Change Faster To Be Better

Credit unions must ensure they are effectively serving current members while positioning themselves for the next iteration of financial services.

Credit unions have experienced a decade of extraordinary financial growth. Membership has expanded by more than 28 million since 2009. Share balances are up almost $550 billion. Loan balances have grown by more than $500 billion as the the portfolio has swelled to nearly double what it was 10 years ago. Average share and loan balances held by members have reached new highs. So, too, has the credit union share of the mortgage and auto lending markets.

During this time, credit unions have invested in technology, converting legacy systems and implementing new processing and delivery platforms. Increased regulatory oversight has necessitated new capabilities in compliance and risk management as well.

The day-to-day business of running a credit union has grown increasingly complex. Delivering the service and value members expect while remaining financially sound requires more time, resources, and attention than ever before. With consumer expectations continually rising and the competitive landscape rapidly evolving often in unexpected ways it’s a challenge for credit unions to ensure they are not only serving current members but also positioning themselves for the next iteration of financial services.

Faster Change For A Better Credit Union

Strategic planning season is in full swing across the country, and Callahan’s team is on the road facilitating sessions with a range of credit unions different sizes, different regions, different fields of membership.

The industry continues to deliver strong results, but there has been a shift in tone in this year’s sessions. There is a sense that day-to-day activities are occupying more time and inhibiting the ability of some credit unions to move their business forward as quickly as they’d like.

The observations come in different forms, but the underlying themes are the same:

  • used to be more innovative, but now it feels like we are just like everyone else.
  • seems like we have lost our mojo. How do we get it back?
  • need to spend more time talking about and preparing for what’s on the horizon.

The challenge of how to accelerate change in the organization is two-fold.

First, no credit union believes it has optimized its member-facing or internal processes. So, credit unions need to make ongoing investments in core business improvements. Second, fintechs, largely, are changing competitive dynamics and pushing credit unions to think past their current practices to consider new ways to engage and interact with members. There are no easy ways to address these challenges. Most credit unions already feel their resources are constrained, particularly when it comes to staffing. But, are leaders at all levels of the organization senior as well as middle delivering as needed?

In one strategy session Callahan recently facilitated, members of middle management were doing what the senior team asked them to do but not going beyond that. Yes, the leadership team needs to have the right information to make decisions. That’s table stakes. But in this credit union, middle managers were processing information without pushing themselves to ask their own questions or bring forward different perspectives. Either the leadership team needs to set clearer expectations about contributions or the credit union needs to invest in developing its middle managers so they have the necessary skills to be effective leaders in the organization.

Even when the management team is delivering across all levels, there’s the question of structure. Specifically, is the credit union organized in a way that supports investing in change?

The solution isn’t always as simple as hiring for a particular role or re-organizing the credit union’s structure. Instead, every individual institution must ensure it is allocating the time and resources toward making change happen.

Day-to-day activities are occupying more time and inhibiting the ability of some credit unions to move their business forward as quickly as they’d like.

Jay Johnson, Chief Collaboration Officer, Callahan & Associates

Improving The Present By Investing In The Future

One client of Callahan is employing a two-pronged approach to accelerate change within the credit union.

The first prong is designed to accelerate change in the core business. The credit union has established a team of staff members from different departments, including IT, operations, lending, and compliance. The cross-functional team meets every month to review and research ways to change internal as well as member-facing processes.

The credit union encourages all staff members to submit ideas, and the process-improvement team can tap into organizational resources for help investigating new approaches. The team makes recommendations on how to achieve greater efficiency and effectiveness, and the C-suite provides a final review to ensure the recommendations align with the credit union’s mission and goals.

The second prong addresses potentially significant future changes to the business. The credit union is forming a separate team which will operate within a CUSO to think differently about how it might re-invent the credit union. Core business leaders within the credit union will share their vision, ideas, and challenges with the new team’s leaders. The CUSO will then identify, research, and work with new tools and business models from fintech startups to develop alternative approaches. The team’s work could involve partnering with, investing in, or even integrating emerging companies.

The credit union separated this team so legacy thinking and systems would not encumber its work it is starting with a blank slate. Separating these leading-edge efforts also allows the credit union to test and learn through the CUSO before deciding whether and how to move forward with new ideas. The CEO and CTO will serve as the link between the old and the new approaches, reviewing ideas and determining next steps.

This article appeared originally in Credit Union Strategy & Performance. Read More Today.

An Ongoing Challenge

The challenges posed by poor processes and encroaching fintechs are likely to only increase in the coming months and years.

Most credit unions think about how to make significant changes over long periods of time. Today’s environment, however, demands organizations make ongoing investments in incremental as well as sweeping change. Credit unions need to work on near-term and long-term changes at the same time. If they don’t, competition will pass them by and consumers with not find them relevant.

Push change. Learn from it. Adjust as needed.

It’s a new paradigm, but credit unions have one huge advantage over their competitors. They have the trust of their members, which affords room to try new approaches, even if those approaches have limited near-term success.

Members are willing to take the journey as long as their credit union is listening to them, considering their needs, and delivering the best solutions for them. That methodology is the key to delivering credit union value and success no matter the lay of the competitive land.

This article appeared originally in Credit Union Strategy & Performance. Read More Today.

September 20, 2019

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