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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.

Wisdom and The Island of Misfit Toys

Posted by Scott Butterfield on June 4, 2017 at 10:25 PM Comments comments (0)

Those of you from my generation are sure to remember the 1964 animated TV special, “Rudolph The Red-Nosed Reindeer.”


In this classic tale, Sam the Snowman narrates the story of Rudolph, a reindeer who is born with a glowing red nose. His father – Santa’s lead reindeer, Donner – feels ashamed, and uses a special cover to hide Rudolph’s nose so that he can join in the Reindeer Games. During some horseplay, the cover on Rudolph’s nose pops off; after seeing his glowing nose, the other young bucks begin ridiculing Rudolph. Rudolph is banned from the rest of the games. Rudolph runs off into the woods and meets up with Hermey, an elf who had been forced out of his job because he was more interested in dentistry than toymaking and singing. The two bond, singing “We’re a Couple of Misfits” after they discover they each have something that makes them unique. Later, they meet a prospector named Yukon Cornelius. The trio manages to flee to the Island of Misfit Toys, an island populated by abandoned toys with idiosyncrasies. Working together, the three save the day by rescuing Christmas, Rudolph and Hermey are no longer ridiculed, and the lead elf finally allows Hermey to open a dentist’s office the week after Christmas.


Wisdom is gained through challenges


I’ve always enjoyed this tale, and I can relate to its powerful message. The morale of the story is that, despite perceived flaws or differences, we are all valuable. Some of my most meaningful work was accomplished alongside folks who, like me, might be considered inhabitants of the Island of Misfit Toys.


Most of us aim for a positive and progressive career path. Unfortunately, that rarely occurs. Life is never as expected, and challenges are needed to facilitate our growth.


I was reminded of this fact during my recent attendance of the CUNA Governmental Affairs Conference in Washington, DC. The conference provides lots of opportunities to reconnect with credit union colleagues from around the country. It’s enjoyable to see people you know who are doing well and growing professionally. It’s even better to see colleagues who’ve had some sort of professional setback (unplanned job change, poor work alignment, bad boss, etc.) and overcome the challenge to shine brightly again. I look at these folks with admiration, and I know firsthand just how difficult those situations can be.


I experienced a professional setback during my 33-year career. It was a painful and challenging experience. While I would never want to go through it again, I can look back and see the wisdom gained, and how it fueled the next level of my personal and professional growth. Simply put, I’m a lot stronger and more successful today because of that experience.


Don’t feel like damaged goods!


If you’re the one going through challenges today, or still smarting from challenges that occurred in your past, don’t let these experiences make you feel like damaged goods! You’re not! I believe one day you’ll look back and be grateful for the challenges you’ve overcome. It’s these challenges that bring out and refine our strengths. You’ll gain wisdom through overcoming these challenges, and that wisdom makes you a better candidate for the right team – a team that will value your experiences and the stronger you.


The value of wisdom on a team


Some of the most amazing professionals I’ve ever worked for have had experiences that made them feel like misfit toys. Get to know them well enough to hear their stories and you’ll most likely hear that those experiences shaped their character, determination, focus, and values.


It’s been said that “knowledge” is the facts and ideas we acquire through study, research, investigation, observation, or experience. “Wisdom” is the ability to discern and judge which aspects of that knowledge are true, right, lasting, and applicable to your life. Life’s experiences give us the ability to discern, judge, and make better decisions. When I’m looking for the right people to collaborate with, I prefer wisdom over knowledge.


Why it matters


Whether we are individually working to become our very best selves or trying to build the very best team, let’s remember the Island of Misfit Toys. In ourselves and others, let’s value those life experiences that strengthen, and human uniqueness that allows people to look at things differently.

CUs are doubling down on the Latino and immigrant market

Posted by Scott Butterfield on February 23, 2017 at 6:15 PM Comments comments (0)

I’m writing this article in response to a recent announcement titled, “Anti-immigration proposals work against economic growth goals” posted by Cathie Mahon, President/CEO, National Federation of Community Development Credit Unions (the Federation), Maria J. Martinez, President, NLCUP and CEO, Border Federal Credit Union, and Miriam De Dios, CEO, Coopera.


First, I’d like to recognize all three of the authors and their organizations for the great work they do in credit-union focused, purpose-driven financial inclusion for underserved and Latino markets. They represent the “who’s who” in credit-union consumer impact and quality of life community development.


Latino-focused credit unions are more relevant


For six years, I’ve been working with credit unions focused on serving the Latino community, partnering to build out Latino-focused community development programs. I can tell you, without exception, these credit unions are among the most relevant financial institutions in the communities they serve. Truly, without these credit unions, their underserved Latino consumers would have no other “non-predatory” alternative. These credit unions are the very definition of relevance – the state of being closely connected or appropriate. Isn’t that what we’re all after? Relevance in the lives of our members and the communities we serve?


In the wake of the recent and tumultuous rhetoric we’ve all heard regarding immigration and the Latino market, we are seeing more credit unions step up and double down on their intent to serve Latino and immigrant communities.


Below are three recent credit-union examples of how a few of our friends are embracing their Latino and immigrant communities at a critical time, a time when their attention is needed most.


Each of these credit unions are recipients of the Juntos Avanzamos (Together We Advance) designation. This award recognizes credit unions committed to serving and empowering Latino consumers. Credit union leaders from the Cornerstone Credit Union League, the Federation, Coopera, and six other credit union leagues are working with 70 credit unions across the country to meet the tremendous demand in the Hispanic and immigrant markets, and to demonstrate that serving these demographics is both a sustainable business strategy and vital to fulfilling credit unions’ collective goal of helping people of modest means achieve financial independence.


Lower Valley Credit Union ($110 million, Sunnyside, WA) – Yesterday, LVCU unveiled its new full-service Kiosk in a local Mexican food store. In partnership with Fiesta Foods, LVCU will be leveraging the Kiosk to serve Latino consumers, many of whom are unbanked, non-citizens. Besides offering ITIN loans and financial education at the interactive Kiosk, the credit union will be helping lower-income immigrant consumers pursue a path to citizenship. Since 2014, the credit union has helped more than 1,000 consumers obtain citizenship. LVCU received its Juntos Avanzamos designation in January of 2016.


LVCU’s new Kiosk is designed to provide Latino and immigrant-focused access to financial products and services.


Seattle Metropolitan Credit Union ($750 million, Seattle, WA) – On Feb. 14, 2017, SMCU was recognized with the Juntos Avanzamos (Together We Advance) designation. In addition to their recognition, SMCU formally opened its Beacon Hill branch in the heart of its Latino and immigrant community. Through this new location and as part of its partnership with the City of Seattle’s Office of Immigrant and Refugee Affairs and El Centro De La Raza, SMCU will grow its new Citizenship Loan program to help new immigrants finance their path to U.S. citizenship, and to increase financial inclusion through affordable products and services to Latinos and immigrant consumers.


 

SMCU CEO Richard Romero was presented with the Juntos Avanzamos award at SMCU’s new Beacon Hill Branch. LTR: NWCUA CEO Troy Stang,Pablo DeFilippi VP of the Federation, and SMCU EVP Tonita Webb.


Point West Credit Union ($100 million, Portland, OR) – On Jan. 25, 2017, PWCU and the Consulate of Mexico in Portland announced their new partnership to promote financial education to the Mexican community in the Portland metro area. The partnership was formalized at a signing ceremony at the Consulate of Mexico. Through this partnership, PWCU provides workshops and assistance in Spanish on financial issues, including credit, budgeting, and savings. This outreach is part of its vision of providing its community “banking without borders.” Besides financial education, PWCU provides much-needed lending to its underserved Latino and immigrant community. PWCU received its Juntos Avanzamos designation in August of 2016.


PWCU Amy Nelson and Stephen Pagenstecher ink their partnership with the Portland based Mexican Consulate.


Try thinking of serving the Latino/immigrant market this way

 

Imagine that a new, large potential credit-union sponsor moved into your community. This new “group” employs thousands of young millennial workers – each in need of affordable products and services. The group doesn’t have any relationships with any other financial institutions. It needs a non-predatory financial institution in the community to meet its growing needs. Seriously, how many of us would jump on this opportunity – nearly all of us! If you have an emerging Latino and/or immigrant market in your potential field of membership today, this is the scenario you are faced with!


Why it matters


I believe our relevance as credit unions corresponds directly to the level of need found in the communities or groups we serve.


The Latino community needs us and we need them. We need young, loyal borrowers and members, and they need affordable access to credit and services. This vibrant demographic is growing, and will be the source of organic credit union growth and improved profitability for years to come. Affordable access to credit and other services offered by credit unions will help these individuals create stronger credit profiles, build assets, and enjoy a better quality of life. It’s a win-win relationship. The credit union movement was created for beneficial scenarios like this.


Today, millions of people living within our communities live in fear and they lack non-predatory financial resources. If ever there was a time for the credit union community to step up and embrace this community, it’s now. The exciting news is that in spite of the fearful rhetoric, more credit unions are stepping up, taking a stand, and demonstrating the true credit-union difference.


Make your voice heard


This week, thousands of us will be making our annual pilgrimage to Washington, D.C. to advocate the credit union difference with our legislative representatives. If you or a member of your team will be making the Hill visit, and you serve a Latino/immigrant market, I hope you will share a story of impact that demonstrates how your credit union is making a difference in your Latino/immigrant community. I encourage you to join Juntos Avanzamos. For more information about this initiative please click here.

 

Zen, The art of credit union leadership

Posted by Scott Butterfield on February 23, 2017 at 6:10 PM Comments comments (0)

It can be exhausting to review a credit union’s to-do list. I’m talking about that long laundry list of everything a credit union team has committed to for the year. It’s interesting to review these lists alongside their owners. All too frequently some items have little to do with the credit union’s key strategic priorities. I see this conflict all the time.

 


Sometimes there is debate over whether or not something on the list will have a material impact on the organization’s key strategic priorities. In these cases, the potential impact of the debatable action is minimal. Far too many items on far too many to-do lists are low-level operational and compliance-related. Important tasks, but tasks that at the end of the year contribute very little to key strategic priorities such as loan, revenue, and membership growth. It’s frustrating: teams spend the year chasing low-impact initiatives, and end it without any significant impact on loan growth, membership growth, service delivery, or revenue.

 


My experience is that the most successful credit unions do a better job at prioritizing focus and activities. They know how to say “no” to the right things. These leaders understand that they lack enough resources to do everything, and they want to commit their teams to those activities that will have the greatest impact on their key strategic priorities, such as growth, profitability, and member service. The to-do lists of these teams are shorter, and more focused. True, they may lack some products and services, or some of the latest technological bells and whistles, but they succeed because their team has a clearer focus and more energy to pursue activities that have the greatest opportunity for impact.

 


Zen leaders create Zen environments

 


Zen leaders understand how to focus energies and resources to those tasks that best fit the requirement of strategic success. Besides leveraging focus and resources more clearly, this approach avoids a great deal of frustration and dissatisfaction for themselves and their teams.

 


I call this “Zen leadership” because it emphasizes rigorous self-control, reflection, practice, insight, and commitment to the benefit of the organization and team. The problem is that many of today’s leaders are so focused on that long list of to-dos that they fail to think strategically – above the day-to-day minutiae – and consequently they spend less time developing their people and removing obstacles for their team. The pursuit of Zen credit union leadership includes mastery over conflicting priorities.

 


Prioritizing means you consistently think strategically, with long-range vision and knowledge of your organization’s highest priorities to see and determine which tasks are more important at each moment. Zen leaders give those tasks more of their attention, energy, and time. They help others focus on what is important at the expense of lower-value activities. Prioritization is about making choices about what to do and what not to do. To prioritize effectively, you need to be able to recognize what is important, as well as to see the difference between urgent and important. Here are a few ideas on how to improve your Zen focus:

 


Clearly identify strategic priorities. Keep this list high-level and short. This is the organization’s “come hell or high water” list of results that have to be reached. Examples might include profitable loan growth, deeper member relationships, or organic membership growth. Focus the team’s activities on these high-value strategic priorities. These activities should dominate the team’s focus and conversations.

  • Expeditiously finish all the highest-impact, key strategic activities first.
  • Consider the net strategic impact of an item – what’s the worst that could happen if a low-level priority doesn’t get accomplished right away?
  • Ask for specific deadlines and quantify how activities specifically support the agreed-upon key strategic priorities.
  • If you report to multiple leaders and feel unsure how to prioritize, ask the group to decide the order of priority. Zen leadership requires honest assessment and feedback on what the team can realistically accomplish and whether or not something should be pursued.
  • Set aside time to frequently discuss and review progress toward the key strategic priorities. Time should be allocated and used in board meetings and team meetings across the organization to review and focus on key strategic priorities. Otherwise, focus will fade, as people tend to drift back to their operational comfort zones.
  • Hold yourself and others accountable for maintaining a strategic focus and accomplishing those “come hell or high water” commitments first.


If you consistently practice Zen leadership, you just may find Nirvana. What is Nirvana? Spiritually speaking, Nirvana is a state in which suffering has been “extinguished.” Credit union Nirvana exists when your organization is consistently achieving strategic objectives, and team members feel successful, having accomplished more and felt less pressure to spend time chasing an endlessly long, lower-impact to-do list.

 


Why it matters

 


There are a lot of credit unions that I deem “safe and stuck.” They’re well-capitalized, but they aren’t growing or generating the earnings they will need to keep up. Unless they change, they will be left behind at some point. The world we operate in is rapidly evolving. Successful credit union leaders have the discipline to focus first on key strategic issues and spend less time hanging onto actions that generate mediocre returns. They have the courage to limit exhaustive to-do lists. They have the courage to say “no” to many things, and find more time to focus on those things that are the most critical to their survival. While many chase long to-do lists, successful leaders chase the strategies that really matter for their members, the credit union, their team, and their community. There’s only so much time. For what will you be known? Focus on that and get after it.


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