do not understand the value you are offering beyond that "hot money" rate. 

Till Death Do Us Part

In a recent survey conducted in the United Kingdom the average Brit stayed with their bank for 16 years. The average relationship was just 14 years…meaning people stayed with their banks longer than the people that they once proclaimed to love! Primary reason they stayed was simple apathy. Banks realize this. Trust me they are building their own virtual castle walls to keep their most profitable customers.

As Big Banks look to create alterative sources for non interest income they will also invest in the very technologies that enable them to build in switching costs to the customers they serve.  I remember when I left my relationship with a Big Bank having to convince my spouse that the online banking, national ATM network, and vast branch network were not the only things that mattered. I had to remind her of how tired we were of the new fees that seemed to come up month after month.  What we discovered was something very different. We discovered local community based financial services. Now this readiness to provide great service is only as good as the people and technology that enable it. Financial Services for many people is an emotional transaction. They know when something "felt right" and they also know when they felt nothing at all. 

As Big Banks continue to look for new fee revenue many people who were in a state of apathy will wonder what alternatives are out there. Credit Unions have to break through the clutter and engage those people that are looking for some other financial services alternative. This is the perfect time to leverage the membership growth many credit unions experienced as consumers fled Big Banks in their flight to safety. Credit union need to invest in people and convenience technology that builds the virtual castle walls needed to both attract and retain members.  

Practical Application:

• Are you just a simpler more vanilla version of what your new member already experienced or will they find your front line staff lacking in their readiness to serve?
• Have you looked into the "click and carry" mobile technology that will make leaving you too difficult?
• Can members send you a check via their phone? Do you even know if they want to ?
• Do your members have to sign paper loan documents or do you allow electronic signature for seasoned members with strong standing relationships with you?  

BigBank Stock Options: Hear No Evil, See No Evil, Tell No Evil

Years ago I recall walking into a new hire class and being told that as a new employee I was now the owner of a stock option for 400 shares of bank stock. Stock Option… the word just sounds cool. My mind danced around with endless possibilities. I was going to be wealthy beyond my imagination. I just had to help the stock get to the first trigger then it was all mine.

Two long years later the stock hit the trigger. I like everyone else was checking the stock price by the hour. People in the next cube over had just cashed in and were putting money down on a house. I called my wife told her to stop cooking we were going out for supper! Then the news hit. The “Oh Momma” of all words in this type of environment… Merger. I was so excited I pulled up another spreadsheet and redid all the math. Numbers and dollars signs danced before my eyes. There was talk of a stock split. The stock was close to 100 dollars up from 60 dollars the prior day. People cashed in left and right. Cars, vacations, homes, motorcycles, people were getting it all.

After running through the math I set my target I would cash out at 105 per share. I waited and watched all day. Work was ignored…each up or down movement brought cheers or groans. The stock got to 104. I held strong. Then it slid to 102…100…97. I wanted to panic but I knew it would bounce back. Others told me to cash out but I had latched onto my mental anchor it would bounce back.

So how does this end? Well, the next day the news broke that the other company had hid billion in losses in a bond deal with Russian bond traders. The stock plummeted. I watched with horror as the stock went below the 1st trigger. Two years later I sold my shares and took all the money I made and bought a two hundred dollar grill at Lowes.

Why do I mention that today? I remember everyone being so excited and so very distracted during that period. Everyone was going to make a ton of money and everyone was watching the stock. During that time no one was focused on the company mission, vision, or customers. It was all about everyone getting their share of the pie. This tunnel vision continues today in large banks.

In a world of stock options it is hard to not concentrate on the stock. Not only do you have a duty to make sure you provide a good return for stockholders you are also motivated because you potentially get to make out better than the stockholders. You have three groups of people who have a stake in the type of service, pricing, and products the company offers – stockholders, customers, employees. The problem is that two of the group members (employees and stockholders) profit if the 3rd group pays more and gets less.

The way to fix this is to allow everyone to own the company. How do you do that? Simple give ownership to anyone who wants to join. Sounds crazy. Sounds like the way credit unions have been doing business for the last 75 years. A better model that rewards everyone.

Practical Application:

The topic of ownership is something every credit union should be jumping up and down to articulate to its membership. In order to do that the membership has to understand the contrast between a member owned cooperative and a stock owned bank. 

Questions to Consider:

How have you educated your staff and your membership on the value they receive by not having to compete with a separate group of stockholders?