At Your Credit Union Partner we spend most of our time on-site with credit union leaders, discussing opportunities and challenges. During 2019, we traveled more than 150,000 miles, making 56 site visits and facilitating 32 strategic planning sessions. These diverse experiences give us firsthand insight into what is top-of-mind for credit union leaders. Five critical observations standout:
Board Transitions – The good news here is that a majority of the boards we worked with throughout the year, are becoming more diverse. New recruits are mostly younger, female, and are racially/ethnically diverse, leading to strategic conversations that are richer and significantly more inclusive. An emerging challenge facing board chairs and credit union leaders, centers on legacy board members who no longer make measurable contributions and “it’s time for them to go.” Credit unions are looking for the best ways to address this issue so they can make room for new board members who have more to offer.
Human Resource Dilemma – Human Resource issues have been a hot topic for many years – it got even more heated in 2019. This year’s conversations centered on the retention of key staff and strengthening the mid-level leadership bench. The search for great talent has gone as far as competitor banks and credit union recruiters appearing in credit union offices, on-site, trying to woo talent away. One client shared that nearly every member of their executive and mid-level leadership team received at least one offer from another institution in the area during the past year.
Successful credit unions are digging deep to find better ways to keep their best people. These ideas include robust educational opportunities. One credit union leader launched a cool development idea, creating a “Mission and Margin” themed educational plan. This plan (bundle) included CMS, CUDE, and a leadership development program for emerging leaders.
Another fresh example is a mid-sized credit union that leveraged a “bring your baby to work” program. The program allows moms to bring their new baby to work with them for the first six months. This is the third time we have heard of this type of program. Proponents share they are keeping great talent, and it’s endearing great loyalty. Recruitment and retention are issues that will be with us for a long time (forever?). Successful credit union leaders are identifying programs that are different and better. To do this, they focus on making sure they have the earnings to be leading edge.
A Shorter Lending Window – Fintech and other technology-savvy lenders are shortening the time lenders have to fund loans that have been approved. Of course, the strategic conversations are focused on improving the ability to automate the approval and funding process. The more credit union lenders can do this, the less likely they are to lose the loan request to a competitor. However, a majority of credit union loans are still being underwritten manually and not immediately funded due to system, delivery, or other challenges (e.g., lender requirements such as purchase agreement, paycheck stubs, etc.). When this occurs, the window between the time a loan is approved and the time it’s funded is larger. From the moment a consumer triggers an auto, mortgage, or another credit search, they are immediately bombarded with offers, many of which provide a better rate or a more convenient process. Most credit unions are investigating strategies to improve loan approval and delivery automation. Credit unions that still rely on a very manual approval and disbursing platform are paying closer attention to funding loans as quickly as possible upon approval.
The Most Engaged Teams – By far, the most engaged and passionate teams we work with are at credit unions with a well-defined community development purpose. Like most leaders, they face capacity, technology, human resource, regulatory, and competitive challenges. Their plates are full. Yet, they still find the energy, time, and capacity for those things that matter most to them. They intentionally serve underserved groups and take on significant community challenges. Their staff actively volunteer for opportunities to serve the community and are not “coerced” by management to participate. Their passion for making a material and meaningful impact in the lives of their members and communities drives them to stretch to do more. These teams shed tears when they share stories of how they and/or their credit union made a big difference in someone’s life.
Thriving Small Credit Unions – Nothing irritates me more than comments that indicate there is no future for small credit unions. It’s irritating because it runs counter to what we experience when working with small credit unions that are very much thriving. Consider this: at a time when the rate of loan and membership growth decreased for a majority of credit unions (of all sizes) in 2019, there are small credit unions that have increasing growth and revenue trends. It’s in this environment of decreasing growth trends that the group of small credit unions we work with regularly achieved the following average results: ROA of 0.623 percent, increasing average loan growth of 8.19 percent, and a high level of membership growth of 5.4 percent. This is ALL organic growth. These are not the ratios of organizations that are going away any time soon. Of course, there are smaller credit unions that fail to embrace change and fail to find a niche where they can effectively compete. The same can be said for larger institutions.
Why it matters
If I had to select a few words that summed up our credit union experiences in 2019, they would be change, purpose, and inclusion. Regardless of asset size, successful credit unions are all engaged in significant changes to ensure competitiveness and long-term viability. Successful credit union leaders are clarifying their purpose and more widely sharing it internally and externally. The best credit union leaders can clearly articulate what makes them better and different. The best organic growth sources for smaller and midsized credit unions are coming from inclusion strategies that focus on underserved markets.
Nobody said it would be easy. But we were promised this by early credit union pioneer Edward Filene: “The credit union movement. It is a great movement, worthy of great deeds, deserving of great loyalty.” We believe Mr. Filene was spot-on.