Money To Burn: Three Strategies To Rethink

Nerd On The Run 

What a great memory touring Washington DC on a Segway. Yep, that sentence automatically nominates me to the Nerd Hall of Fame. There I was gliding around people and taking in the historical sights of the Capital. As I was trying to move around town and not run over people or fall on my face I could not help but notice the different ways people were taking in the sights of the capital. Some people were on tour buses, some were on rented bikes, some roller blades, and lastly some just walked from one point to the next. No matter the method people were taking in the sights and enjoying the weather in a way that fit them. 

What really struck me was that even though we were all going down similarly marked paths we were going about it in different ways with each of us expecting different things from the journey. You could literally see the difference in generations by the reaction I created as I glided past someone on the Segway. Small children pointed and said they wanted to ride. Young adults looked bored as seeing a Segway was nothing new; just a guy in a nerdy bike helmet riding a Segway. Older tourists stepped to the side and looked at me with distrust. They were visibly afraid I would suddenly lose control of the technology I was riding  and go crashing into them. Each group saw the same technology on their path as something different. Some saw amazement, some saw the normal or routine, and some saw something they simply did not trust or understand.

I think the same reaction is happening in financial services as we try to understand the sweeping changes that have enveloped our industry over the last three years. To combat consolidation in the market many credit unions are adopting technology that is supposed to help understand  the member and deliver cost efficiencies . Yet, that same technology is often sweeping in nature. So credit unions find themselves trying to navigate a path with all those same groups I almost ran over with my Segway. Like me on the Segway many credit union management teams face the same challenge of trying to create a uniform experience across age groups and delivery channels. They face the same concern that they don’t want to lose control of the technology and end up taking themselves out.

There are many different strategies out there and all of them seem to come with a complimentary white paper and free webinar on how they will revolutionize the way we serve our members. One thing I do know is that some of these strategies are the wrong strategies. I suspect that for some credit unions the key strategies they are adopting fall into a couple common themes. As you ponder these three strategies I want to share with you some research, that I believe is relevant, from the Raddon Financial Group (http://www.raddon.com). 

Tell Them We Are Not a Big Bank and They Will Come…

Yawn….they paid the money back! People have put TARP in their rearview mirror. The truth of the matter is that Big Banks went to Capital Hill, got a spanking, and then on the way out of town they grabbed all the assets, improved market share, and got a nice check for a couple billion as they walked out the door. Anyone seen a Ally Bank commercial lately? We all know they were wearing black hats at the start of the congressional hearings but when they left the building they had a new image, a new name, and a new slogan. This means that for many small community based financial institutions they are now competing with Big Banks with even more assets, with larger consumer bases which allows them to lower their cost per transaction even more. The added insult for many credit unions is that the average consumer has a very short memory or is oblivious to all the changes that have happened over the last three years. There simply is not a lot of road left on this message and strategy.

Free Checking –Leave it Free and They Will Come … Be Careful What You Ask For

Many of us are aware most Big Banks have eliminated or reduced free checking. On the other end of the spectrum most credit unions have adopted a “wait and see” strategy hoping that they will pick up deposit growth from dissatisfied bank customers. There are some basic assumptions in this strategy that credit union leaders need to validate. The chief assumption is that the growth will come from depositors you would want as members. If you break down consumers into six broad categories (Fee Driven, Credit Driven, Middle Market, Low Depositor, Middle Depositor, and Upscale) the majority of consumer movement is in on the lower end of the spectrum. Big Banks are driving away non profitable customers and credit unions are assuming that they will suddenly turn into profitable members.

Imagine a large exodus of millions of people. Each person is simply being driven out from where they were. They end up going down the path of least resistance and end up in a temporary camp. Imagine the town next to the camp being filled with kind hearted people who decide to take them in and help them back on their feet. This action is noble and it is in many ways heroic. What it is not is profitable in the short term. The towns resources are used without anyone paying additional taxes. The same thing will happen with credit unions as they become the refuge for unprofitable Big Bank customers.  Many of those that are being driven from the banks are the people who are “Fee Driven” and that segment simply is not credit worthy for the loans you will want to lend to them. So now you have low deposit, high transaction members who are credit challenged. 

I am not saying credit unions should not be the refuge for these members – we are here to serve the underserved. I am simply suggesting that the strategy has inherent challenges that need to be thought through.  Maybe you are counting on the fee income from overdraft from these members. Looking long term that source of income is squarely on the radar for the new Consumer Financial Protection Bureau who will see this income as part of their mission to make sure that markets for consumer financial products and services are fair, transparent, and competitive.

Build or Buy the Technology and They Will Come

The media loves technology and all the buzz words that come with that technology. Apps, living in the cloud, DROID, mobile, tablets, all of it just sounds cool. When you listen to that tech vendor with the great PowerPoint you almost think it is time to shutter the branch network and go virtual. Well, before you make any big budget decisions I want to provide some additional points of thought to consider. One thing to ask yourself is what do members value the most at a financial institution. The answers are as follows; Free Checking 76 %, Good Service 70 %, Convenient Branch Locations 48 %, Good Online Banking Experience  41%, NSF Fees (under 30 $) 28%, Loan Rates 18%, Deposit Rates 17 %, and Mobile Banking 12 %.

It seemed odd to see the branches ranking 3^rd on the list when it seems in the past month or so I have read numerous blog articles calling for the reduction of branches as they are becoming obsolete.  I have no doubt that members will continue to shift from branches to other delivery channels like online and mobile. That being said the biggest driver of member satisfaction other than free checking was good service. Where does the majority of that good service happen? In the branches. True, a great call center and back office staff are added bonuses but most member interaction is still face to face in the branch network.

When members were asked what would make you move your PFI the answers were; Lack of free checking 34%,Service Issues 31 %,NSF Charge (over 30$),Branch Hours/Location13 %, Deposit Rates 13 %,Online Banking 11 %,Loan Rates 10 %,Product Range 9 %,& Mobile 4 % .

What does all this mean? It suggests that it is hard to move the type of members we want to move from Big Banks. When polled 50 % of financial institution consumers said they believe they receive better service at a smaller financial institution. We also know that service continues to resonate with consumers. I believe any strategy we adopt has to also find a way to empower that teller or member service specialist in helping them feel valued in what they are trying to do for the membership. This is a hard sell. It is more fun to buy tech than it is to create incentives for great service.

So now I have poked holes in the three strategies I have heard recently. Please feel free to pass this blog article along to someone else so they too can mutter under their breath. As always this is a dialog in which I hope to generate additional ideas on how we can all compete and thrive against Big Banks. Now leave a comment so you can influence the next reader and let’s make a difference for small community financial institutions together. 

Moving Past Our Jekyll and Hyde Debate - Selling The Credit Union

“Desires dictate our priorities, priorities shape our choices, and choices determine our actions. The desires we act on determine our changing, our achieving, and our becoming.”

A Story of Jekyll and Hyde

One of the most famous stories on our desires dictating what we become was written by Robert Louis Stevenson who captured this constant struggle between the warring nature of desire when we he wrote the novel about Dr. Jekyll and Mr. Hyde. The story tells us that in the beginning “Dr. Jekyll is a highly respected London physician [picture Brad Pitt] a good and kindly man, who in his youth had showed inclinations toward evil which he put behind him. As a doctor who has to learn about various drugs, the doctor comes across one which enables him to change his external form to that of a repulsive monster, the very embodiment of the evil lurking within him, whom he calls Mr. Hyde.”

This same warring between two sides is alive and well within the credit union movement. The irony is that each side sees the other side as the evil “Mr. Hyde”. To some in the credit union industry the drug that brings the hidden evil to the surface is the concept of “sales”.  They worry about greed and lack of internal controls. They picture member business lending running wild or tellers trying to push product through the drive through lanes. Sadly, there are examples of this in recent headlines. Texans Credit Union at 1.6 billion is the most recent victim of a sales process that went awry as they concentrated their efforts into business lending only to end up under NCUA convseratorship.

When you hear the word 'sales' what comes to your mind? For some credit unions, the word “sell” engenders a feeling akin to a tooth extraction with rusty set of dental tools. In other credit unions, the same word is on the hearts, minds, and lips of every employee. They walk around in some type of "bliss like" state trying to uncover unmet member needs.

Redefining Sales

However, almost every credit union misses out on the most important sale of all. This is not a product or a service rather it is the opportunity to “sell” itself as an institution to its members. Many credit union employees have been with their credit union so long that the value and benefits, which are derived from being associated with a credit union, are second nature. Unfortunately, this simply isn’t the case with their membership. Every credit union employee and volunteer (i.e. employees, senior management, and board member) should take every opportunity to discuss with their members the substantial benefits that come from using a credit union.

The practice of selling the credit union is much more than a theoretical exercise. There are real life consequences which will naturally follow. Taking a few minutes at the end of the loan process to share with the member, in terms of real dollars, how much they saved can make a tremendous difference. It is about painting a picture or telling a story that the member can understand. Sometimes the value we create gets lost in the numbers. Instead of talking about percentage points you have to put it into something more tangible. Imagine the member hearing “Mr. Smith, we have saved you $4500 in interest over the next 4 years as compared to that bank up the street”. That is real money that is going straight back into his wallet. This does two things: Mr. Smith will realize that he trusts the Credit Union and will want to make the credit union his primary financial institution (PFI) and he will tell many of his friends and family about how much money he saved the next time he sees them.

Many leaders in the credit union movement are extremely concerned about growing their organization in a sustainable manner. By simply reinforcing the perceived value (remember, the actual value is already there!) provided by the credit union, individuals will become promoters on behalf of your credit union. This will dramatically increase both the wallet share and the market share which the credit union enjoys among its membership. Wallet share will be increased in a number of ways. First, each new "promoter" will deepen their total relationship as they migrate from a “car loan” member to one in which the credit union serves as their PFI.

As your members tell other individuals that are “car loan” or minimum share members, their association will begin to evolve into deeper relationships. Ultimately, a higher percentage of existing members will yield far greater and far more sustainable income.

Another benefit that will come from selling the credit union will be the new members that will result from an army of "member-promoters" sharing their positive experiences with others. Some will become members right away. Others will hear the message and, when they receive poor treatment at their current financial institution, will decide to see what everyone is talking about. This becomes a self sustaining cycle. Happy members tell other people (members and non-members). These primary converts then tell others who then become secondary converts. The cycle continues.

Moving Past Our Own Reluctance

Unfortunately, with any new practice or habit, there is a tremendous amount of inertia which must be overcome. Organizational resistance and lethargy will, in the beginning, make progress seem slow. Some staff may feel that they shouldn't need to tell people what they should already know. However, with many things, practice makes permanent. Each time the staff sells the credit union, it will become easier and easier. It is critical that credit union sell occurs every time. If it doesn't, the cycle will grind to a halt.

At the end of the day everyone who works at a credit union is in the business of helping members understand the real value of what they belong to. To help them understand that value you have to help them wake up by sharing some real life practical advice.

Too often the only advice being offered by financial institutions is related to helping the wealthy plan how they will retire on a beach with a hammock. Let the banks fight over the same small slice of affluent consumers as they keep recycling tired overpriced “wealth management” services. As credit unions our mission should be a touch more noble.

We have to help our members with “life management” advice. We need to help our members who are caught in that cycle of purchasing things they don’t need, with money they don’t have, to impress people they don’t even like, see past the poor habits they have developed. We have to move past the debate of what type of sales culture we need to have and start getting our members to become our advocates by first being their advocates.

This blog article was written by Matt Mecham, who works for a large "small town credit union". In the past Matt has worked for several credit unions ranging from $250 million to $1.3 billion. He has seen firsthand the differences between large and small credit unions, as well as the different challenges faced by each. To learn more about Matt please visit his profile @Matthew Mecham

Look, Listen a Little Harder...Hard Lessons From Hong Kong

Avoid that camera shop and street; it is run by Chinese Mafia

Last year I was in Hong Kong and it looked like Times Square in New York. Neon lights everywhere. I was dazzled by all the lights and the people. It a scene I will never forget because I got lost on my first trip to Asia. Our tour guide pointed out a street close to our hotel and said, “Avoid that camera shop and street; it is run by Chinese Mafia.” He might as well have said, “Hey, you need to go down that street. As soon as I was checked in, I went exploring in my Hawaiian shirt and rolled up cargo pants.

The streets were crowded and there was so much to see. Every store had something new and each vendor was cooking something I had never smelled or seen before. I took note of the camera store and the street I was on. Luckily the streets signs were in Chinese and English.

After about an hour I noticed I was the only tourist walking around. More and more there were expensive cars parked on the streets, with very mean looking drivers resembling the bad guys in a Hollywood movie. The words Chinese Mafia no longer sounded so interesting and I decided it was time to turn back It was then that I noticed the street signs had changed and were no longer written in English.

Pick Pocketed and Lost - Perfect Everything is Going According To Plan

Being such an experienced world traveler, I figured I would go to my back-up plan which was to show my hotel card key with the address on it and have a taxi take me back to the hotel. As I looked at the hotel card key, though, I discovered I had brought the one that did not have the address on it. To make matters worse, as I patted my pockets, I found that I had been pick-pocketed and all my cash was gone.

Feeling sorry for myself and trying to recount my way, it hit me that I could not remember exactly all the twists and turns I had made. Suddenly I found myself in a situation and a place I had not expected to be in. Too often this same thing happens to our members as they find themselves in economic circumstances they did not anticipate. They look back and find they did not recognize the twists and turns in life, and find themselves financially lost. They are unsure of what steps to follow to get back to a place where they feel safe.

Tired from worry I made my way back to a more crowded part of the street and saw the camera store. Once at the store, though, my hopes were dashed as I saw it was another camera store that looked exactly the same as my landmark. Now completely lost, I kept walking as I didn't want to just stand still in my green Hawaiian shirt looking pathetic. After all as an “experienced” world traveler, I was trying to blend in.

Listening To The Universe -The Idiot Walking around Blindly in Hong Kong

As I was walking, I kept pushing past the sidewalk stalls and the people who were trying to sell me clothes or custom made suits. Then I got an idea--a moment of pity from the universe to me, the idiot walking around blindly in Hong Kong--and the idea was … LISTEN.

Listen to what? Everyone was speaking Chinese! Then I noticed the tailors trying to sell me a suit were Indian and that they had been speaking English. Elated, I started to go from one Indian tailor to the next asking if they had heard of my hotel.

Then as I was speaking to a tailor, I got another great idea as he pressed his business card into my hand, which was to … LOOK. I looked down at the card and it looked like the other cards I had thrown in the trash as I was walking, but this time I turned the card over. There on the back of the card was a map that showed how to get from any hotel to this shop where I was standing.

Within a half hour I was back in my room safe and sound.

The same principles that helped me find my way back apply to our members who are looking for financial solutions. We have to listen to our members as we interact with them. We can’t sit back and assume they will ask for our advice. Too often our front-line staff fails to hear the unspoken questions our members want to ask someone.

We have to get our staff to look up from that teller transaction slip or computer monitor and really seek to understand what is going on in front of us with our members. Seeing who is in front of us is not always as easy as it sounds.

Years ago I recall dropping my four-year-old daughter off for preschool and the classroom had glass walls. I went to the classroom next door and watched her. She sat on the floor and cried. As a new father, my heart broke. I stood 10 feet from her, but she could not see me because she would not look up. I was there right in front of her.

We have the ability to really make a difference in the lives of the people we serve and come in contact with. These are people from our own communities, people who are trying to recover from one of the most severe economic downturns in recent history.

Some of us know people who are trying to get back on their feet, good people who have gotten lost in corporate downsizing or trapped in the mazes of underemployment. It is easy to not listen or to not look up at them directly. It is too easy to only see the Beacon score or the latest overdraft fee because they are living off overdraft each month.

This view is short-sighted, to say the least. Big banks have a similar, “only the financially healthy need apply" mentality.

Listen to the next loan application your loan officer takes. Is he or she listening to the member to gain real understanding? Is the loan officer asking questions about outside loans that can be consolidated to free up money for the member? Is the loan officer looking to do more than just act like an order taker?

As community-based economic cooperatives, we have to be the ones who listen and look a little harder at the person in front of us.

This article was originally published for CUES SKYBOX. Please visit their blog for other great credit union articles. 

Helping Our Members Live Up to Their Privileges

A Tale of Privilege
While attending a conference a former airline pilot related the following story to me. A man's lifelong dream was to board a cruise ship and sail the Mediterranean Sea. He dreamed of walking the streets of Rome, Athens, and Istanbul. The man worked diligently and saved every penny until he had enough for his passage. As his funds were limited, he brought an extra suitcase filled with cans of beans, boxes of crackers, and pouches of powdered drink mix, and that is what he lived on every day.

The man watched the others take part in the many activities offered on the ship—working out in the gym, playing miniature golf, and swimming in the pool. He envied those who went to movies, shows, and cultural presentations. He yearned for only a taste from the tables heavily laden with all the amazing food he saw on the ship. Every meal was by itself a feast! However, the man merely looked on and did not participate as he wanted to spend as little money as possible. He had used almost all his money on the ticket for the voyage. While he was able to see the cities he had longed to visit, for the most part of the journey, he stayed in his cabin and ate only his humble food.

On the last day of the cruise, a crew member asked him which of the farewell parties he would be attending. It was then that the man learned that not only the farewell party but almost everything on board the cruise ship—the food, the entertainment, all the activities—had been included in the price of his ticket. Too late the man realized that he had been living far beneath his privileges.

This story struck me when I heard it. I thought of so many of the people I come in contact with at credit union events who are so passionate about the world of credit unions and the value they add to their membership. Yet, we often spend our time on efforts that are driven by external forces like; free checking, lending volumes, or new legislation like the Durbin Amendment. We spend so much time saying the country needs credit unions but fail to really help our members understand just what their "ticket" for their cruise bought them. It was then I realized that membership had its own set of “privileges”. I could not help but wonder if many of us are like the person in the story.

The Man In The Story Sparked the Experiment
Many of us will conclude that I am speaking about the man who had not realized his privileges until the end of the voyage. I do think that part of the story is sad. However my focus is on the crew member who told the man of his privileges. If only he had spoken to the gentleman earlier. If only he had made it a point to greet each new passenger as they boarded the ship and had given them a flyer explaining the privileges that are part of being a passenger on the ship. If only somebody had cared enough to simply ask a question earlier in the voyage.

This sparked an idea that I wanted to try. So I pulled one of my best member service specialists and asked them to pilot a question for me. I wanted her to ask every member she interacted with what their favorite credit union membership privilege was. She was somewhat skeptical at first fearing that the members would not know what she meant by “privileges”. In fact on the 2nd day she emailed me the following as I was driving to a CUES chapter meeting, "My manager and I were discussing the verbiage. Could we change the word to benefits? Saying – Mr. Member, what benefits do you appreciate and utilize the most being a member/owner with the credit union? Or – What benefits do you find the most valuable to you being a member/owner with the credit union? PS. Don’t text me back while driving!”

I email her back (no, I wasn't driving – I was lost with four other credit union leaders in a minivan wondering if we would ever find a major road with a road sign again) and asked her to keep trying with the word privilege.

That word conveys something that people want to know about. What sounds more exciting to you, “Thanks, for joining our pool membership here are the features and benefits of your membership” or “Thanks, for joining our pool membership I want to make sure you are aware of the privileges you receive with your membership.” Now, maybe it is just me – but I want to know about my privileges!

The next day during lunch I check my mobile and get the following email from her, "Just wanted to let you know we have been getting fabulous feedback on all the conversations and we've been able to turn negative responses into positive ones by educating the member on whatever their dilemma is and have even been able to open some new accounts and insurance and investment referrals.”

What had happened was that most members when asked what their favorite privilege was could not answer the question. This then led the member service specialist to then explain other products or services associated with the credit union like investment advisors or credit union auto buying service. This is so much more powerful as a transition phrase from service to sales than the typical, “before I let you go” statement we all here all too often in from our staff.

Practical Application:

• So how are your passengers doing on your ship? 
• Are they sitting on the sidelines wishing they could enjoy eating at the table? 
• Does your staff find them in time for them to enjoy the voyage? 
• As our members are trying to make it through the financial storms that are looming on the horizon what actions could your staff take this week to help your membership understand the privileges that are theirs? 

Send this link to a credit union employee you know. Strike up a conversation with them on what question could they ask that would help your membership grab hold of the potential to improve their financial well being by really participating with your credit union.

With Big Banks No Longer Listening...Who is Listening to Your Members ?

Classic look back on one of the blogs most popular posts. It was relevant then ...seems just as relevant today. Originally posted 10/17/10

Heard Any Good Advice Lately
When was the last time you had someone offer you some really good advice? Not the advice of, “You need to watch this TV show” or “Go see this movie” type of advice. I mean “Wow, I am so glad you told me that advice”. For some of us that might have been as recently as today or yesterday. Others reading the blog might have to stop and really consider when the last time they received some really good advice was. Ever wonder why with so many expert opinions and people chatting on Facebook, Tweeting, and texting on their mobile phones that the amount of practical and actionable advice seems to be a tiny percent of all the conversations going on?

Whatever Happened to Listening
With so much communication happening one has to wonder how much listening is also going on. This is critical question as listening enables trust. The fastest way to understand the advice someone needs is to listen to what that person has to say. That sounds very simplistic. However, we live in a world that loves to market and get the message out. We have software that knows my last purchase, where I live, how much people in my neighborhood make, and what my average balance is on any given month. What that software doesn’t know is what keeps me up at night. Sure it might be able to predict what keeps the average forty year old living in Middle America up but not me specifically. That software can’t with all its predictive analysis duplicate the smile and conversation that takes place between one of your service agents on your platform with one of your members. Even in an age of social media the most effective way of learning member needs is not in the development of software packages but in the development of front line staff and line managers.

That is because our members want to reduce uncertainty and risk and the fastest way to do that is to build relationships that they feel are built on common bonds of trust. Every successful business relationship is one that endures past the initial transaction or interaction. The relationship moves from being based on a single commodity (the moment or action of the initial transaction. Which often is the transaction of the least monetary worth) to being based on mutual benefit and increased mutual value. This shifting of perspective is a pivotal moment in being able to move from being side provider of financial products and services to being your members’ preferred financial institution.

A core behavior for building member trust is in the ability of credit union staff to listen to what members are saying to them. It is not uncommon to find people making seven statements to every question that they ask. You can’t help the member with the problem if you don’t understand the problem the member has.

The fastest way to build trust and develop a real relationship that is truly beneficial is to listen to your member. This is true of most relationships and financial relationships are no exception. For most people banks and credit union have become commodities. Too often credit unions are used as a source for a low auto rate or a place to park hot money because of a CD special. These are the very transactions we have to move past with our membership. Passive interaction and order taking are not going to build a relationship.

Practical Application:

That member who you have seen week in and week out for the last year…what is their credit score? What debts are they paying that have rates with other lenders that are higher than what you offer?

When your staff interact with members what "Go To" core questions do they use to really understand where the member is at in their financial well being?

For your key SEGS what interactions have you undertaking to make sure you are in tune with their workforce’s financial needs? Are you engaged and listening to your HR partners?  

Credit Union Blind Spots: Leadership Wedges

The Wedge
There is a story about an iron wedge that I recall hearing years ago. The legend was told by a white-haired farmer who recalled as a young boy finding a faller’s wedge. The wedge was flat, and heavy, a foot or more long, and splayed from mighty poundings.

[For those of you who do not know a faller’s wedge is, it is used to help fell a tree. It is inserted in a cut made by a saw and then struck with a sledgehammer to widen the cut.]

Now the young man who came across the wedge was already late for dinner, so he laid the wedge down between the limbs of the young walnut tree his father had planted near the front gate. As he headed for home he told himself that he would take the wedge to the shed right after dinner, or sometime the next day.

Filled with good intentions the young man meant to deal with the wedge, but somehow there was always something more pressing to attend to. Soon the wedge was firmly gripped as time moved forward and the man married and took over his father’s farm.

 The wedge, grown in and healed over, was still in the tree the winter the ice storm came. In the dark silence of that bitter night one of the three major limbs split away from the trunk and crashed to the ground. This so unbalanced the remainder of the top that it, too, split apart and went down.

The next morning in the light of dawn not a twig of the once-proud tree remained. It was to this sight that the farmer awoke. With time to only mourn his loss the man’s eyes caught sight of something in the splintered ruin of the once proud tree.

 ‘The wedge,’ he muttered reproachfully. ‘The wedge I found in the south pasture.’ A glance told him why the tree had fallen. Growing, edge-up in the trunk, the wedge had prevented the limb fibers from knitting together as they should.

Credit Union Wedges - The Core Group

Today like the farmer in the story many credit unions suffer from wedges that are embedded into the cultural fibers of their organizations. They have simply grown used to all decisions being made by a core group. Typically this group are the ones that have been with the credit union for thirty years and started as a part time teller and worked their way up to the lofty inner circles where all the real decisions happen.  

Instead of looking for ideas and solutions from others, this group sees creativity and insight as a privilege. You are either in or you are out of the process. This group of leaders unwittingly holds back the energy and talent of those around them. Instead of looking for new intellect to add to the dialog they fall back on recycled ideas that are simply versions of other recycled ideas from playbooks that worked for them “back in the day.”

Imagine what the other side of the spectrum could look like. Where would your credit union be if it had leaders that sought to unleash talent and to multiply the abilities of those around them? Picture a leadership team that actively sought how to double the brainpower of staff and managers for the good of the organization.

I came across an article that talked about how leaders can magnify and unleash the talents of others that listed the following attributes:

Attract and Optimize Talent:

When you hire talented people learn the capabilities of the individual so you can connect them to opportunities to improve the group. See beyond organizational titles and look for talent at various levels of the organization. Cultivate and reward people who seek to come up with solutions. Spot light them to the organization in a newsletter or with your internal media boards.

Create a Culture of Intensity:

The maze of titles and offices and small minded kingdoms that come with internal politics are the breeding grounds for mediocrity. You simply need to scan the newspapers for credit unions and community banks that invested everything into the talents of too few people to see this play out. They would be on the list headlined by the words “Regulators Seized”.  Peel back the label on many of these institutions and you would find managers that created tension and anxiety by suppressing the best ideas from those around them. At the first hint of danger they circle the intellectual wagons and stop communication to the very people they need the best ideas from.  

Great leaders do just the opposite by giving everyone the information they need with permission to voice their ideas on that information. This unleashing of ideas draws in people to the process. Spectators on the team are pushed to the sidelines and your natural leaders and creative thought workers get busy making things better.


Toss the Ball

If you were watching your favorite sports team (soccer, football, basketball, and baseball) you would be horrified if you saw the same person take the ball and try to win without ever giving the ball to anyone else. It would be baffling to even consider such a strategy.

Today in financial services too often the “thought police” do exactly that.  They rely solely on their own understanding when they consider what direction to set for the organization. This same mistake is then multiplied by each lower level of the organization as leaders are taught and groomed not to engage others. These leaders spend the majority of their time “telling” others instead of “asking” others.

Don't wait until it is too late and then look at the wedge you never took the time to deal with. A wonderful experiment is to spend your next week asking the hard questions that spark ideas in others. Instead of answering your own questions allow those around you to fill in the voids you have presented. Allow yourself to toss the ball and give those around you permission to catch the ball and run with it. Don't fall trap to one of the common credit union blind spots of not removing the wedge and looking beyond the people in front of you. Magnify the intelligence of your organization by engaging others and letting them fill the voids you know exist.  

Words of Wisdom From a Former Credit Union CEO

The term “small credit unions” is relative. That said, even when times are good, the “small credit union” tends to face challenges in a way that “larger credit unions”, another relative term, do not.  Speaking from experience, the pressures on the small credit union leadership looms large on a daily basis. The leadership must be intimately involved in all aspects of the operations.  Regulatory burdens alone loom large for the small credit union. Small credit unions have a more intimate relationship with their members. These smaller institutions are under a higher degree of pressure as they assist their members.

Asset quality in small credit union has not changed over the past several years.  The net worth ratio remains robust.  Navigating the economic uncertainty can be difficult.  Negative trends catch the eye of examiners, boards and management.

There are no quick answers here, however, with that said, there are common themes, of which, regardless of asset size are helpful.

• Place negative trends in context.  Make sure interested parties know how other credit unions are fairing.  Information will help directors and management make informed decisions and transparency reduces the likelihood of knee jerk overreactions.
• Most small credit union have plenty of capital.  Avoid penalizing members with higher loan rates. higher fees, lower dividend rates. service reductions, and layoffs just to maintain net income.  Analyze the impact of those decisions.
• Rising delinquency and loan losses require close monitoring and active collections.  Don’t simply tighten underwriting standards. Revisit loan quality parameters.  Analyze the remaining inherent risk in the loan portfolio.  Score the loan portfolio and analyze the scoring migration.
• Mortgage defaults are on the rise.  One mortgage delinquency in a small credit union can have a large impact.  Develop a mortgage modification policy and guidelines to assist the membership during economic downturns.
• Avoid big strategic initiatives in uncertain times.
• Loan demand falls during economic downturns.  Reliance on investments takes center stage.  Investments yields are low so be conservative when placing investments. “SLY”-Safety, Liquidity, and Yield.  Build a basic ladder.
• Since market conditions are volatile asset-liability management becomes more important.  Set policy parameters on fixed rate mortgages.  The federal reserve is out of policy options on the short-end of the yield curve.  The federal reserve through quantitative easing or now QE2,  is forcing mortgage rates down to historic lows.  Market rates will rise at some point.  Credit Unions with large portfolios of long-term fixed rate (rate insensitive) assets will pay a high price (compressed NIM) in a rising rate environment.
• Engagement with outside 3rd party vendors require additional caution during uncertain economic times.  Have a robust vendor due diligence program and policy in place.
• Stress that your deposits are federally insured.
• Reduce to writing your plans and be able to communicate your credit union’s tolerance for risk.  The regulators will expect the leadership has considered where the credit union is financially headed and there is a road map containing a reasonable achievable plan.

During times of financial dislocation credit unions, regardless of asset size, can show others the benefits of the cooperative movement.


The blog entry you have just read was written by Edward Lis who was a former CEO and CFO of two different credit unions. If you enjoyed this article I encourage you to learn more about Edward by visiting www.edwardlis.com


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