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The Top 3 Direct Loan Growth Strategies for 2018

Posted by Scott Butterfield on December 7, 2017 at 1:45 PM Comments comments (0)

The 2017 strategic planning season is ending. During the year, we facilitated dozens of strategic-planning sessions with credit unions of all shapes and sizes: small and large, rural and urban, community and single-sponsor charters. We were exposed to a wide range of unique credit union opportunities and challenges. We also took note of several reoccurring themes. The most common? Credit union desire to focus LESS on indirect member and loan growth and MORE on direct member and loan growth strategies.


The reason for less indirect, more direct

We heard many leaders of large credit unions say they intend to pull back (but not stop) indirect lending during the coming year. Common reasons for the shift in strategy include:

  • Seeing lower indirect portfolio profitability
  • Reducing indirect loan concentration risk
  • Avoiding high and increasing indirect loan-to-collateral values
  • Challenges of cross-selling other products and services to indirect members
  • Stiff competition for indirect loan purchases, including a growing number of out-of-market paper buyers


It makes sense that these credit union leaders want to attract new members and borrowers who are more likely to use additional products and services. They want to build meaningful relationships and they want to earn higher interest yields from other types of loans.


Given the chance, most credit union leaders would increase their pursuit of direct member and borrower growth if they believed they could be consistently successful. So what are the keys to success?


Three tools for your direct growth play

Besides facilitation, our clients ask us to come prepared with ideas on how they might better achieve their strategic goals.


The following are three specific strategies we shared during the year specifically focused on member and borrower growth.


It starts with the right prescreen approach. Leverage prescreen tools to qualify and segment your potential member/borrower list according to your own unique criteria, zeroing in on those individuals most likely to respond to your offers. First, gather the internal intel you need based on your most profitable members/borrowers. Once you have a good understanding of the characteristics that make up your most profitable members, work with your credit provider to leverage that intel to identify new potential members/borrowers located within your field of membership. This isn’t a one-and-done strategy. Credit unions that are consistently successful will tell you that success comes from adjusting, testing, and monitoring criteria to find the best approach. For those of you concerned with the cost associated with regular prescreen marketing activities, consider the high dealer reserve cost associated with indirect loan purchases. Once perfected, the cost per new member could actually be a lot less than indirect. Another word on prescreening: if you’ve tried before and been less than successful, don’t give up! Work with your data provider to dig deeper, and consider the hundreds (thousands) of potential criteria that might lead to success. Ask your data provider to give you specific credit union best practices to consider. DON’T, just buy a standard prescreen. My experience is that they rarely generate the response you’re looking for.


Anticipate who is “In the Market.” Utilize “In the Market” models to identify members/borrowers who will be in the market for a specific type of product in the next one to four months. Add an extra layer of data analytics to focus your time and money on consumers who need a financial product now, or in the near future. Propensity models and estimated interest rates are great tools for identifying consumers most likely to respond. Who doesn’t want a lower interest rate, or to be delivered the right credit offer when shopping for an auto, personal, or home loan?


Determine which individuals are open to a deeper relationship with a credit union. Focus your marketing efforts on consumers most likely to open a credit union account versus a bank account. Experian has recently developed “Relationship Clusters” that assist credit unions in filtering potential members/borrowers who have a greater propensity to select a credit union over a bank. The cluster filter can be applied over most credit union products, and it increases the likelihood of targeting consumers open to credit unions product offerings. Initial results are remarkable, with triple-digit increases in consumer response rates based on these clusters.


“By listening to our clients, we’ve researched and proven a way for credit unions to layer a variable into these efforts of helping them identify who is most likely to do business with a credit union,” said Marshall Abercrombie, Experian strategic account executive. “This type of tool is often referred to as a net-down tool where credit unions can drill down on a list of names that pass their criteria when making decisions before they advertise. Ultimately, this tool impacts the overall campaign performance by improving response rates while reducing unnecessary marketing spend.”


Why it matters

I’m not opposed to successful indirect auto-loan programs. I believe they are an important part of our growth and service strategies. I have managed several successful portfolios myself. However, indirect lending does come with the challenges that have been expressed in this article. There are many credit unions that simply could not grow members or loans without their indirect channel. I always ask credit union leaders in this situation for their plan B. How will they survive if they are no longer able to compete in the indirect market? All credit unions need to have the ability to directly attract new members and borrowers to achieve long-term relevance and sustainability. The good news is there are a lot of credit unions that excel at direct-channel growth, and we can all learn from them.


We operate in an intensely competitive world. To consistently win, we must find the right members, with the right product, at the right price, with the right delivery channel – before anyone else does. Leverage quality data and intel to help you find the right members and ensure your place in the market.

Is Your Brand a Line in the Sand?

Posted by Scott Butterfield on December 7, 2017 at 1:45 PM Comments comments (0)

Your brand consists of the perceptions and images that represent your credit union. Many credit union leaders think of their brand only as a logo or tagline, but a meaningful brand is so much more. Your brand is the promise of what you’ll deliver, your members’ experience, and most importantly, what your organization stands for.


Where do you draw the line?

The line in the sand metaphor denotes a point (physical, decisional, etc.) beyond which one will proceed no further. Its origin is commonly accepted as a reference to the action of William B. Travis, who, in 1836, while commanding the defenders of the Alamo and contemplating a demand for surrender, drew a line in the sand and asked those willing to remain and defend the Alamo to their deaths to step across.


Operating in a hyper-competitive financial services market is extremely challenging, and not for the faint of heart. Whether you like it or not, you have a credit union brand, and it exists somewhere along a continuum of “different shades of the same boring thing” to a very bold brand committed to something that forces your organization to take a stand, i.e. financial inclusion or social justice. The more your brand image blends in with the tens of thousands of financial competitors, the less you’ll stand out. But, if your organization can rally around a theme, cause or belief that is meaningful and bold, you’ll stand out and attract people to your cause – and they become your loyal advocates.


At YCUP, we get to rub shoulders with the best and brightest credit union leaders. We get to experience bold brands, behaviors and beliefs that inspire action, amazing results and advocacy. One of these amazing examples is Bank Australia. Earlier this year, The World Council of Credit Unions invited us to moderate a presentation by Rowan Dowland, General Manager of Corporate Development at Bank Australia. Don’t let the “b” word mislead you; Australian credit unions are called banks and Bank Australia is a credit union in every sense of the word. Bank Australia’s brand is “values-based banking.” As an organization, Bank Australia’s brand has boldly drawn a line in the sand. Its target market is millennial-aged, globally social-conscious consumers, and its leaders know firsthand this target market trusts and supports businesses committed to a social purpose and positive environmental change. Bank Australia takes bold stands where other financials dare not tread. It draws a line in the sand and takes affirmative positions on issues such as financial inclusion, immigration, marriage equality, and the environment. Its leaders don’t shy away from declaring their position; they embrace it. They strongly believe that standing on the sidelines is no longer an option for them. The brand is bold, it stands out, and most importantly, it inspires action. Bank Australia’s outcomes are as dramatic as its brand in bank awareness, target market support, community impact, corporate culture, growth, and revenue. Bank Australia does very well by doing good.


“People don’t buy what you do, they buy why you do it”

Far too many of our credit union brands are focused on what we do (low-rate loans and low-fee transactions) and how we do it (seamless delivery channels, happy tellers), and very few of us focus enough on why we do what we do. In his “How Great Leaders Inspire Action” video, Simon Sinek suggests that people are not attracted to what or how we do something as much as they are attracted to why we do it. When our “why” has real purpose and meaning, e.g. financial inclusion for the working class, or an end to predatory lending in our communities, we will attract people who support that cause and they will then advocate for our cause and make it their own. Simon challenges leaders to identify and share their causes and beliefs. Ask yourself if your team’s current beliefs or causes are aligned with the target market you need to attract for the next 20 years. If the answer is no, you’ll want to refocus to find something meaningful enough that the desired target market will listen to and follow you.


Common day causes worth fighting for

If you’re not sure what you’re fighting for, there are many issues facing the target markets we want to serve. Issues and causes that really matter in the lives of millions of consumers. Some of these causes have a natural connection to credit unions, such as financial inclusion for the underserved, action against poverty, affordable housing, relief from predatory lending, and high student loan debt. Other causes not as directly linked to credit unions, but no less inspiring to the people we hope to serve, include equality issues and climate change – to name a few. Consider one of Bank Australia’s very unique brand messages: “A bank that carbon-offsets every car loan is the Bank Australia needs.”


Why it matters

Brand boldness is needed now more than ever. I don’t believe creative-looking logos, snappy taglines, funky names, and run-of-the-mill products and services are enough to maximize attention in our crowded and competitive space. My experience has been that the clearer the credit union’s purpose (why) and the strength of their commitment to it result in extraordinary outcomes for the members they serve.


If you haven’t already, find something that really matters, both to you and to your target market, then take on the cause and make it your own. Draw a line in the sand and make it your rallying cry. Sure, you’re likely to anger some, but you’ll become a hero to thousands. The world needs more heroes.

Who Needs You Today?

Posted by Scott Butterfield on December 7, 2017 at 1:40 PM Comments comments (0)

The credit union movement was founded on the principle of service.

We’ve all heard the phrases:


  • Not for profit, not for charity, but for service.
  • People helping people.
  • The real job of a credit union is to prove, in modest measure, the practicality of the brotherhood of man.


Credit union history teaches us that the ideal of service means more than better rates, lower fees, and friendly service. My experience as a credit union employee for more than 25 years, and as a strategic consultant for past seven years, has taught me that credit union service was founded on a little bit more.


“It was the best of times, it was the worst of times…”

Like the fictional world depicted in Charles Dickens’s “A Tale of Two Cities,” the world around us is full of hope and despair. It’s a time of the haves and the have-nots; it’s a time of peace and a time of war; it’s a time of prosperity and it’s a time of poverty. While times and the world have changed drastically since the beginning of the credit union movement, the need for meaningful service is higher than ever. There are a lot of people who need financial help today, and that involves more than a lower interest rate, a smile, and a cool mobile app. They need you.


Most of us (but not all) get it

I talk to a very diverse group of credit union people every single day. It’s what I do. Many of these conversations are focused on why their credit union exists, what makes their credit union uniquely stand out, and how they can remain relevant in a changing world. The most successful conversations (and strategies) are centered on a deeper definition of service. By deeper, I mean these credit union leaders will tell you that they exist to help people who are experiencing financial challenges. They do this by truly listening, then offering good financial advice, flexible products (and underwriting), and second chances. Their teams trip over each other trying to find ways to help those members experiencing the greatest need. They are less judgmental of people and the financial challenges they are faced with, they have empathy, and they spend more time looking at situations from the member’s perspective. I get to work with a host of credit unions strongly engaged in their local communities, taking on tough community and consumer challenges. These leaders are investing (financially and in Human Resources) to help overlooked consumers attain affordable housing, reliable transportation, and micro small-business loans to help create wealth and lift families out of poverty. Ask these credit union folks and they will tell you they have a very strong and clear cause, and it resonates with their people and the communities they serve.


They love to share amazing stories of how they helped members through a difficult challenge. Their measurement of success is deeper than earnings, capital, and growth. Examples of what they measure and track include credit migration scores to see how borrowers who had less than prime credit at the time of the loan have improved their overall credit score over time; the number of jobs created (through new micro-business lending); first-time account holders (previously unbanked); the number of first-time homeowners; and the number of consumers they helped achieve citizenship. This list isn’t all encompassing, but it provides good examples of a deeper level of service and impact.


I love to talk to these CU people. Whether it’s their boards, management or their staff, these people light up whenever they get the opportunity to tell you about the special services they provide to their membership and their communities. And their stories aren’t one-offs; they happen frequently, and are common themes between branches.


Why it matters

There are a lot of people and communities struggling today. If you take a moment to look closely around you, you will find people who need you. Sick family members, discouraged friends, stressed-out coworkers, and struggling credit-union members. They need someone to notice and help them. Your help – whether it’s a word of comfort or encouragement, removing an obstacle, financial help, advice, or just active listening – could have a meaningful, positive impact. Today, you could make a meaningful difference in someone’s life.


From a personal perspective, giving service gives us a stronger sense of purpose and fulfillment. I believe there is a difference between fulfillment and happiness. Fulfillment is more important to me, as it’s deeper and more long-lasting than happiness. I’m happy when I get to go fly fishing, but that happiness isn’t long-lasting. However, the fulfillment I receive from helping someone is deeper: I become a better person, and it is long-lasting. We all want to be happier, but I would recommend pursuing those things that provide greater fulfillment and personal growth.


From a credit union’s perspective, the more our people help one another, our members and our communities at large, the greater the fulfillment for the individual and the culture. This will lead to a stronger brand, and greater growth and financial results. I believe that culture eats strategy for breakfast: greater growth and financial success will follow a stronger credit union service culture. A helpful culture will make us employers of choice, and we will attract community partners that share our values and purpose.


From a credit union movement’s perspective, doubling down on our legacy of selfless service is all that will separate us from the rest of the mainstream financial services. I know that our cooperative structure is different, but I honestly don’t think it matters much to consumers en masse. If I’m like most average consumers, I don’t think the world needs more for-profit banks or “bank light” credit unions. There are plenty available to take care of those who are in good financial shape. My research and experience with best-practice community development credit unions has taught me that there is high need for not-for-profit credit unions that will help people with financial challenges and address real challenges in the communities they serve. I also know that these service models are sustainable, and among the fastest-growing and most profitable. It’s true, credit unions can do very well by doing good.


If you haven’t yet done so today, I encourage you to take a moment, look around you, identify someone in need, and go make a positive difference. If you are in leadership, I ask you to take an extra moment to consider your membership and the communities you serve. Who needs your help the most, and how can you marshal the resources needed to make a remarkable difference? Now, get after it.

Credit Union Soup for the Soul

Posted by Scott Butterfield on September 11, 2017 at 7:40 PM Comments comments (0)

I was in Connecticut last week to join friends at Members Credit Union and Nutmeg State Financial Credit Union in celebrating their recent National Juntos Avanzamos (Together We Advance) Award (more on that in a minute). I couldn’t help but smile when I noticed via a lobby directory that Members Credit Union shares a building with the famous Chicken Soup for the Soul authors. I immediately thought about how credit union work could be considered food for the soul.


For those who don’t know, Chicken Soup for the Soul is a publishing company predominately known for its Chicken Soup for the Soul series of books. The first book, like most subsequent titles in the series, consists of inspirational true stories about ordinary people’s lives. The book became a major bestseller in 1993, and remains something of a social phenomenon.


Credit unions rule


When it comes to finding inspirational true stories about companies committed to helping the financial lives of ordinary people, credit unions rule! I hear inspirational stories of how credit unions find ways to serve people who are struggling, overlooked, and under-appreciated almost every single day.


Trust me when I say that the happiest people in all of credit union land are those who are engaged in helping people – especially people who really need their help. It’s this service and outreach that, like chicken soup, nourishes the soul. It inspires the busiest of people to double down and do more, and inspires those around them to jump in, roll up their sleeves, and get to work. I believe that pursuing purpose is more rewarding than pursuing profit, and I know that I’m not alone.


Consider the world we live in today, and how credit unions are clearly different and better:


At a time when Wells Fargo hoped the $142-million settlement of a class-action lawsuit over its agents creating up to 2.1 million unwanted checking, savings, and credit-card accounts between 2011 and 2015 would end the iconic company’s headaches, a new report emerged of a similar scandal involving auto loans and insurance. At the time, I was engaged in conversations with the first-year class at the CUNA Management School specifically focused on credit-union best practices for serving underserved markets’ financial needs that remain unmet by most banks and targeted by tens of thousands of predatory lenders. These credit union leaders identified creative and impactful ways to respond to the underserved case studies I presented. I left that group inspired by their credit union spirit!


At a time when income inequality is growing rapidly and wages have been stagnating, creating qualify-of-life challenges for millions of people in the United States and billions of people abroad, credit unions have significantly increased their efforts to reach out to and serve the underserved and overlooked. In the United States, the number of Low Income Designated credit unions has exceeded 2,300. These special credit unions are committed to serving low-income consumers and their families. In my 30-year career, I don’t believe awareness of and commitment to lower-income consumers has ever been higher. Thanks to the NCUA, National Federation of Community Development Credit Unions, CUNA, National Credit Union Foundation, CDFI Fund, Leagues, and other trade associations, awareness and advocacy have never been higher. Today, more credit unions are engaging each other and their communities to identify educational and product opportunities to help lower-income consumers make better decisions, build financial assets and better credit – all focused on creating a better quality of life for the person, family, and community. When it comes to people helping lower-income people financially, credit unions stand alone. I just completed a full-day Community Development Workshop sponsored by the Wisconsin Credit Union League and the Wisconsin Credit Union Foundation. It was cool: the workshop was at full capacity, with credit union leaders driving across the state to be part of the event. The audience included small, large, urban, and rural credit unions, each eager to find new ways to seek out and serve lower-income and underserved markets. The stories I heard from credit unions in attendance were certainly “soup for the soul.”


At time when talking heads are arguing for a 700-mile-long, 30-foot wall to keep people away (from a better quality of life for themselves and their families), credit unions across the country are actively engaged in building bridges to warmly welcome Latino immigrants with affordable financial services, regardless of citizenship status. These credit unions are making meaningful investments in providing this group of overlooked consumers with access to low-cost accounts, credit-building, and affordable access to transportation, housing, and even small businesses. Today, more than 70 credit unions have received the national Juntos Avanzamos designation, recognized for having the purpose, people, and products needed to successfully serve this market. How can one adequately measure the quality-of-life impact that accompanies citizenship and financial inclusion? It’s high, and very desirable.


Why it matters


I don’t know about you, but I desire chicken soup most when I’m a little under the weather. Like the chicken soup analogy, credit unions work best when they serve those who need them the most. It’s in our DNA, and for more than 100 years, credit unions have been helping those who need us the most: the overlooked and underserved.

At a time when the world seems to be heading down a path of greed, fraud, and deeper inequalities between the haves and the have-nots, credit unions can gain strides by seeking out and serving those who need us the most. When credit unions do this, they are relevant, and serving as the “soup” for struggling souls.

The Road Less Travelled to Membership Growth

Posted by Scott Butterfield on September 11, 2017 at 7:40 PM Comments comments (0)

It’s strategic planning season for many of us; a time for reassessing our environment and revisiting our strategic themes to ensure we are heading down the right road.


The competition is fierce. Most of us prefer an uncontested market space, but the reality is that many of us operate in hyper-competitive markets, fighting for dominance. But the payday for those credit unions that take the right road and find their niche is deeper consumer demand, greater organic growth, and shrinking competitive relevance.


Are your current strategies enough to reach your goal?


If your organization has a growth strategy, I encourage you to consider this strategic question: will your strategy help you locate the road less traveled to target the right consumer with the right product offer at the right time? If you can confidently answer “yes,” carry on. But if you operate in tough markets, with dozens or more local or remote organizations competing for the same potential members, I challenge you to revisit your strategy and consider other options. In a market filled with equally skilled and resourced competitors, can your organization afford to have the second-best strategy for matching the right person with the right product at the right time? It’s great if you find the right person, but what if you don’t get to them in time? What if your offer is wrong?


The road less traveled


In my strategic planning travels, I’m exposed to hundreds of potential credit-union growth strategies. As excited as some leadership teams are about their growth strategies, I have to say most are very similar. It’s tough to dominate a market or gain measurable market share when similar competitors are slugging it out using the same old strategies.


One reason we see so many of the same strategies is that credit unions tend to 1) follow what has worked for others, and 2) select the best strategies they perceive they can afford. If any of this reflects how you determined your strategy, I hope you will revisit your strategy with the following considerations:


If you’re following strategies that have worked for others, what can you do to give your strategy an edge over the competition?


If your strategy is limited by what you think you can afford, consider what happens if you invest less than what’s needed to make sure you get to the right person with the right product at the right time. Invest too little and you might be better off making no investment at all. Why throw good money after the probability of poor results?


Case in point


Most credit unions, especially large ones, use customized consumer target lists to find and reach new potential members. These strategies have been around for a long time. Success is mixed, and I believe that one reason is because so many credit unions and banks located in the same markets use similar lists, targeting the same people at the same time.


There is a road less traveled for target marketers. Today, we have access to data that can be used to help us realize deeper segmentation to find consumers that may be overlooked by the competition, and give a credit union the edge at getting to the right person first. But to realize this deeper level of segmentation, one must be committed to spending the time with their internal and external data managers to look deeper and further for those consumers. Here are a few examples:


Thin-file borrowers. On the surface these thin-file consumers look less attractive. However, alternative risk scores can help target these specific populations that will likely drive growth for years to come.

Relationship preferences. What if you could identify those potential consumers who are more likely to work with a credit union over a bank, and what if you could invest more of your marketing dollars attracting this group?

In the market consumers. Most consumers are not in the market at a given point in time. Leveraging propensity models can help identify those who are, and significantly increase response rates and campaign ROI.


The road less traveled is so much more than a custom data dump with saturated data points. This strategic road looks deeper and wider to find overlooked, high-quality new members.


“It can seem counter-intuitive at first, but making a move toward a more focused marketing effort can actually lead a credit union to a broader audience, a larger membership, and improve their member service capabilities,” said Jason Dietrich, an Experian consultant. “When I work with credit unions to design more targeted campaigns, the increased efficiency and ROI allows the credit union to invest in new areas they otherwise couldn’t – like digital- and mobile-friendly channels, and overall member services.” 


Why it matters


Your relevance and long-term sustainability rely on your team’s ability to out-compete your competitors. If you want to win, make sure that you have the right strategies. Find a way to be clearly different and better. You can do this by targeting the right consumer with the right product at the right time. This is possible with an all-in commitment, smart thinking and wise use of data.

Is Your Heart Really In it?

Posted by Scott Butterfield on September 11, 2017 at 7:35 PM Comments comments (0)

Last month, former Yahoo CEO Marissa Mayer resigned after running the company for about five years. She resigned because Verizon’s $4.48 billion acquisition of Yahoo officially closed, netting her a $23-million payout.


At a conference in London, Mayer said that one of the things she was looking forward to in her post-Yahoo life was “using Gmail again.” Presumably, as CEO of Yahoo, she had to use Yahoo Mail. She was widely criticized for the remark. In tweets sent after the story published, Mayer said she would continue to “use the excellent Yahoo Mail, too.”


Perhaps her initial comment can be chalked up to bitter grapes over the loss of her annual bonus and stock award resulting from an investigation that found two security breaches at the company were mishandled by senior executives. Who knows?


My first thought when the story broke was, “Wow, I guess her heart wasn’t really in it at Yahoo.”


Check your pulse


At work, is your heart really in it? Are you doing what you do, just because it’s a job and the pay is decent? Or are you doing it because it’s

something you really believe in and find great satisfaction from? Personally, I’ve experienced both scenarios as a leader, and I’ve worked for both types of leaders. I definitely contributed more and achieved more whenever I had my own heart in it and whenever I worked for someone who had their heart in it. When your heart is fully in it, you really care. You care more about the quality of the work, you take things personally, and you’re not afraid to do whatever it takes to fulfil the vision of what you are working towards. You look forward to the work, your miss it when you are away from it, and, given any extra time, it fills your thoughts and actions. You take great care because it’s important.


It’s boring and tedious when you’re committed to things your heart really isn’t in. You’re not as focused on the goal because, frankly, it just isn’t that important to you. Perhaps this is what happened at Yahoo. A probe by an independent board found that Yahoo senior executives failed to properly comprehend or investigate a security breach that led to the compromise of billions of accounts. Performance will be mediocre when people spend more time looking at the clock or thinking about things they’d rather be doing. Working toward something that isn’t important to you can be very stressful; working toward something you really care about is called passion.


When your heart needs a defibrillator


Whether you are the team leader or a member of the team, your team will perform better if your heart is in the game. If you are reading this and find your heart in need of a jolt, here are a few things to consider:


Focus on meaning – try refocusing on why the work should matter more to you. Consider the big picture, and try to look beyond the paycheck. You’re fortunate if you’re working in the credit-union space. Not everything we do in credit union land really matters, but there is a lot that does really matter. We do meaningful work when our organizations teach people how to better manage their finances; we help working-class families get an affordable vehicle or purchase a home; we help small business grow and create new jobs; and we engage in our communities, making them a better place. Regardless of your role in the organization, you can be part of this, and perhaps you may find some personal meaning.


Mentor someone – For some, few things are more rewarding than helping others develop and grow. If you’re in a position to, offer your help and encouragement to others. Share your skills, knowledge, and expertise. Demonstrate a positive attitude and act as a positive role model. This level of service may be just enough to help you regain a meaningful pulse.


Refocus on your own development – Whatever your position, focus on becoming the very best that you can be. Take extra pride in your work and set new goals for yourself, goals that will help you grow. Change and development isn’t easy, but there is a great amount of joy and satisfaction to be had from making the effort. Who knows, perhaps your efforts here will motivate someone else to care a little more and become more engaged.

Make a change – If you’ve really tried, but find that your heart isn’t in whatever it is that you’re doing, I challenge you to move on to something that provides more meaning for you. Personally, I don’t believe we ever become our very best or make the greatest contribution when our heart isn’t really in it. Making a career change can be difficult and very stressful. I’ve been through this transition. For me, the stress of making the change turned out to be less stressful than remaining in the situation would have been.


Why it matters


Most of us spend a significant portion of our lives working. Having our heart in what we do will motivate us to stretch and reach for more. It will add meaning and joy to our lives. It will make our organizations stronger, and inspire others to be the best that they can be. We will make our greatest contributions.


Someone who is omniscient has said that where your treasure is, there your heart will be also. I couldn’t agree more.

CUs Trapped in the Thick of Thin Things

Posted by Scott Butterfield on September 11, 2017 at 7:30 PM Comments comments (0)

Spend as much time with credit union boards and management teams as I do and you’ll learn that far too many credit union leaders spend too much time focused on the “thin” operational things and not enough time and thought on the “thick” strategic things.


The thick important things are the mission, vision, and values that define us. The thick is the bold strategies that inspire us to move forward and motivate meaningful engagement. It’s a fuller understanding of how the world is changing around us, and a constant desire to evolve, adapt, change, grow, and affect others in a meaningful way.


The thin, less-important things are operational and tactical. The business we’re in requires a high degree of compliance and exactness, whether it’s timely reporting to examiners, accurate transactions for members, or monitoring internal controls. These things are all very important. However, if we’re not careful, these operational details can easily become all that we regularly focus on, and we become trapped in the thick of thin things.


Symptoms


It’s usually easy to spot credit unions trapped in the thin of things. Growth and revenue are weaker at these credit unions. Culturally, they reward good operational results, but don’t reward new ideas or risk-taking at the same level. Ask these leaders where they are headed and they give you a capital, asset, or revenue ratio. It’s sad when the “people helping people” movement is defined first by numbers and ratios. They are thin on strategic plans and thick with every possible operational procedure you can imagine. They are compliant – meaning the only rules they follow are the ones spelled out in a rule or regulation or based on whatever the broader credit union herd is grazing on at the moment (yes, I just compared some credit unions to a herd of sheep). It’s not uncommon to find credit unions that celebrate immaculate exams, audits, and ridiculously low delinquency numbers – all the while, they have failed to keep up with technology, and growth and revenue is weak because they have failed to invest for tomorrow. Review the board minutes or management team minutes of these organizations and you’ll see mention after mention of thin operational issues and very little strategic content. Credit unions must excel both operationally and strategically to survive.


Remedies

Credit union leadership (board and management) determine the level of strategic thought and action that will occur. Leaders must have the discipline to invest time. For some, it’s easy to drift from strategic to operational – especially if operational is their default comfort zone. Your team will follow your lead and respond to what you recognize and reward.


Once you have your priorities straight, make sure you have the right people in place to handle all (or most) of the operational issues. Having the right people in place and delegating the right things will allow you to spend less time on operational issues and more time on strategic issues. I realize this is challenging for smaller credit unions. However, I believe that even though smaller credit union leaders are forced to spend more time on operational things, it’s possible to carve out extra time for strategic thought and action. I work with a lot of best-practice smaller credit unions with very busy leaders who still make strategic action a priority – even though they are still reviewing loans and dealing with examiners. Ask these credit union leaders where they’re headed and you’re sure to get a meaningful answer, and their credit union’s performance and culture reflect their strategic thinking.


Management and boards can do a better job structuring board meeting agendas. Everything operational that can be moved to a consent agenda should be. Next, move strategic business to the top of the agenda to be sure you don’t run out of time. I’d rather run out of time on the operational items at the end of the meeting. Each short-term and long-term strategy should have goals and milestones that management regularly reports on. Results on these strategies should be the focus of the board conversation – not budget line items that could easily be addressed offline, or waste-of-time conversations explaining why the number of delinquent loans increased from 25 to 27 during the month.


Invest the time in developing the right strategies for your credit union. Spend less time focused on what the credit union down the street is doing and more time looking at the issues that are influencing your members, and the future members you want to attract. You want to anticipate and plan for what their needs will be five years from now, and make sure you are prepared to meet them. Spend as much time considering external opportunities as you do external threats, less time complaining over regulatory uncertainty and more time addressing opportunities to differentiate and evolve.


Why it matters


Strategic Planning for Dummies points out that “a strategic plan is a critical management tool that guides an organization to do a better job because a plan focuses the energy, resources, and time of everyone in the organization in the same direction.” Understanding that is easy; constantly doing it is the hard part. You and your team’s ability to think and act strategically will determine the long-term viability and success of your organization. If you’re not sure where your organization is headed or you feel stuck in the thick of thin things, act now. Even if you have to start small, begin now to make strategic thinking and action a priority.

Change the Complexion of Your Board

Posted by Scott Butterfield on September 11, 2017 at 7:20 PM Comments comments (0)

Diversity among your directors provides a competitive advantage.


Democratic membership representation is a hallmark of the credit union movement. Common-bond groups long have elected people from among their ranks to serve as their voice in credit union decisions.


These volunteers understood first-hand their constituency’s needs because they were part of the same socioeconomic demographic.


But the makeup of many credit union boards hasn’t kept pace with the changing face of membership demographics. Statistics indicate—and first-hand experience confirms—that older, white men continue to predominate boards.


These volunteers provide valuable service to their credit unions, but may lack a personal understanding of many current and prospective members’ needs and preferences. Increasingly, credit unions view board diversity as a competitive advantage. Diversity reflects more than just race or ethnicity.


Emerging demographic trends


Consider the demographic landscape of the U.S. as it stands today, and as it will evolve in coming years and decades.


A record 40% of all households with children under the age of 18 include mothers who are either the sole or primary source of income for the family, according to a new Pew Research Center analysis of data from the U.S. Census Bureau. The share was just 11% in 1960.


These “breadwinner moms” are made up of two very different groups: 5.1 million (37%) are married mothers who have a higher income than their husbands, and 8.6 million (63%) are single mothers.


Millennials (born between 1982 and 2004) have surpassed baby boomers (born between 1946 and 1964) as the largest U.S. generation, and differ significantly from their elders in many ways.


They are the most ethnically diverse generation in American history: 43% of millennial adults are nonwhite, the highest share of any generation. And they are on track to be the most educated generation to date.


Americans are more racially and ethnically diverse than in the past, and the U.S. is projected to be even more diverse in the coming decades.


By 2055, the country won’t have a single racial or ethnic majority. Much of this change has been (and will be) driven by immigration. Nearly 59 million immigrants have arrived in the country during the past 50 years, mostly from Latin America and Asia.


Today, a near-record 14% of the country’s population is foreign-born, compared with just 5% in 1965. During the next five decades, the majority of U.S. population growth is projected to be linked to new Asian and Hispanic immigration.


The share of Americans who live in middle-class households is shrinking. The number of adults living in middle-income households fell to 50% during 2015 after more than four decades during which those households served as the nation’s economic majority.


And the financial gaps between middle- and upper-income Americans have widened, with upper-income households holding 49% of U.S. aggregate household income (up from 29% in 1970) and seven times as much wealth as middle-income households (up from three times as much in 1983).


Diversification of diversity


Does your credit union currently serve these groups, and/or do they represent a market you would like to serve better? If you answered yes, does the diversity of your board reflect that group?


When pondering that question, consider all of these groups:


  • Gender diversity. According to retail analysts Mintel, 84% of women influence financial decisions compared with just 49% of men, and that influence extends to everything from family holidays to technology. Consider the importance of having a representative number of working women and mothers on your board.
  • Age diversity. Millennials sometimes don’t make a lot of sense to those in the baby boomer generation. For example, despite being the most educated generation ever, why are nearly half comfortable with alternative financial services such as check-cashing and payday loans?


And at a time when credit unions are catching up with remote deposit capture, younger people are focused on digital-first platforms. Technology decisions made in boardrooms today will have lasting impact.



  • Race and ethnic diversity. Many credit unions have recognized not just the moral obligation to serve ethnic communities, but also the business opportunities.



Without appropriate representation on the board, the impact of community service projects to these groups will be limited.


  • Income diversity. More than one-third of credit unions have received NCUA’s low-income designation.

 


More than half of all consumers have less than prime credit, and predatory lending is growing unchecked.


Consider how important it would be to have someone on the board who has experienced living on lower wages, or who has experienced credit setbacks. Credit union boards that truly understand these situations tend to judge less and more openly support credit union programs directed at credit-challenged consumers.


Take action today


If your board’s representation already reflects your unique membership, congratulations. Remember to assess your board’s makeup as your membership changes.


If you need to make changes, consider these three ideas on how to form a diverse board:


  • Define your commitment to serving the group you’ve identified. For example, any decision to serve a new ethnic group should be strategic and long-term, which will make it easier to recruit volunteer nominees.
  • Identify groups who believe what you believe. If the credit union’s intent is to actively serve the local Latino market, you’ll likely find potential volunteers from like-minded groups within that community.


To target millennials, consider contacting local colleges, and reach out to past recipients of your scholarships. Candidates will view activity on a credit union board as a way to represent and serve the people they care about.


  • Consider gender in each demographic. Women should hold roughly 50% of seats on your board, supervisory committee, and other volunteer groups. When male board members look to their friends and colleagues for “recruits,” they likely will nominate male candidates.


Credit unions should mine for female members looking for an opportunity to serve, and could recruit someone serving on the board of a kindred organization.


Albert Einstein said the definition of insanity is doing something over and over again and expecting different results. This holds true for board diversity. If your past activities have yielded low diversity, you’ll need to do something different to get a better response.


Improving board diversity isn’t an option—it’s a necessity. Without democratically elected volunteers, we’d cease to fulfill the credit union mission. Without governance diversity, we cease to be relevant to our members, potential members, and communities.

Capitalizing on Credit Card Growth

Posted by Scott Butterfield on June 4, 2017 at 10:40 PM Comments comments (0)

The opportunities for credit union loan growth haven’t been this good for a very long time. According to the CUNA Mutual March 2017 Trends Report[1] (January 2017 data), overall, credit union loan balances rose 0.9 percent in January (better than the 0.4-percent pace reported in January 2016) and 11.5 percent during the past 12 months. Credit union seasonally-adjusted annualized loan growth reached 12.8 percent in January of 2017 – the fastest pace since January of 2000.


For many credit unions, loan growth opportunities are found in abundance among existing members and a record number of new credit union members. CUNA reported in its 2016 year-end report[2] that membership in U.S. credit unions increased by 4.1 percent in 2016 overall. When compared to previous calendar year results, this is the fastest growth seen since 1986. U.S. credit unions now report 108.2 million members – a total which is equal to slightly more than a third (33.5 percent) of the country’s population.


Growing credit union loan balances reflect an abundance of opportunity in the market today – is your team making the most of these opportunities and finding the optimum amount of success? For those of you looking to make more of these market opportunities (while they last), I offer the following thoughts.


Be prepared, and take advance of peak credit card spend time


Overall, credit card spends increases from lows during the first quarter and then peaks annually during the fourth quarter. The chart below illustrates this trend back to 2014.



Smart credit unions are preparing now to make the most of this strong opportunity in fourth-quarter 2017. Here are a few suggestions to help you capitalize on what will likely be a very strong year of credit-card activity.


First, don’t rely on best guesses, or what you believe others are doing. Use trustworthy data that is relevant to your membership and target market. Trusted sources like Experian have created powerful card spend[1] algorithms, built from credit data, to help credit unions find the best opportunities. This data can help your team:


  • Target high-spending members with your very best offer
  • Assign the credit limit your members need and want
  • Assign the right APR to make sure you maximize interest and interchange income
  • Retain profitable cards and identify those members who provide new opportunity


My experience is that many credit unions miss the boat when it comes to capturing the larger credit-card opportunity. High-performing credit unions are using the best-trended data to have a better understanding of their members, and customizing the product features and offer. Successful card programs are built upon a lot more than a low rate and reward program. Smart credit-union marketers know which members are likely to be Rate Surfers, Balance Revolvers, Transactors, Consolidators, Non-active, or Seasonal users. Card experts know how to present the right card product to the right member at the right time.


Why it matters


Portfolio expert and Director Jason Dietrich of Experian’s Global Consulting Practice reports that year-over-year growth for national banks in credit cards is at a higher clip than credit unions: 12 percent for national banks versus 9 percent for credit unions (balance growth). National banks are credit unions’ primary card competitor in the market. This identifies an opportunity to revisit the way credit unions approach their card portfolios, and to take steps to maintain and grow their card share versus national banks.


When asked to identify one thing credit unions should be focused on when it comes to managing their card portfolio, Mr. Dietrich replied, “retention.” Good retention activity requires a view toward retaining both spend and balance, aligned toward the needs of individual members. It’s very important that on the balance retention side, credit unions stay in touch with members who are showing the need or desire to consolidate debt, or who have significant revolving balance elsewhere at rates higher than the credit union can offer. Getting an offer for a balance transfer to them in a timely manner is important for balance capture and retention. And for retaining spend, the foundation for effective retention comes from identifying which members use credit cards primarily for spend rather than to revolve. For these members, ensure that proactive steps are taken to make your card product the most attractive one for that purpose. Several tactics are proven effective in achieving these goals, but it all starts with proper and timely identification of member needs.

 

Who knows what tomorrow’s loan-growth opportunities will be. Let’s each win as many of these opportunities as we can TODAY. Be assured that your toughest competitors are using the best data, analytics, and marketing strategies to beat YOU in the market. You can take that to the bank.


You’re strongly encouraged to assess your credit-card portfolio strategies. Make sure you are using the very best tools to make the most of today’s opportunities while they exist.


[1] http://www.experian.com/consumer-information/consumer-spending-data.html

The Three Most Important Strategic Questions

Posted by Scott Butterfield on June 4, 2017 at 10:35 PM Comments comments (0)

It’s that time of year again when many of us are finalizing arrangements for annual strategic planning meetings. Besides nailing down the right venue and getting calendar confirmations from each of our board members, our thoughts turn to weightier matters and questions, such as “where do we go from here?”


In preparation of the event, questions are asked, challenges considered, and opportunities identified in order to determine the best mix of content and focus. Agenda content designed to engage the group, challenge ideas, and encourage strategic plays an important role in the execution of a productive meeting, however, having facilitated hundreds of strategic planning meetings for credit unions of all sizes and in all manner of venues ranging from scenic Caribbean oceanfront resorts to dilapidated board rooms that could barely fit 10 people, I can tell you that the most successful planning sessions (and credit unions) take time at the planning meeting to answer the following three critical questions.


Three critical questions that must be answered


Strategic thinking, according to Peter Drucker, is knowing the right questions to ask. He taught that the three most important strategic questions each company must answer are:


  • What is our business? (Mission)
  • What will our business be? (The changing environment that we are certain about)
  • What should our business be? (Vision)


The best answers to these questions are elusive to many credit unions. Answering these questions isn’t as easy as you might think, especially in the ever-changing environment that we operate in. Consider for a moment our movement’s hallmark mission of “people helping people.” It sounds great, and it has inspired people for a very long time. But the blanket saying isn’t enough for individual credit unions. How we define “people” and “helping” in this statement can be as different as each unique credit union that embraces it.


To more fully understand what business we are in (our mission), we must have a pretty clear idea of whom, specifically, we serve. Most credit union leaders will acknowledge that they can’t be all things to all people. But sticking to that statement is challenging. The best alignment of people helping people it to find people who have a desperate need for a particular something. Real success comes when we find that specific something and consistently deliver it better than anyone else. Back in the old days, the people and the something were very clear to everyone. Credit unions were the people providing affordable access to credit to people the banks wouldn’t lend to. Everyone understood it, it worked, and credit unions experienced phenomenal growth.


But understanding what our business should be in the changing environment can be a bit more complicated. Whom, specifically, are the members we serve (and want to)? What generation do they spring from, and what is their economic status? What is their ethnicity? Are they high-touch or high-tech? Are they well-educated or working-class? What do they value? What do they need help with, specifically? Do they need help with basic financial matters, or complex retirement, or business ownership-related matters? Are they seeking their first auto loans, or do they just need someone to “buy” the loan paper from the car dealership to complete their purchase? What do they consistently need most, deposits or loans? Are they rate-shoppers, or seeking someone who will listen and give them a second chance? So many questions to answer. The most successful credit unions have a very firm understanding of whom they want to serve, and they know specifically what type of help is needed.


Once we can answer whom it is that we want to help, it’s time to align this mission to the opportunities in the environment. This will help us set our sights on what our business should be (vision) three, five, or 10 years from now. This is where so many of us try to be all things to all people, and it gets a lot of us into trouble. The competitive landscape we operate in has never been more competitive, and it’s only going to get more so. To be the most successful, we need to align our strengths with those consumer needs that we are in the best position to deliver.


For example, if it’s our intent to serve tech-centric consumers, we had better have the internal expertise, infrastructure, and innovative culture to be the best at consistently delivering the latest and the greatest. It’s difficult to “win” this consumer with last month’s technology. If we desire to serve platinum-credit rate shoppers, then we must have the scale to offer consistently rock bottom loan rates. Frankly, given the operating expenses at many smaller credit unions, it’s impossible to regularly have the lowest rates in town. They try, and they have the marginal or negative promotional Return on Investment ratios to prove it. If you desire to serve the lower-income, credit-challenged working class, you’ll need to have higher loan yield and fee income to offset higher operating and loan loss expenses. You’ll also need to have staff with higher empathy and skill sets to educate, serve, and develop this unique member group.


For best results, align your mission (of who you want to help), with the people who need your help the most. Remember, the field of potential lenders lined up at your local auto dealership is already pretty deep.


Why it matters


Any planning meeting – regardless of the venue quality, food, free branded gear, bar, or fancy-pants facilitator – that doesn’t facilitate your answers to these three questions isn’t strategic.


Your organization’s long-term viability is dependent on how well you’ve answered these questions. For better planning results, spend more time focused on them and less time on the “meet and greet” hors d’oeuvres.


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