Credit Union Inspiration: Looking Beyond The Mark

Light and Inspiration
Have you ever been reading in a room as the warm afternoon light slowly dimmed? Often you don’t even notice the dimming of the light until someone walks into the room. Puzzled they ask you why you are reading in the dark and then flick on the light switch. In an instant a bright flood of light fills the room and shadows that had been advancing on you disappear. What previously had been dim and hard to see suddenly becomes clear and recognizable. In this experience the light can be characterized as immediate and intense. Compare that experience of an early morning sunrise. If we were to stand together and gaze at the horizon and watch night turn into morning what would we see? Almost every time I have tried this I always miss “the moment”. I seem to get lost in my thoughts and miss the slow and almost imperceptible increase in light on the horizon.In both cases the result is the same – increased light. In contrast to turning on a light in a dark room, the light from the rising sun did not immediately burst forth. Rather, gradually and steadily the intensity of the light increased, and the darkness of night was replaced by the rays of early morning. 

As we have all come to expect the sun did dawn over the horizon. Oddly though the visual evidence of the sun’s arrival was apparent hours before the sun actually appeared over the horizon. In this experience the light can be characterized as subtle and gradual.

From these two everyday experiences with light, we can learn much about the nature of leadership and inspiration. Inspiration can come in a variety of ways sometimes it comes in a flash of insight and it is immediate and intense. Yet, at other times inspiration can come in a much more subtle and gradual manner. The two experiences with light I described help us to better understand these two basic patterns of understanding our own inner voice and how we perceive inspiration.

A light turned on in a dark room is like receiving that bolt of insight from the universe all at once. Many of us have experienced this pattern of inspiration as we have been given answers to questions or business issues we have studied or pondered.


If you were to talk to other leaders around you and question them regarding their own experiences regarding inspiration you might hear words such as immediate and following a “gut feeling”. Many business case studies are filled with random flashes of insight that dramatically changed the course of the company’s strategy and direction. While there is no doubt this bolt of lightning can occur the reality for many of us is that this pattern of dramatic inspiration tends to be more rare than common.


If you are anything like me then the gradual increase of light radiating from the rising sun is like receiving a letter from the universe with a snappy joke at the beginning and then a much more subtle “line upon line, precept upon precept” type of instruction or insight. For me big, grand, strategic visions seem to come in small increments over time. They tend to follow according to my desire to move forward with the knowledge that I already possess. To take risks and then step forward knowing the next answer is around the corner. 


Looking Beyond the Mark
As leaders we tend to extol the dramatic flashes of insight so much that we may fail to appreciate and may even overlook the customary pattern by which the inspiration actually happens. Too often the simpleness in receiving small and incremental impressions from hallway conversations with peers or staff that over time act as breadcrumbs to a desired answer or the direction we need may cause us to look “beyond the mark”.

I have talked with many individuals who question the strength of their visionary abilities. They often underestimate their strategic capacity because they do not receive frequent, miraculous, or strong impressions on how they should lead their business units. I believe these individuals are being too hard on themselves and simply do not recognize how they receive inspiration.

Another common experience with light helps us learn an additional truth about the “line upon line, precept upon precept” pattern of inspiration. Sometimes the sun rises on a morning that is hazy or foggy. Due to the overcast conditions, seeing the light is more difficult, and identifying the precise moment when the sun rises over the horizon becomes a fool’s folly as it is not possible.

That being said even on such a morning we have sufficient light to recognize a new day and to chase after our widely important goals. In a similar way, we many times receive inspiration without recognizing precisely how or when we had our flash of insight.

Gathering Inspiration- One Bolt of Lightning at a Time
As we all come out of lending season it is time to start thinking about what strategic initiatives we need to be planning for. As you draw up your list I would challenge each of us in the credit union industry to look beyond the mark. Our members live in a world of payday lenders and big banks that are focused on building branches based on tiers that insure that the customers with the most money get the most service while those with no money get nothing but self service. 

As we look around for inspiration we have to be willing to widen our circles in which we collect knowledge. We have to be willing to look across channels and other artificial boundaries. As we do this we are able to find sources of insight that allow us to collect that "bolt of inspiration" one bolt of lightning at a time.

A place to start is to consider your own organization and how it mentors upcoming leaders? The reason this is critical to gaining personal inspiration is that it allows you, as a mentor, to formalize the lessons of your own career experience. As a nice side benefit you often will be surprised to find yourself learning from them as you recall life and leadership lessons you have not applied in some time.

As leaders we have to be able to stand ready for those moments of blinding inspiration. We have to be able as credit union thought leaders to be able to move those ideas into action. However, if we only stand ready for the occasional flash of insight then we doom ourselves to spend much of our working careers not looking for inspiration at all. We have to be able to discern inspiration in both its boldest manifestations as well as it most subtle.

Credit Union Lending: Learning To Hustle

I remember as a boy going to spend the night with a friend.  His mother worked evenings and had not been told I would be spending the night and was naturally put out with her own son for inviting me over.  She handed her son one dollar and said, “Fine, he can stay but you are going to have to hustle for your supper.” With that she showed us a bare refrigerator and left for work.  My own mother was a waitress so I was not alarmed by the empty refrigerator. However, I was concerned over the whole concept of “hustle for your supper.”  My friend then flashed a big smile and said, “Come on, it’s time to hustle.”

Before long we had turned the house upside down looking for spare change. Our one dollar had grown to five dollars in spare change found under beds, in dirty clothes, and behind the cushions on the sofa.  I was amazed so much money was literally just waiting to be picked up.

We got on our bikes and peddled to the corner store where we bought a “soup bone” and some carrots and potatoes.  I also insisted on a can of “mixed vegetables” to round out our “hustle soup”.  As we headed back to his house I was so excited to see how our soup was going to turn out. We boiled the bone with the vegetables and added the can of extra veggies at the end.  As I recall the soup was one of the best I had ever had. It was part water, part scrawny carrots and potatoes, and a great deal of “hustle”.

I have given a great deal of thought on two recent blog postings, “Credit Union Culture Cooperative or Cut Throat” and “The New Credit Union Mantra: Stop Breathing”.  Both posts got a tremendous response on the blog and on various credit union discussion groups.  The comments clearly showed people who longed for the “old days” of when credit unions truly thought of themselves as cooperatives.  So that led to the idea of the “hustle soup” from my childhood memories.

What we need is to each add a small tip to the soup. Since we are all in lending season I thought it might be worthwhile to throw in “lending tips”.

So my tip is that of using chat to generate loan volume.  Many financial institutions use  web chat so this is not cutting edge technology. However, most use chat as a general member service tool.  I think this approach adds complexity to your call center operations. Chats typically take twice as long as a phone call. So while you have added another channel for your members you have added a channel that takes twice as long to fulfill the same type of service request.

Rather than using chat as a general member service function use it only on your rates page.  Change the title of “Chat” to something more specific, “Connect with a Loan Specialist.”  Instruct your chat specialist to turn every chat into an outbound phone call when possible. 

Just this week I had an agent come up to me so excited about a web chat that he had earlier in the day. The member started the chat off the rates web page and asked about our lowest rate.  The agent asked if he could call the member to more quickly cover all his options and give him the solution that best fit his need. As they were talking the lending agent offered to review his credit history prior to taking the application so that they could present the best possible application to the underwriters.  As the agent went over the CBR he noticed three trade lines that could be refinanced at a lower rate. The end result was that this web chat generated three applications for a total of 65,000 dollars that booked that same day.

That brings up my second tip which is training your lending agents to take double and triple applications. Too often loan officers become order takers and they forget that their primary role is that of saving the member money by borrowing money at a lower rate or helping a member refinance to a lower rate.

This primary function requires people who love to help people with loans. Only the best of the best should be loan officers.  Once you have these people you need to remove all non sales duties from them.  You don’t have your most passionate lenders doing the paperwork. You give the paperwork to people who love paperwork!  Make sure you prioritize call routing in your call center so that you have a pure application queue. Contrary to what you may think all calls are not created equal.

You can do this in your branches as well. Use your first impression station to funnel lending opportunities to your best lending specialist. Try to keep them as busy as possible taking application after application. You have other people in the branch who like to balance checkbooks and open certificates.

Lastly, you only use web chat on your lending page.  You make sure it is the highest priority. Think about what you have here.  You have a person on your web page wanting to talk rates! That is a golden opportunity you have to make the most of.

I typically see centralized lenders who have focused duties generate as much as a whole branch.  I kid you not. A good phone lender who is set up correctly can generate around 2-3 million in applications and book between 450,000 to 900,000 thousand in a month. I realize that this depends on the volume you have.

My main point is that you don’t have your best lending officers balancing check books for people. You have other people who would love to do that but have no desire to do lending. You want people to do lending who are not afraid of having to make their own “hustle soup”.

Alright, I have added my two tips for lending success now it is your turn.  It is time for each of us to act like we are all part of a cooperative.  This might be hard to believe but this blog has readers from all over the world who can add something and gain something. Each of you can contribute and make this posting the ultimate cheat sheet for lending success.  Each of us has Big Banks or other giant competitors we have to go up against each day. Let’s all add something here. Small credit union or large we are in this together…. it's time to hustle for our supper. 

Credit Union To and Fro: How Focused Is Your Credit Union

A story is told of two men who formed a partnership. They built a small shed beside a busy road. They obtained a truck and drove it to a farmer’s field, where they purchased a truckload of melons for a dollar a melon. They drove the loaded truck to their shed by the road, where they sold their melons for a dollar a melon. They drove back to the farmer’s field and bought another truckload of melons for a dollar a melon. Transporting them to the roadside, they again sold them for a dollar a melon. As they drove back toward the farmer’s field to get another load, one partner said to the other, “We’re not making much money on this business, are we?” “No, we’re not,” his partner replied. “Do you think we need a bigger truck?”

In today’s credit union there are thousands of things to focus on. Thanks in part to modern technology the contents of various reporting services and other database resources are all at the fingertips of many of us. Too often it is easy to find ourselves spending countless hours mindlessly following data streams down various rabbit holes or scanning other avalanches of information. One would be tempted to ask, “To what purpose?” Those who engage in such activities are like the two partners in the story, so busy loading and unloading melons onto a truck and then hurrying back and forth to the roadside store. They spend each day hauling more and more but failing to grasp the essential truth that we cannot make a profit from our efforts until we understand the true value of what is already within our grasp.

As many of us are in the middle of our lending season we followed all those reports down the rabbit holes to conclude lending growth is more of a challenge and so we are all looking for the magic bullet that will give us the loan growth we budgeted last fall. The temptation is to go to the product manual and come up with a new gimmick or product feature that will create a new wave of member lending. However, a less glamorous solution is to look at our leadership teams and then consider the amount of focus they have. Are our teams acting like the two men in the story trying to decide to buy a bigger truck or maybe keep the same ole truck but just “paint it'?

Yet, if you were to pull your leadership team members together and have them list the top challenges and tasks for the week would you find them focused on the items that are your most pressing goals?

This topic of focus has been on my mind since I read the story of Army Ranger Joseph Kapacziewki who was injured when an enemy grenade was dropped into his armored vehicle in Iraq. His body was severely injured. His lower right leg was shattered and his right arm left useless with extensive nerve damage. It seemed that no part of his body was spared by the blast from an enemy’s grenade.

In 2005 when doctors worked to help mend his shattered limbs the easy prognosis was that this was a Ranger who would not run into battle again. That prognosis was not one that Joseph shared. It certainly was not the prognosis he choose to focus on.

His story is a testament to the ability to focus on a singular goal. When he learned that his body had a natural intolerance to morphine he endured countless hours of pain as he mended from each surgery. I marvel that his first thoughts on getting his finger to twitch was to have his wife wheel him down to the hospital's practice firing range with a laser-equipped M-4 rifle. For hours every day, he would lie behind sandbags and fire the weapon, retraining his hands and fingers that had lost feeling how to once again handle a weapon.

There are no comparisons between what this man endured and with what we endure in our day to day lives. However, there are lessons to be learned on the power of focus. We can learn to see past the potholes in the road and focus instead on the blue patch of sky ahead of us.

I have seen leaders like this who refuse to accept the status of just being good. They drive for results and have the expectation that those around will also drive for results. They have the ability to see past the mindless activities of day to day operations and ask clarifying questions that help others zero in on the core mission of what the group is trying to accomplish.

My challenge to you is to ask your leadership team, “What are we trying to accomplish?” The next question is what can you do to remove the clutter that is on the table so that the only thing your team is looking at is the very thing you are trying to do?

As credit unions we are at times so preoccupied by what the bigger credit union or the Big Bank is doing we forget to take a hard look at what we ourselves are doing. We work in a time when it is easy to focus on why it is too hard to succeed due to a tough economy. We read blog articles that make excuses so that we can settle on just being “old fashioned” credit unions. The price of not knowing what to focus on is measured in credit union members having to settle for less...to expect less from you each and every day.

Are you like the two men in the story who spend each day hauling more and more but fail to grasp the essential truth that they cannot make a profit from their efforts until they focus on the true value of what is already within their grasp.

To read more about the real hero of the story please visit

Army-Rangers-amputee-Purple-Heart

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


Don't just read the blog become part of the blog by submitting your own article or by leaving a comment below. 

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.

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?

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.