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T H E ON LY A LL-DIGITA L ALL-B USINESS R ESOUR CE FOR CR ED IT UNIONS THE AUTO LENDING ISSUE INTRODUCING The TEAM BUILDERS FEBRUARY 2017 VOLUME 12 ISSUE 2 GOVERNANCE John Gregoire MEMBER BUSINESS Corinne Kalsky GOVERNANCE Clinton Koker MARKETING Eva LaMere Rex Johnson LENDING Kenneth Bator TRAINING FINANCE Emily Hollis GOVERNANCE Jeffrey P. Nelson COMPLIANCE Justin Hupter BRANCHING Meredith Deen PAYMENTS Bill Prichard Scott McClymonds LEADERSHIP Fill In The Blanks & Prosper SINGLE SUBSCRIPION RATE - 75 PER YEAR. SUBSCRIPTION RATES (BASED ON CU ASSETS) UNDER 100 MILLION 300 PER YEAR. 10 Team Subscriptions 101 - 999 MILLION 400 PER YEAR. 20 Team Subscriptions 1 BILLION PLUS 500 PER YEAR. 40 Team Subscriptions CU Name Date Teambuilder Subscription Form 2017 How many team members This many and more ECUB MONTHLY CEO VELOCITY CFO CURRENCY CU TRAININGS CUB WEBSITE TECHNICALLY SPEAKING COMPLIANCE UPDATE LENDING SOLUTIONS MARKETING MATTERS BRANCH BUSINESS Name Title E-mail ID MEMBER BUSINESS LENDING C R E D I T U N I O N B U S I N E S S A U G U S T 2 0 1 6 C U B U S I N E S S . C O M ABOUT US THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS PUBLISHING TEAM Tim O Hara Editor & Publisher tim cubusiness.com Patti Manzone Designer UP FRONT Tim O Hara SECURITY Mike Ruth CRM Joe Salesky TECHNOLOGY John Waupsh LEADERSHIP Michael G. Winston Ph.D. COOPERATIVE GOVERNANCE John Gregoire CU BUSINESS Alec Hollis BRANCH STRATEGIES AuthorMeredith Deen BRANCH BUSINESS Kaitlin Morrison CU TRAINING Kenneth C. Bator WEB DESIGN IMPLEMENTATION MaryAbigail Dills MORTGAGE LENDING Jeff Kline LENDING SOLUTIONS A. Rex Johnson COMPLIANCE Ashok Kumar Associate Publisher ashok cubusiness.com TH E O NLY A L L - D I G I TA L A L L - B U S I NE S S R E S O U R C E F O R C R E D I T U NI O NS THE AUTO LENDING ISSUE INTRODUCING The TEAM BUILDERS FEBRUARY 2017 VOLUME 12 ISSUE 2 GOVERNANCE John Gregoire MEMBER BUSINESS Corinne Kalsky GOVERNANCE Clinton Koker MARKETING Eva LaMere Rex Johnson LENDING Kenneth Bator TRAINING FINANCE Emily Hollis GOVERNANCE Jeffrey P. Nelson Justin Hupter BRANCHING Meredith Deen PAYMENTS Bill Prichard Scott McClymonds LEADERSHIP SUBSCRIPTIONS Credit Union BUSINESS is published monthly (12 issues per year) by CU Business Magazine Inc. A one-year Digital membership is 75 yr An online membership form is available at www.creditunionbusiness.com subscription TEAMBUILDER https creditunionbusiness.com the-teambuilder SALES AND ADVERTISING Tim O Hara Publisher tim cubusiness.com or 561-282-6015 1 CONTACT INFORMATION Credit Union BUSINESS Magazine P.O. Box 2223 Palm Beach FL 33480 (561) 282-6015 (561) 588-7711 (fax) tim cubusiness.com 4 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M TABLE OF CONTENTS FEBRUARY 2017 VOLUME 12 ISSUE 2 TAB THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS 6 8 12 15 17 21 25 UP FRONT Tim O Hara The Team Builders Counting My Blessings for Being Surrounded by Talent ATM SECURITY 28 30 34 38 44 48 BRANCH STRATEGIES Turning Branch Idle Time into Productive Hours of the Work Day Meredith Deen BRANCH BUSINESS Protecting the ATM Mike Ruth CRM It s a Matter of Security Automotive Indirect Lending and Local Branches CU of America s Experience Kaitlin Morrison CU TRAINING Is the Wells Failure a Potential Windfall for Credit Unions Joe Salesky TECHNOLOGY John Waupsh The Trust Crisis Hey We Are a Credit Union... and Nobody Cares Kenneth C. Bator WEB DESIGN IMPLEMENTATION MaryAbigail Dills Get More Efficient and More Proficient with Partners LEADERSHIP Creating Your Digital Project Plan MORTGAGE LENDING High-Performance Programming Michael G. Winston Ph.D. COOPERATIVE GOVERNANCE John Gregoire Collaboration in Action Jeff Kline LENDING SOLUTIONS A. Rex Johnson MEMBERS Development Company What CEOs Want and Deserve CU BUSINESS Alec Hollis It s Time To Go All In Using Derivatives to Serve the Member 5 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M UP FRO NT BY TIM O HARA T The Team Builders Counting My Blessings for Being Surrounded by Talent Credit Union and other heavy hitters who help make the credit union industry so dynamic Now a dozen years later we re under full sail with a slate of excellent regular contributors. This team of experts helps each member of the credit union executive team. That expertise extends to the retail end of the CU business as well with a regular column called Branch Business. I ve long had a vision of a credit union executive team meeting around a conference table to discuss ideas while quoting liberally from Credit Union BUSINESS magazine articles. Now I m told it happens a lot. And that s a very good thing. Two years ago we stopped printing on paper an arduous process that takes several days out of the month and more than an additional week to have the USPS deliver the magazine across the country. These days we broadcast the magazine across the map in a few minutes. And we routinely send individual articles to specific recipients. For instance Ms. Hollis s CFO Currency is sent to CFOs CEOs and finance officials across the credit union industry. Same goes for Lending Solutions (lending department personnel) Marketing Matters (marketing) and Compliance Update (compliance officers). That targeting is made possible by our Team Builder group subscription program. Credit unions can join the Team Builder program by simply clicking on the conference room ad on page two of this issue. From there they fill in the name title and email address of each team member and specify which articles they d like us to send. We ll respond right away Thanks for reading Tim 6 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M he front cover says it all These are some of the industry experts who provide excellent advice for credit union executive readers. I was thinking recently about how CU BUSINESS magazine came to the idea of creating a concentrated focus on business performance. It was 12 years ago and I was extremely fortunate to become acquainted with Marc Bringman a very gifted writer who authored a regular CU BUSINESS column called At C-Level. I never tired of reading his highly charged business articles because they were interesting. Each featured a workplace-related problem followed by a solution and a well thought-out result. I received many positive comments about Marc s column from readers and within two years of our association Marc agreed to become the Editor of CU BUSINESS magazine. In that role he did a wonderful job of creating the format we still employ today nuts & bolts business journalism. Let s create a regular column written by experts for each department within the credit union Marc suggested during one of our daily phone conversations. And that s just what we did. The first expert I approached was Emily Hollis a founding partner with the very successful investment firm of ALM First Investment Advisors. Rex Johnson is known far and wide as the Dean of Lending and it was a good day when he agreed to supply a regular column based on his experiences in credit union lending. Scott McClymonds owner of the consulting firm CEO Velocity began to supply colorful and interesting behind-the-scenes articles about leading credit union CEOs. His showcased executives have included Donna Bland of Golden 1 Experience the Power of Plus. Let Advisors Plus guide your path to optimization and growth. The Power of Problem Solving The Power of Potential The Power of Profit With 200 years of industry experience our consultants have been there fixed that. We combine experience with analytics to identify high-impact growth opportunities. We create high-ROI results you can take straight to the bottom line. The Power of Partnership Our team works with your team on products and marketing to delight your members. Bring your credit union to the Plus side Call 727.299.2535 or visit us at AdvisorsPlus.com. AT M S EC U RI T Y BY MIKE RUTH Protecting the ATM It s a Matter of Security Don t let a compromised ATM fleet destroy your credit union s reputation. To increase your ATM security and to curb cyberattacks certain processes and planning tips will help keep you in the safe zone. Enlisting everyone at your institution from the C-Suite down is critical. Keep reading for a step-by-step run-down of these strategies. redit unions are operating under increased scrutiny by regulators and consumers on security practices and plans. That is why security is top-of-mind for most credit unions. Recently 74 percent of financial services CEOs cited extreme concern about cyber threats.1 And that s no surprise given that 37 percent of financial services organizations recently reported a double-digit increase in cybersecurity incidents.2 C Boosting ATM Security Starts at the Top If your ATMs are compromised perhaps the biggest blow and most difficult to repair will be to your reputation. Fortunately there are proven steps that your credit union can take to increase ATM security and starting with the c-suite is the first 1. Start with the board of directors and the c-suite. Given the scope of the potential impacts of an ATM security breach security needs to be an explicit part of your enterprise risk management strategy. Involving your c-suite and board of the directors is an important step in the risk management process. 2. Help your executive team understand your ATM risk profile. The impact of ATM security on your institution s overall risk profile needs to be clearly understood by your board and management. Make sure senior executives have the information and resources they need to properly understand the scope of ATM security needs and what it will take to address them. Executives don t want to get into the technical details of what a specific threat does but they need to be able to quantify what the risk is. This will help them better understand the level of funding that will allow the credit union s operational 8 ATM Security Breaches on the Rise When shoring up their cyberdefense credit unions can t afford to ignore their ATM fleet. From bruteforce physical attacks to sophisticated cyber malware credit unions are forced to protect ATMs against a broad range of threats. Recent figures from FICO indicate that the number of U.S. ATMs compromised by criminals rose a whopping 546 percent from 2014 to 2015. The general consensus is that this surge is due to criminals working to get in before the EMV migration in the U.S. reaches critical mass to reduce skimming. However even after EMV technology is completely in place one thing is certain as long as there is cash stored in an ATM there are people who will attempt to steal it. Creating a successful ATM security plan includes enlisting the help of the executive team employees and customers. C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M ATM SECURITY teams to properly craft a security policy that will help address threats. Such threats include card skimming card trapping and smash and grab physical attacks in which the perpetrators try to steal the entire machine. 3. Get to know the proper tools and guidelines. The Federal Financial Institutions Examination Council s guidelines include a number of recommendations for credit union boards even for those institutions determined to be at the lowest assessed risk level. Among them are Discuss ATM risks at board meetings this will help to better understand the scope and depth of the problem and keep a focus on ATM security. Consider information on security-related expenses and tools in the annual budgeting process. Complete a formal risk assessment. Conduct regular not less than annual employee training. Take Proper Security Measures to Combat Phishing Attacks To combat phishing it s not enough to have the best anti-virus or malware detection software in place employee education is also critical. Your employees can be your best line of defense against security attacks if they are aware of the scope of threats aimed at their organization. Credit unions should ensure that Employees know the importance of not clicking on unknown emails or ads on reputable sites and should be able to recognize bogus emails and ads. All personnel are warned not to use unsecured devices or connect unprotected personal devices such as flash drives to company systems. Additionally credit unions should ask these questions when addressing security issues within the company Do you have a formal security training program for all employees Do you request that your employees inspect your ATMs for physical anomalies whenever they use them Have you established and communicated policies regarding unsolicited emails Cyberattacks Phish for your Employees Employee customer and soft IP data remain the top three targets of cyberattacks in financial services which is likely why a recent PwC report found that 59 percent of financial services businesses are investing in training and education programs to better defend against evolving security threats.3 One of the ways cyber thieves target employees and customers in their efforts to extract sensitive data is with phishing the sending of unsolicited emails attempting to get recipients to click on a link or take an action. When they do the result is often the downloading of malicious software called malware onto the credit union s systems and networks including ATMs. Phishing remains a top security challenge for the financial services industry with 31 percent of all phishing attacks targeted at financial institutions.4 9 C R E D I T U N I O N B U S I N E S S Enlist Your Customers for Added Awareness Not only can your employees guard against security attacks enlisting your customers to help is also important. You don t want to raise undue fears or concerns but you do want your patrons to know that you understand potential threats and have taken the necessary measures to ensure proper ATM security. Some credit unions even use ATM idle screens to convey anti-skimming messages and remind users to check for foreign devices on the ATM. Don t wait until you re on the defensive let your customers know what you re doing and enlist their support. 2 0 1 7 C U B U S I N E S S . C O M F E B R U A R Y ATM SECURITY Today virtually everyone is aware of security and data protection and ATM scams are regularly documented in the media. However it s important that you don t allow others to dictate the message your patrons receive. Letting your customers know that you are continually working to make your ATMs more secure delivers a strong positive message for your credit union. When It Comes to ATM Security Planning is Key Proactive planning can save valuable response time when a security breach occurs and can result in accelerated containment and resolution of the incident. When creating a tailored ATM security plan keep these suggestions in mind Identify Security Risks A thorough assessment should identify all potential ATM security risks in your environment. You must first understand what type of vulnerabilities your ATMs have in order to determine what capabilities should be deployed to prevent damage detect intrusions and provide alerts when potential threats are identified. For example machines that sit inside guarded lobbies have a different risk profile than machines that sit on an island with no video camera surveillance. Determine Key Metrics You must determine which specific performance metrics will allow you to accurately assess the impact and effectiveness of your security initiatives. Once these metrics are identified then you may strategically define and prioritize which security features to put in place. This will help guide your plan toward effectively reducing critical vulnerabilities and minimizing the impact of a physical or virtual breach. Make Your Plan Your Own An organization s structure governance culture and risk 10 C R E D I T U N I O N B U S I N E S S assessment can all have a significant impact on its ATM security plan. ATM security must fit within with your overall business strategy and it is important to do the necessary research to make your plan unique to your organization. Review the various security frameworks available and identify the components that are most applicable for your organization as your plan might include components from multiple sources. Include Your ATM Vendor Most if not all ATM vendors have security guidelines available that provide a best practices approach. True ATM security is all about understanding the big picture the breadth and depth of threats and how all of the parts of your ATM infrastructure fit together. Your ATM vendor can be a valuable contributor to this planning process. When it comes to protecting ATMs against security threats the old adage that an ounce of prevention is worth a pound of cure rings true. The way your credit union proactively responds to a security breach can protect your members and save you from potentially irreparable damage to your reputation. Mike Ruth is the ATM Product Manager at Cummins Allison. He can be reached via email at RuthM cumminsallison.com. Sources 1 pwc.com 19th Annual Global CEO Survey February 2016 2 chartis-research.com Cyber Risk Management Financial Services 2015 April 2016 3 Pwc.com Turnaround and Transformation in Cybersecurity Financial Services 4 Phishlabs.com PhishLabs 2016 Phishing Trends and Intelligence Report 2 0 1 7 C U B U S I N E S S . C O M F E B R U A R Y THEY SAY... GOOD THING. We make it great. Cummins Allison self-service coin counters can transform the way your branch manages coin. Customers enjoy a quiet convenient and easy-to-use coin-redemption experience while you see tangible bottom-line benefits. With multiple machine choices and hands-free coin-management programs your staff can spend more time interacting with customers. Increase branch traffic enhance customer loyalty and improve teller line efficiencies. It s a small change that can make a big difference. Simple yet effective branch automation technologies from Cummins Allison build branch traffic and allow your staff to focus on what matters most more meaningful engagement with customers. CHANGE is a MAKE A CHANGE AT cumminsallison.com traffic CRM BY JOE SALESKY The Trust Crisis Is the Wells Failure a Potential Windfall for Credit Unions The Wells Fargo fallout is far from over and the trust issues it has raised could be a boon for credit unions. Is your CU in a position to attract customers and their associated billions of dollars who have lost faith in the big banks These time out approaches will help your credit union capitalize on this unprecedented opportunity. ust when we thought the worst was over for Wells Fargo a study released last month by cg42 reports the fallout has only begun. According to the study Wells stands to lose 99 billion in deposits 4 billion in revenue and up to 30 percent of its customer base who are pursuing other banking options. Unlike the mortgage crisis this current Trust Crisis will not impact consumer asset values though it has clearly impacted broad consumer sentiment toward large retail banks both for Wells Fargo and others. This new crisis of trust may result in more regulation attempting to treat symptoms of the issue instead of getting to the heart of the problem. CRM failure has been well documented over the years as shown by a 2009 Forrester Research report surveying 133 organizations that are using one of 24 leading CRM solutions. A staggering 47 percent of these organizations reported failure from their CRM platform. Wells Fargo s use of thinly integrated Salesforce and Microsoft CRMs to track silos of leads combined with faulty incentive programs checked by disparate systems controlling quality when opening accounts online and in branch likely caused this breakdown. 12 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M J A worrisome fact is that the Wells issue is not unique most of the largest U.S. banks share its challenges and could likely have similar issues. Online and mobile channels have seen significant investments yet branch and call center teams continue to be plagued by manual processes screen-hopping and cut-andpaste operations across multiple systems to achieve even simple tasks like opening an account or filing a travel profile. Customer self-service investments and advances such as eKYC have not been adequately leveraged across channels. Credit unions have been slower than banks to adopt CRM but many have started down the same thinly integrated campaign and lead management path that CRM led to the deceptive incentive programs and systemrooted issues undermining our biggest banks. With billions of banking dollars potentially up for grabs the issues overshadowing our largest institutions could have a silver lining for credit unions who have always distinguished themselves by their alternative model and reputation built on transparency service and trust. The question is whether credit unions will be able to capitalize on this potential windfall and see a huge upswell in membership growth and product onboarding. Can credit unions double or triple membership and broaden engagement without experiencing their own issues of quality and service Without the traditional profit-based motivation it is unclear if credit union leaders are incented with the sense of urgency required to capitalize on the opportunity yet for many organizations this could fundamentally change the resources and service levels available to their members in the future. It s time to press pause on initiatives and make sure to align with priorities for growing relationships with members. It s time to take five and seize this opportunity rather than consuming precious resources and time trying to keep up with competitors features. Here are three simple guidelines for credit union executives as they examine and improve their customer management solutions. 1. Implement automation for new customer onboarding which uses the same eKYC and product fitment logic in self-service (mobile online ATM) and assisted service (branch phone) channels. 2. Automate monitoring the success of product fit based on new account activity to assure that associate recognition goals are on active accounts (good business) not solely new accounts opened. 3. Invest in fixing the branch associates customer action center capabilities so they can quickly complete all the typical tasks (e.g. a lost wallet a travel profile) without screen-hopping and cut-and-pasting. Create an environment where associates can work side by side with members to collaborate on their needs and make it simple to serve and grow the relationship. I have yet to meet a credit union executive who felt their systems were easy for associates to learn and use. A few have noted that systems training is allocated more hours than financial product education for their teams. This has become increasingly difficult as new products often require associates to learn even more systems. Making Life EasierTM Hi Say Hello to the future of payments. Transform the payment experience. Start at www.tmg.global. 2017 The Members Group LLC. TMG logo is a registered trademark of The Members Group LLC. TM Making Life Easier is a trademark of The Members Group LLC. 13 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M CRM The financial industry has gone through two distinct phases of adaptation thus far and has the means to continue this trajectory. The pre-digital 1.0 world was simple for the customers and cash handling and other tasks consumed associates time. The credit union s bedrock was its branch and membership tied together by a common bond. Members could speak with knowledgeable team members regarding life events financial matters and access to their accounts. Then came the digital revolution. The 2.0 world added ATM online and mobile channels that enabled member access anytime anywhere. The products offered and the systems managing these products grew concurrently with channels and the digital world became easier for the member but more difficult for associates. The 3.0 trend is to remove friction from member interactions to deliver better service transparency and collaboration. We ve all experienced friction. We ve been transferred to specialists in response to an offscript question. We ve waited silently on hold or with an associate while simple tasks take longer than we think they should. Is it easier for a member to do their business with you than someone else How often do members start a process either online or on the phone only to have to repeat themselves because the channels and departments can t work collaboratively and share information Friction saps goodwill from both members and credit union teams. Collaborative Apple-like member-centric service is the true differentiation for credit unions and its appeal has never had a greater opportunity with Millennials and others who value transparency service and trust. The benefits of digital on-boarding and improvements in associate systems go beyond the Trust Crisis opportunity with credit union membership. Thirty percent of the current associate base are digital-native Millennials and this figure is expected to reach 50 percent of the workforce by 2020. These new associates quickly learn new systems that are intuitive and choose employers that are collaborative transparent and community focused. Fixing the friction has an additional benefit associates can spend more time growing their knowledge of the products you offer to better serve members over time. You ll know when you ve reached the objective by a very simple but powerful change. Instead of greeting members with the question Can I help you your team will greet them with the promise I can help you and be able to keep it. Joe Salesky serves as CEO of CRMNEXT the largest global provider of CRM in financial services where he is responsible for the company s entry into the U.S. market. A seasoned expert in software and financial services Joe has spent more than 25 years developing and delivering disruptive technology-enabled solutions. He holds 21 patents on technologies currently used by both consumers and large enterprises including mobile banking and the original patent for web-conferencing. A luminary in his space Joe has deployed missioncritical systems at more than half of the Fortune 500 companies and is a respected speaker at industry and media events. He has been quoted in leading national international and industry publications and has led his companies to achieving numerous prestigious awards. 14 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M TEC HNO LO G Y BY JOHN WAUPSH Get More Efficient and More Proficient with Partners W Are efficiency and proficiency being maximized at your credit union If not you could have a hard time competing in the not so distant future. These five touchpoints will help make your CU better at both what it does and how it does it. ithout knowing much about your credit union I ll throw this out there you have too much overhead and not enough expertise across your team to compete long term. Within five years you will need half to three-fourths of your currently human-powered retail banking work to either be assumed by technology or outsourced to a whole host of trusted partners. Make a list of all the tasks you know that your credit union should not be doing. What should be vaporized by technology or could be dramatically improved by a reliable expert vendor Research specialist companies that have proven success in banking and next to each task write potential vendor names for continued due diligence. While this shopping list will naturally include the obvious technology vendors it should also consider areas inside your organization that need supplementary help (e.g. compliance marketing etc.). In addition it should round out with the professional services needed to compete today (e.g. data security search engine marketing business intelligence tools research). The world has changed and that s why we are where we are. But as much as it may put you in the defensive position from a service perspective advancement in technology ubiquitous digital access and the push toward a convenience economy afford your credit union the opportunity to become much more efficient and proficient in how you do what you do. Some quick examples Re-examine the technology you use to get things done. An outdated laptop running Excel can take minutes to save or open file. Don t cut off your nose to spite you face. From sharing screens with AirPlay to working on new devices like iPad Pro to utilizing project management and communication software like Slack (which works with hundreds of other software titles to make itself even more useful) hundreds of contemporary technologies have proliferated in the past few years that could propel you and your team forward. Best yet it s all cheaper faster and more integrated than ever before. 15 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M TURN ON YOUR TECH STAFF withTEAMBUILDER. 4 TECHNICALLY SPEAKING www.cubusiness.com teambuilder buy TAB TECHNOLOGY Hire the best talent not just local talent. Use Slack inexpensive video chat AWS cloud storage (when implemented with the right security measures) and inexpensive travel options (Kayak Airbnb and Uber) to help you scale your team by finding the absolute best talent without requiring the new recruit to move to your town. Bonus points if you can work with the new talent to arrange part-time or retainer-based services rather than making him or her an employee. Don t get stuck in the rut of one vendor to rule them all. Users couldn t care less about your desire for vendor simplicity. No one vendor can be the best at everything. It may be easier for you to manage just a few vendors but your user does not care or even know about that. Several vendors working in all areas of your business can help you and your team scale in ways you never thought possible. Stop doing things that are not core to your business find service partners instead. The new economy has created thousands of services that didn t exist before allowing you to instantly zap work from your physical space and have the tasks performed by experts at a fraction of the cost of in-house personnel. These services can include website development and digital marketing automated compliance services via regtech virtual receptionists and human resources and benefits outsourcing. Use time-saving services for your organization. Amazon offers Amazon Business to help you save money on everything from office supplies to breakroom snacks. It also lets you schedule regular free deliveries for your branches months in advance. With a simple push of the Amazon Dash button you can reorder the product instantly so no one needs to spend time in the ordering process. Partnering with established fintech companies and startups can be an effective way to scale expertise and to ensure your institution evolves with and for 16 C R E D I T U N I O N B U S II N E S S B U S N E S S your accountholders over time. Re-examine internal roles and responsibilities through the critical lens of someone who knows that nearly every responsibility today is available as a for-hire professional service with the tap of a finger. By eschewing the allure of the incubator selecting partners based on specific achievable goals and proceeding interdependently your organization will sponsor a productive mutually beneficial relationship free of agony and unnecessary expense. John Waupsh has pioneered integrated fintech and financial marketing solutions for over a decade including Kasasa a national brand of financial products offered exclusively at hundreds of community financial institutions around the United States. His work has helped Kasasa grab three Finovate Best of Show titles as well as numerous other awards. He is a speaker at top fintech and banking conferences and is the author of Bankruption How Community Banking Can Survive Fintech (Wiley November 2016). Excerpted with permission of the publisher Wiley from Bankruption How Community Banking Can Survive Fintech by John Waupsh. Copyright (c) 2016 by John Waupsh. All rights reserved. This book is available at all booksellers. More info is at johnwaupsh.com. FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M L EA DERS HI P BY MICHAEL G. WINSTON PH.D. High-performance Programming H Your credit union s leadership is the lynchpin to its overall success. But how do you build leadership in the wake of the financial services sector s tarnished reputation These three best-in-class strategies will lay the firm leadership foundation your CU needs to thrive. There are significant lessons to be learned from the recent decade-long economic downturn. Those companies that invested in their human capital typically outperformed the field. The other companies allowed themselves to be diverted. They focused on trying not to lose which is wholly different from trying to win. Those firms have more ground to cover now. In good times and bad there has always been and will always be a War for Talent. You cannot have a great company unless you have great leaders in that company. And the best leaders have a deep commitment to building leadership talent throughout the organization. This is regarded as an obligation and a privilege. These leaders encourage development by rewarding excellence serving as role models and encouraging growth. They push decision-making to the lowest appropriate level and develop subordinates confidence in their ability to lead manage and impact business results. They allocate sufficient authority igh-performing organizations in all business sectors recruit talented individuals and place them in focused driven teams. They let these individuals skills drive intelligence and creativity rise to the surface. They train them challenge them and focus them on rewarding challenges and opportunities. They give them the place space knowledge and opportunity to excel. By doing so the talents of these newly acquired team members can shine through and the company develops its next generation of leaders. The best leaders have a sense for who is the right fit for the company and who will succeed. They have a proven track record for bringing in the right talent and helping these individuals develop. They have a way of leveling the playing field and helping everyone feel like s he has a seat at the table. In the late 1990s and beyond prompted by a McKinsey study on the War for Talent vision statements were revised to emphasize acquiring and developing human capital. Initial commitment appeared particularly strong in the financial services sector. Over time however as a challenging business climate lingered these promises were not kept in many organizations in and out of financial services. Company after company reacted to short-term pressures by pushing the pause button on development of human capital. One hardly heard about the War for Talent any longer. 17 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M LEADERSHIP and resources to subordinates to enable them to make significant decisions and to act independently within their area of responsibility. These are the primary drivers of development and sustainable competitive advantage. In an era of constant change the only competitive advantage you have is your ability to learn faster than your competitors. Developing competencies is key to gaining competitive advantage. Create a platform for exceptional execution and profitable growth that encompasses talent management organizational design culture building executive continuity and performance management. Don t let this valuable offer pass you by. The financial services sector has unique challenges with its recently tarnished reputation of having caused the recent decade-long recession. Many banks and mortgage companies freefall from grace was said to be caused by leadership practices that were driven more by arrogance ignorance and greed than by a clear noble and compelling vision. In trying to conceal the impending demise some leaders began to rationalize deceive constituents and make bad business decisions. They made up their own definitions of what constituted moral ethical and legal behavior. When the dust settled the global economy was in shambles. Little was left but broken trust and shattered lives. Research Jump on the CU BUSINESS Express to help your credit union GROW for your members employees and community. Sign Up Your Entire Crew for Team Builder C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M LEADERSHIP TAB confirms that public trust has greatly declined in the banking sector. Any bank s failure to honor commitments to the government regulators and the public at large lowers its reputation. A tarnished opinion can arise from any type of situation relating to mismanagement of the bank s affairs. Non-observance of the codes of conduct under corporate governance suppression of facts and manipulation of records and accounts are also instances of reputational risk. Bad customer service inappropriate staff behavior and delay in decisions create a bad bank image among the public and hamper business development as well. The November 4 2014 Harvard Business Review notes that Millennials everywhere not only demand to know the organization s purpose its reason for being but are also prepared to leave the firm if that purpose doesn t align with their own values. Key amongst their values is principled performance. They do not want to work for a company that cheats its customers or defrauds a nation. When designed as integrated and cumulative learning processes each program is built upon the principles of a prior program and leads to the next programs. By meeting regularly participants are able to digest the principles articulated in the sessions and have ample opportunity to apply what is being taught. They also become more of a team. Ethics and principles should be at the core of this process. 2. Delegation and empowerment Push decision-making to the lowest appropriate level to develop people s confidence in their ability to lead and impact outcomes. Instill a sense of ownership of the business allocating sufficient authority and resources to enable people to make decisions and act independently within their area of responsibility. The best vehicle from which to learn is the job. 3. Real action learning Have program participants work in focused teams that interface directly with executive management to address real-time business issues. The issues should be significant not busy work. Executive teams should identify define and frame issues for program participants to address. Executive champions can then serve as sponsors mentors and bureaucracy busters. At Motorola we used this strategy to focus on and improve global growth cost reduction customer satisfaction and cycle time reduction. Follow-up coaching and feedback with each participant will enhance skill development and ensure that new practices are applied at work. Here are three best-in-class strategies with which to rebuild leadership in financial services. 1. State-of-the-art process Develop leadership programs focusing on different management skill levels and using a combination of company presenters external worldclass subject matter experts e-learning technologies and post-program project work to reinforce key strategic initiatives. Participants then compare the state of the practice in their company with the state of the art in the world. Relevant gaps are noted assessed and eliminated. Participants are engaged as both learners and teachers supported in their responsibility to promote the company culture and direction. 19 C R E D I T U N I O N B U S II N E S S B U S N E S S FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M LEADERSHIIP Carefully crafted leadership programs promoting principled performance enable a company to focus on common challenges create a unified perspective and provide management tools to enhance its competitive advantage. When leaders train and work together they create a foundation for effective change management. This approach provides key people with the same learning experience a common vocabulary shared skill-building and mutual reinforcement. Leaders need to be accountable to share the credit and shoulder the blame. They give others the responsibility and opportunity for success. Good leaders inspire teams to have confidence in their leadership great leaders inspire team members to have confidence in themselves. We want all team members to be able to lead themselves lead the team and lead the business to give them the leading edge. Don t let this valuable offer pass you by. Michael Winston had a career of distinction in executive positions for over three decades in five Fortune 100 companies including serving in executive positions for Motorola Merrill Lynch McDonnell Douglas Lockheed and Countrywide. As global head of leadership and organization strategy he worked closely with C-Suite officers to develop business models craft strategies and structure create cultures and develop leaders. As chief leadership officer for Countrywide Financial Winston built the strategy leadership and culture and tried to stop the fraud corruption and deception he observed. His warnings were dismissed and ignored. Winston s experiences in confronting Countrywide executives about fraud market manipulation and insider trading are highlighted in numerous media reports including a New York Times feature. He is a founding member of the Bank Whistleblowers United and holds a Ph.D. from the University of Illinois and a Master s Degree from the University of Notre Dame. He attended executive programs at Stanford University and the University of Pennsylvania s Wharton School as well. His book World-Class Performance is available for purchase on Amazon and at other fine booksellers. For more information about Winston visit him on Facebook LinkedIn and michaelwinstonandcompany.com. Jump on the CU BUSINESS Express to help your credit union GROW for your members employees and community. 1. Each member gets CU Business monthly eMagazines. 2. Individual articles are emailed to each member by job title. 3. Bonus New members also receive last 12 articles CFO Currency Lending Solutions Marketing Matters Branch BUSINESS etc...) 4. Each member has full access to CUB website and its 65 issue library. Sign Up Your Entire Crew for Team Builder Click Here To Register Your Crew A U G U S T 2 0THE 6 1 ONLY ALL-DIGITAL ALL-BUSINESSSRESOURCE FOR .CREDIT M C U B U I N E S S C O UNIONS 20 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M COO P ERATI VE GOVERNA NC E BY JOHN GREGOIRE What CEOs Want and Deserve I CEO reviews have a tendency to be anything but straightforward. Inconsistent comments and scores impede clarity. Worse some CEOs are reluctant to challenge such inconsistencies. As a result the Board CEO relationship can be impinged. These tips will make the matter clearer so that everyone involved gets what they deserve n our previous article we described the CEO review as a weakness in the all- important Board CEO relationship. We also mentioned that the performance evaluation is complex and difficult. HR professionals tell me it is the bane of their existence. Typically the reviews are late and poorly constructed. They believe that most managers see the performance review process as a necessary evil. In reality this process is one of the most valuable of all management tools. A proper performance evaluation is informational instructive and personally valuable to the employee. It is also a reflection of the manager s skill and commitment to his or her staff. All of this applies in spades to the performance of the CEO. Most CEO reviews consist of two key components aset of organizational performance measures typically in the form of an organizational scorecard and a more subjective perspective of the Board s perception of the CEO as an organizational and community leader. This second component encompasses the Board s comfort with the Board CEO relationship. Our prior article gave some basic metric information. We will provide a detailed method for developing a robust and member-centric scorecard in a future article. This article will focus on the more subjective portion of the CEO review. Typically each Board member is asked to rate the CEO relative to several questions. These inquiries are 21 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M designed to assess leadership and relationship-communications performance. 1. The CEO is effective at identifying the strategic long-term needs of the credit union and at developing and implementing plans that result in achievement of these needs. Rating Comments 2. I am satisfied with the level and quality of information and communications provided to me by the CEO. Rating Comments TURN ON YOUR CFO and CEO 4 CFO withTEAMBUILDER. CURRENCY www.cubusiness.com teambuilder buy COOPERATIVE GOVERNANCE TAB The opportunity is provided for explanatory narrative for each rating. There is also typically an opportunity to provide a written perspective of the CEO s performance in a more general manner at the conclusion of these forms. This process is a well-intentioned attempt to ensure all Board members have the opportunity to give input and to provide the CEO with a clear understanding of their perspective as to his her performance. It also supplies an opportunity to give some guidance toward any potential corrective actions. In our experience the end result of this process is rarely clear. In fact there are frequently one or two scores or comments that are inconsistent with the general tone of the comments. Such comments and scores not only make the overall Board message unclear but also often lead to confusion on the part of the CEO. Occasionally the CEO does not challenge this inconsistency to the potential detriment of the Board CEO relationship. In our experience CEOs want and we believe deserve a review that clearly reflects the Board s perspective of performance with productive comments on areas for improvement. A critical element in Board governance is that the Board will Deliberate in many voices and Govern in one. This value should also apply to the CEO review. How to provide one voice in the CEO evaluation In our discussions with CEOs it is clear they would value an evaluation that reflects the consensus govern in one perspective of the Board. Such general agreement requires assimilation of the score and nar22 C R E D I T U N I O N B U S II N E S S B U S N E S S FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M COOPERATIVE GOVERNANCE TAB rative replies into one consensus document. This task may become the responsibility of the Board Chair or a CEO review committee depending on your governance structure. One method of achieving this aim is to have the Chair or committee provide a consensus document from the individual responses. This document should be provided to the entire Board for acceptance before being provided to the CEO. We know of many occasions where this step is missed and the Board is not privy to the final document provided to the CEO. It may seem to be a small detail but considering the importance of this document we believe it is vital to have all Board members both aware and in support of the Board s CEO evaluation. Creating the consensus document is an important and challenging task. The easy road would be to simply develop the document with little to no input from the full Board and then give it to the CEO. Discussion of the proposed document with the entire Board adds an additional step but pays off in multiple dividends. It is always valuable for the Board to speak with one 1. 5. I am satisfied with the level of information provided to me by the CEO. I am adequately informed to function as a director. Average Rating 4.0 Comments 2. I value the effort the CEO is making to condense and reduce the amount of material and info being provided to us. Rating 5 3. The level of information is not nearly so important to me as the clarity and usefulness of the information. The CEO has worked diligently to provide more with less a favorable thing in my opinion. Rating 5 4. The information provided to me is typically incomplete. I do not appreciate the CEO condensing the information. It makes me think he is trying to hide something. Rating 2 23 C R E D I T U N I O N B U S II N E S S B U S N E S S voice. This step ensures that all Board members are aware of the one voice message. Best practices in this process go a bit further. The additional step of providing the entire Board with the proposed consensus document is embellished with a dialogue to ensure general agreement. It is strongly suggested that this dialogue be facilitated by a governance expert to allow all Board members equal participation. Often the Chair or committee will attempt to facilitate this discussion. This takes one of the natural and chief Board roles and adds the responsibility of facilitation. A governance expert will provide both facilitation and perspective on this important discussion. Another rationale is to simply provide all scores and narratives without the consensus process. Such an approach ensures that the CEO is fully aware of the feelings of all Board members. Clearly it is valuable to know if one or more Board members hold a strong even if minority opinion of the CEO s performance. This is one more reason for inclusion of a governance expert in the process. Frequently those Board members with diverging opinions have uniquely different perspectives of events or issues. In our experience when all Board members have the same perspective of events and issues a consensus evaluation can be easily developed. Those with a minority view are often convinced and willingly support the majority view. There are undoubtedly times when an individual has such a strong belief contrary to the group that it must be addressed. A governance consultant will be equipped with tools and techniques to ensure this is accomplished. By completing this process including the best practice described the Board will ensure a strong and clear Board CEO relationship now and into the future. The CEO will also have clarity into his her performance and guidance as to performance improvement opportunities. FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M COOPERATIVE GOVERNANCE John P. Gregoire is a partner in Koker Nelson and Gregoire (KNG) a consulting firm dedicated to executive compensation succession planning and performance management in credit unions. With more than forty years of experience in the financial services industry and having held senior management positions in state and national trade associations and credit unions his is a broad-based perspective reaching to board governance team leadership CEO appraisal score carding succession planning mergers and the alignment between executive compensation and organizational strategy. John also founded the ProCon Group Ltd. now in its twentieth year of serving a client base comprising over forty percent of credit unions with a billion dollars or more in assets. A founding member of the Filene Research Institute he was instrumental in the development and publishing of the report on Board Responsibilities and Work Styles in Effective Credit Unions. He has authored a variety of articles on strategy the balanced scorecard and governance. John earned his master s degree in management from the Claremont Graduate School Peter B. Drucker School of Management Program working directly with Drucker on topics of executive management. He is a former board member of the National Credit Union Foundation. You can reach John at 608-239-3449 or John.Gregoire kngco.com Solutions Get Results Give Your Tellers the Tools They Need High Capacity Currency Recyclers and Dispensers Contact a Magner Consultant Today Phone 800-243-2624 Online www.magner.com 2017 Magner Corporation of America. All rights reserved. 24 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M CU BU S INES S BY ALEC HOLLIS Using Derivatives to Serve the Member I If the mere mention of the word derivative sends you hiding under the covers it s time to set aside your fear. Far from being the boogey man in the closet derivatives are a friendly ghost when it comes to managing a credit union s interest rate risk. Keep reading for a shift in scare-tactic perspective. can t tell you how many times I hear clients mention they are slowing down loan production or altering product offerings in the name of interest rate risk (IRR). While altering product offerings is one method of influencing IRR in a way it contradicts the idea of serving members and providing them what they need. Interest rate risk (IRR) is a normal part of a depository s business model and managing it is vital to profitability. To some the word derivative may have negative connotations and sound scary or daunting especially in light of the oft-referenced financial crisis of 2008. However it really shouldn t. Derivatives are nothing more than capital-efficient tools for managing this risk. The essential idea is to shift IRR to a targeted or desirable level. IRR is typically viewed from two predominant perspectives the earnings perspective and the economic value perspective. The use of derivatives can help alleviate both. Ultimately there is a profitable side to risk management and being hedged. The first step to hedging using derivatives involves understanding the exposure. Typically analysis for derivatives involves calculating exposure under very small changes in interest rates such as 10 basis points (bps). Exposure is frequently viewed in dollar amounts such as the dollar value of a one basis point shift in rates (DV01). Figure 1 below shows the equity exposure to changes in interest rates from a total balance sheet perspective the same analysis also can be done for a single asset or liability or a portfolio of either. To hedge the equity at risk a derivative contract matching the average dollar exposure between 10 bps shifts would be selected. 25 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M TABBUSINESS CU Permissible derivative instruments for credit unions to hedge IRR include forward futures contracts swaps caps floors and swaptions. While seemingly complex the most important differentiation is how the credit union pays for the contract and what the payoff profile looks like. The biggest distinction is forwards versus options. A forward contract obligates its buyer (seller) to buy (sell) an asset at a specified price and date that is agreed upon at initiation. A futures contract is simply an exchange-trade forward contract. There is no upfront premium paid (except for transaction costs). Interest rate swaps fall into this category. (Swaps are simply a series or string of forwards.) Option contracts on the other hand are similar to insurance policies in that they have a large upfront premium cost. Deciding on hedge instruments and methodologies ultimately comes down to the nature of the risk at hand the cost-efficiency and operational considerations. In practice most depositories use swaps because they tend to do a better job of hedging specific assets or liabilities. They also do not have large premium costs. While positively convex option contracts may hedge convexity risks the cost of convexity protection is embedded in the option premium cost. Regulatory and operational considerations are also important. To mitigate the equity at risk in Figure 1 rarely would a depository employ a balance-sheet-wide hedge (sometimes called a macro hedge). Although appealing for the sake of simplicity Financial Accounting Standards (FAS) 133 and FAS 138 With 20 billion of investments under management ALM First is an SEC-registered investment advisor acting as an unbiased third party offering commission-free fee-based services to over 200 financial institutions across the country. Services include Asset Liability Management Investment Advisory Merger Valuations Hedging with Derivatives Loan Profitability Analysis ALM Validations Investment Portfolio Analysis MSR Valuations Training and Education and more... 800-752-4628 www.almfirst.com 26 C R E D I T U N I O N B U S II N E S S B U S N E S S FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M CU BUSINESS TAB amendments require derivatives that do not qualify for hedge accounting treatment to be marked to market at least quarterly. Thus electing hedge accounting while complex is done to prevent excess income volatility. Two methodologies exist for hedge accounting fair value (FV) or cash flow (CF). For both a specific asset or liability (or portfolio of either) must be designated as the hedged item. An FV hedge seeks to mitigate potential changes in the fair (market) value of the hedged item. A CF hedge seeks to mitigate potential IRR. At ALM First we advise clients against this and instead manage IRR as a separate function to facilitate the spectrum of available products. Using derivatives as a management tool can open up the credit union to a variety of additional product offerings along the entire yield curve and even in different marketplaces. It can also enable growth in product offerings. Ultimately these benefits flow to the member through greater flexibility in product offerings and more effective risk management practices. variability in cash flows that could affect earnings. Maintaining hedge accounting requires periodic testing of effectiveness and should be highly effective (between 80 percent and 125 percent). The diagram in Figure 2 represents a pay-fixed receive floating swap transaction that would essentially turn a floating rate liability into a fixed rate liability. Derivatives can seem complex at times and the regua ory and accounting treatments don t make them any easier. While other methods do exist to alter interest rate risk derivatives remain among the most effective tools to manage IRR. Shying away from interest rate risk through not offering certain loan products effectively equates to using the membership to manage AFinancial Advisors in 2012. Mr. Hollis performs asset liability analyses for financial institutions various what-if analyses budget forecasting liquidity forecasting and any other modeling requirement to fit the needs of ALM s clients. As an Associate Mr. Hollis s additional responsibilities include the presentation of results to client ALCOs and senior management as well as mentoring new financial analyst team members. Mr. Hollis holds a bachelor s degree in finance from the University of Notre Dame in South Bend Indiana. 27 C R E D I T U N I O N B U S II N E S S B U S N E S S FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M BRA NC H ST RATEG I ES BY MEREDITH DEEN Turning Branch Idle Time into Productive Hours of the Work Day T Is staff deployment a struggle for your credit union Daily lulls can be either wasted time or time put to good use. Here are some tips on how to transform idle time at your CU into a productive part of your employees workday. One teller processed an average of 23.8 transactions per hour the best of the group. This teller also logged the most hours in the mode of processing interactions with accountholders a total of 159 hours. In comparison the bottom-ranked teller processed only 16.7 transactions per hour and logged 107.5 hours of member interactions. Those hours were divided by total payroll hours for each employee to deduce the WFU or 78.72 percent. While this institution received a decent score it was not one of the best in FMSI s three-month-long study. Conducted between March and May 2016 this investigation encompassed about 10 000 employees at more than 1 000 different branch offices. The top 10 institutions in the Branch Workforce Utilization Study he recently released FMSI Branch Workforce Utilization Study offers a contrasting view between those financial institutions that effectively manage how their branches are staffed and those that struggle with when and how to deploy tellers and branch supervisors. Here s one of the most fascinating takeaways from the report the periodic lull in the workday a.k.a. idle time that virtually any teller experiences is actually a realistic opportunity to provide employee training. More on that later. The Branch Workforce Utilization Study a free download at fmsi.com generates a data point that can be used to measure the effectiveness of any retail branch staffing levels. This measurement called workforce utilization or WFU provides a financial institution s executive team with a valuable optic into improving its branch network efficiency. TURN ON YOUR Standard vs. Low Performers Consider the example of a Standard Performer financial institution. (The names of the institutions and employees involved in FMSI s study are withheld for privacy reasons.) The Standard Performer institution ranked as 78.72 percent on the WFU scale. The WFU number was generated through a painstaking tally of both transaction data derived from an institution s core system and HR data. In the Standard Performer s case five tellers and two teller supervisors were measured. 28 C R E D I T U N I O N B U S I N E S S BRANCH SUPERVISORS & MANAGERS withTEAMBUILDER. 4 BRANCH BUSINESS C U B U S I N E S S . C O M www.cubusiness.com teambuilder buy 2 0 1 7 F E B R U A R Y BRANCH STRATEGIES TAB posted WFU scores in the range of 90 percent to 81 percent. To complete the comparison an institution described as a Low Performer tallied a WFU score of 54.8 percent. The low score was a result of combined tellers who overall processed fewer transactions per employee while still working a similar number of total paid hours for the period a sure sign of excess staffing. Banks and credit unions use the full data reports on their institutions to improve how they staff their branches. A key culprit behind inefficient branch management is a work schedule that puts too many employees on the clock during times that lack adequate customer foot traffic. FIs can address this issue by using workforce analytical tools and scheduling software as well as some suggested management approaches. and supervisors still appear to be saddled with idle time That s when new training comes into play. Idle Time Reduction Suggested Management Approaches One possible solution Consider hiring part-time workers for a particular shift. Part-time employees can be scheduled to work specifically when management knows the branch will be busy. That will help reduce the number of idle hours logged by full-time employees. There s also a potential opportunity when full-time staff depart for another job. Instead of replacing those employees with another full-time worker consider referencing your analytics to see if the data supports hiring a part-time worker instead. Many institutions should also consider adopting a universal associate staffing model. A universal associate can discuss products and services with potential customers which can lead to sales opportunities as well as process transactions. This more adaptable approach can easily fill in for whatever area of the branch is needed on the spot. Once an institution has ascertained its peak periods and when demands for employees are highest more efficient schedules can be created while maintaining desired service levels. So what about those times even after staffing levels have been reduced when tellers 29 C R E D I T U N I O N B U S II N E S S B U S N E S S Instead of downtime during which idle chatter often takes place employees can use slow periods in more productive endeavors such as learning a new skill or taking on a sales assignment. Filling idle time with more meaningful tasks can be more easily accomplished with sophisticated employee scheduling solutions where accountability measures are applied. This practice is a win-win because the company gets better use of its employee-compensation expenses and the employee is given more rewarding work. Finding the perfect balance of a branch s staffing levels isn t easy. It s tricky to calibrate the number of tellers sales personnel and managers to a specific office s peak hours especially when foot traffic fluctuates. But this task has taken on greater importance in a hyper-competitive business environment. Moving away from the manual scheduling processes of the past and adopting sophisticated analytical and scheduling applications is one of the most important first steps. It can help any institution come closer to meeting sales goals and turning in financial reports on a branch s performance that any executive team can smile about. Ms. Deen is president of Alpharetta Ga.-based Financial Management Solutions Inc. (FMSI) which provides financial institutions with business intelligence and performance management systems for efficient branch staff scheduling and lobby management. She can be reached at meredithd fmsi.com. FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M BRA NC H BUSI NES S BY KAITLIN MORRISON Automotive Indirect Lending and Local Branches CU of America s Experience Is your credit union struggling with automotive lending If so a partnership with an indirect auto lending service provider may be the solution to your challenges. These insights from a CU that in embracing indirect auto lending got back on track and helped its members obtain better loans will help you succeed. T o make car shopping simpler some credit unions are embracing the indirect lending trend and offering their members loans through a partner organization. This approach affords members access to a wider range of online tools other options for automotive loans and other features to help them manage their vehicle-buying experience. Before partnering with CU Direct for indirect auto lending Kansas-based Credit Union of America experienced significant challenges in its automotive lending program. Gary Hull CU of America s AVP of consumer lending said his credit union s automotive lending was struggling before the partnership. Since joining forces he says CU of America learned how to obtain buy-in from local branches build relationships with local car dealerships and get its consumer auto lending program on track again. To learn more about how CU of America succeeded in helping its members obtain better loans we asked Hull to share his insights on indirect lending with us for this month s column. Gary Hull CU of America s AVP of Consumer Lending 1 Revamp member experiences with auto loans by going to the source of the problem and fixing dealer relationships. As they shopped for new vehicles consumers would typically encounter CU of America s loan options in one of two ways. Either shoppers would start with the pre-approval process at the credit union branch or they would start at the dealer and learn about CU of America s auto loans there. During the pre-approval process current members would often start applying for financing and finish 30 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M Making Life EasierTM Hi Say Hello to the future of payments. Transform the payment experience. Start at www.tmg.global. 2017 The Members Group LLC. TMG logo is a registered trademark of The Members Group LLC. TM Making Life Easier is a trademark of The Members Group LLC. TAB BRANCH BUSINESS with a visit to the dealership ready to buy a car with their pre-approval from the credit union in hand. At the dealership circumstances would quickly change as some dealership staff then subverted the branch s efforts. Dealers would encourage members to seek other financing instead since members couldn t actually sign loans onsite and would need to make another trip back to the credit union. This was confusing and frustrating to members and branch staff alike Hull noted. Attracting and retaining members interest in auto loans was difficult for CU of America. We would pre-approve people and lose most of them Hull said. With no option to sign at the dealership we d lose out. For some credit unions the relationship between local branches and automotive dealerships can be somewhat adversarial. Auto consumers are often in a hurry to find the best deals on car loans and may accept loan options offered at the dealership regardless of whether a better loan is available at their local credit union. With help from CU Direct CU of America rebuilt its relationship with local dealers and with automotive shoppers. Consumers can now purchase their vehicles through CU of America onsite and have access to online tools to help with car shopping. This convenience simplified the process which made dealerships more positive about working with the credit union. Hull said. Branches thinking this [indirect lending] doesn t help can hurt your program. Hull recommended using branch teams to help direct members to the new indirect program. Local branch teams work directly with credit union members and help them navigate their everyday financial challenges and opportunities so these are natural partners to help with a new indirect lending program. Branch staff help members understand the value of their credit union s auto loans so they are a great resource and can be cheerleaders for an indirect program. Hull said having the right incentives for branch staff can help make indirect lending successful. At least initially credit unions should offer incentives to staff members who are encouraging consumers to check out the credit union s lending program even if the actual loan isn t processed directly at the branch. At CU of America front-desk service representatives were offered incentives for every member they directed to the indirect loan program. Shoppers could visit a web portal where they could shop local dealerships that partnered with their credit union. From there the process was more straightforward for buyers who then could quickly obtain the loans they needed. The branches that helped these members 2 Get buy-in from local branches so they will help your credit union implement indirect lending. Indirect lending removes loan origination and servicing from the local branch and places it with a partnering company or other organization. Therefore there may need to be buy-in from branch staff to create a successful indirect lending program. Branches may be hesitant to push something that lacks incentives for their teams Hull suggested. You have to get buy-in from branch managers. You have to make this a win-win for the branches 32 C R E D I T U N I O N B U S II N E S S B U S N E S S FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M BRANCH BUSINESS TAB would then receive credit for their contributions to the loan process. 3 Track your progress with one key question Is this really a win-win Many lending programs fail when they stop seeking the best for each party involved Hull said. The real key benchmark for automotive lending programs is to ask if each stakeholder is really benefiting from the program. If the answer is no the credit union must be bold enough to seek changes. For CU of America this meant taking a hard look at its auto loans for areas where the credit union could improve. Automotive lending programs involve multiple stakeholders. Each stakeholder must benefit from the partnership or it could fall apart. Hull suggested a careful analysis that considers each stakeholder s piece. This requires careful communication with the other stakeholders and a willingness to find common ground. The member s got to win the dealer s got to win the credit union s got to win. Your staff has to win Hull said. It must be a win-win to succeed. Once CU of America began paying attention to every piece of its lending program it became easier for the different stakeholders to work together. Each group understood why the lending program existed and how to move forward. Credit unions that are considering an indirect lending program should ensure that they have the support of their executive staff and commitment from the other stakeholders to the program s long-term success. Since results are not immediate credit unions must be diligent about learning how to improve their automotive lending programs and about finding better ways to serve their members. With a little patience the transition may be a rewarding experience for everyone involved. Credit unions can transform the experience for their members improve relationships with local car dealers and make their lending programs successful for all stakeholders. Your credit union s efforts to offer a better lending program for automotive buyers can help you provide more of what your members need and may ultimately help you not only grow your membership but also improve the revenue of your organization. Don t Be in The Dark about Auto Lending With the challenges of offering a high-quality lending program it s no wonder some credit unions continue to struggle. Insufficient knowledge about auto lending best practices bad relationships with dealerships and a lack of strong shopping tools can leave some credit unions unable to serve their members in this area as well as they want to. Indirect lending can provide credit unions with the necessary tools knowledge and assistance to put together a better automotive loan program for their members. 33 C R E D I T U N I O N B U S II N E S S B U S N E S S In addition to covering Branch BUSINESS for CU Business Kaitlin is a freelance business writer based in Central Washington State. She is passionate about educating her readers and is a proud credit union member and supporter of credit unions. You can read more of her writing at www.kaitlinmorrison.com. FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M CU TRA INING BY KENNETH C. BATOR MBA Hey We Are a Credit Union...and Nobody Cares E You re a credit union. That sets you apart right Wrong. The truth is no one really cares. What they really want to hear from your CU s marketing message is what s in it for them. Here s how to take the emphasis off you and put it on your members individuality. financial business to you without question just because you re part of a movement Fortunately the person who made the movement comment is also a client of mine. So I had built up enough of an emotional bank account whereby my blunt and abrupt reaction didn t elicit her slapping me upside the head so hard my glasses went flying against the wall. I did however get a look from her to suggest that I better change my tone and explain where I was going with this really quick. I went on to state I m not saying that being a credit union isn t important. It certainly is. What I am saying is that most members and potential members just don t care. With that I explained that while being a credit union is a differentiator and an important brand association one that I also argue all the time it isn t the number one brand association on the list for any institution. asily one of the most significant accomplishments of my 25-year career in the credit union industry was cofounding the Police Officers Credit Union Association (POCUA) a consortium I continue to manage through my firm today. The last event we held was the POCUA Collaboration Meeting in October 2016. During the program we discussed the challenges facing financial cooperatives that serve law enforcement. One credit union CEO in attendance stated that one of the biggest struggles is educating members on the credit union difference. Before anyone else had an opportunity to reply as the facilitator of the program I asked Why is that important Those who know me know I asked that question not only with a sarcastic tone but also with the intent to eventually make a point. There were a few responses of the usual variety and then the one that frequently makes my blood pressure rise was spoken Because it s a movement. I immediately began gyrating almost like Miley Cyrus in full twerk mode while saying Oh it s a movement Well that makes all the difference then. As a potential member I should just bring all of my 34 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M CU TRAINING In other words your marketing messaging leading off with We re a credit union and that means... is a quick way to have almost everyone tune out immediately. In true Jim Collins Good-to-Great fashion the brutal fact is that nobody cares. All right maybe somebody cares ... like that volunteer who has served on the board for 47 years or the CEO who worked his way up from being a teller in 1967. But I can assure you that almost all of your current and potential profitable members don t. What consumers do care about is what s in it for them. And unfortunately in the ultra-competitive world of banking that profitable member s most desired features and benefits are offered not only by your credit union but over 1 000 other financial services providers as well. Each consumer even someone in the middle of nowhere but with an internet connection has hundreds of choices for deposit and loan products. So the fact that your credit union offers three different checking accounts and low rates on two credit card options doesn t excite anyone. He or she can find that what s in it for them somewhere else. So how are we going to attract new members and new business if no one cares we are a credit union or that we have multiple competitive banking options The what s in it for them that most financial cooperatives do have to offer is the clear understanding that their members are different. The difference in the members we serve is much more powerful and a much more 36 C R E D I T U N I O N B U S I N E S S effective message than the credit union difference. In today s marketing individuality is a key aspect of the consumer. Everyone whether he or she admits or not identifies with a particular group or even a specific label. The question we need to answer is how can we best tap into that identification Police officers want to be around other police officers and they want to be respected especially in these unfortunate times. So there is a lot more appeal to banking with the National Police Credit Union or their local law enforcement CU rather than just another bank. Longshoremen in Los Angeles County want to work with people who understand the challenges of their profession. So they go to ILWUCU. Active and retired military want to feel special. So rather than working with the community bank they go to Navy Federal. F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M CU TRAINING TAB Speaking of Navy Federal Credit Union there is a lot to be learned from its commercials on national TV. If you watch these ads carefully you realize that there is very little mention of product or rate. Heck if you are watching one for the first time you don t even know Navy FCU is a credit union until the end. But what Navy Federal does do in those commercials and they do an excellent job of it is twofold the CU humanizes its members and makes it clear that the credit union understands why its members are different. But Navy Federal is nearly 80 billion My credit union can t compete with that I can already hear readers of this article yelling at me from across the country. I m not asking you to compete with them or their level of ad buying. I get it. You can t afford to have five commercials air during the Super Bowl. But what you can do is use a similar formula to the one Navy Fed does only on a smaller scale in your marketing mix. Contrast one of Navy FCU s commercials with one I saw a few years ago done by a local community credit union. The CEO got on TV and said something like We re a credit union and that means ... Click. That was the sound of most viewers changing the channel to see what the score was in the other basketball game. That s what I would have done too if it weren t for my curiosity to see where the ad was headed. When I heard the end I wished I had grabbed the remote as the CEO wrapped up with We have all the same products and services that the big banks do. Then why shouldn t I just go to or stay with the big bank if you have nothing special to offer me or better yet to make me feel special While the credit union difference can be an important difference it s the icing and not the cake. In the case of my credit union friends serving law enforcement leading off with how they know how to serve police officers better than any other institution in the world will be a more powerful differentiator than trying to explain why a non-profit financial cooperative is better than a for-profit bank. As one boss 37 C R E D I T U N I O N B U S II N E S S B U S N E S S I had many years ago told me when I was developing a marketing campaign Make it all about them. Once we have earned the members trust and their business then they might be open to learning about the credit union difference. Then they might actually care. Even if they don t if they do care about your institution your employees and how you specifically made a difference in their lives isn t that better anyway The difference your business makes with a particular niche your members care about and the difference you make with each individual are more important than the credit union difference will ever be. Ken Bator is the author of The Formula for Business Success B C S and the founder of Bator Training & Consulting Inc. (BTC). Ken helps credit unions create environments where employees actually want to come to work and members want to keep coming back. BTC accomplishes this through a combination of branding culture building and strategic planning. This is the unique B C S Formula created by Bator and featured in his latest book. Contact Ken directly at 714-681-2821 or kbator btcinc.net. Ask about BTC s new service the B C S Audit And learn more about BTC s presentation topics at www.btcinc.net. FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M W EB DES IG N IM P LEMENTAT I ON BY MARYABIGAIL DILLS Creating Your Digital Project Plan W You ve got a digital project in mind but no idea where or how to begin. Sound familiar This six-step process will jumpstart matters so you can get your plan off the ground and into motion. One credit union s successful website launch shows you how it s done. hen planning for a large-scale digital project like a new website launch there can be an overwhelming sense of not knowing where to start. During a recent website launch Solarity Credit Union created a detailed project plan and execution structure. We would love to share our experiences with you in hopes that they will inspire you to successfully execute your own digital project plan. 1. Define Your Audience. Defining your audience is the first and most important step in the project planning process. The details you uncover in this step will guide everything else you do moving forward so it s important that you get this right When we were preparing for our website project we took great care to define our audience as thoroughly and accurately as possible. Do some initial research. Look into your current client database and determine your client demographics like age geolocation income level gender education level and any other qualitative and quantitative markers you can dig up. Reach out to your audience. Determine all the avenues you can use to get in touch with your customers and ask them what s most important to them when it comes to a project like yours. When we were preparing for our website project we contacted our customers and utilized focus groups and surveys to learn more about them. U N I O N B U S I N E S S Create user personas. User personas are a time-tested strategy for really getting to know your customers and user segments. A user persona is a representation of the goals behaviors and demographics of a specific group of users as defined by your current and goal customer profiles. As we began defining the goals for our digital project plan we created unique personas to better understand Solarity s distinct target markets. For example you could define one persona as Post-Graduate Young Professionals. These users would be between the ages of 21 and 26 and be college graduates who are in the first five years of their careers. Their priorities may include things like being on a defined budget paying off student loans and saving money to buy their first homes. As a result they are likely very active users who monitor their financial standing on a daily basis and therefore are frequent users of our website. 38 2 0 1 7 C U B U S I N E S S . C O M C R E D I T F E B R U A R Y EW N introduces Self-Service Coin Centers MADE SIMPLE COMPACT and AFFORDABLE Simple One Button Operation Easy to read prompting display and instructional photos 423 4 Compact Less than 2 x 11 AFFORDABLE 7 500 As low as 400 SERIES CHOICE OF OUTPUT 233 4 Model 405 Full sort with exact bag stops for 5 bags 1 5 10 25 50 1 programmable for Federal Reserve half or full bags Model 424 Mixed coin output to 4 bags programmable by weight or piece count Model 401 Mixed coin output to a vault Contact a Magner Consultant Today Phone 800-243-2624 Email solutions magner.com Online www.selfservicecoin.com 2017 Magner Corporation of America. All rights reserved. 171 2 WEB DESIGN IMPLEMENTATION 2. Determine Key Internal Stakeholders. Stakeholders within your own business will determine the success or failure of your digital project plan. These individuals are going to be the ones who lay out the technical requirements and have a strong hand in the planning and execution of your project. Not to mention they ll be critical members of the committee that will evaluate and select your future vendor partners. When we were getting ready to define the team for our digital project plan we looked to our individual stakeholders to really step up and lead the project. 3. Identify Your Shortcomings. Once you have your stakeholder teams in place utilize their expertise to learn where the shortcomings they see internally are coming from and how these deficits can be improved. Determine whose buy-in is required. At this stage it s important to make sure you are choosing stakeholders whose buy-in is required for the success of your digital project plan. In our case it was team members across the leadership level of our organization like the CIO the project director and the VP of marketing. These individuals will absolutely have to give guidance at every step and component of the project as a whole. Define the subject matter experts (SMEs) you ll rely on. Although an SME isn t necessarily someone who will have to give his or her seal of approval to keep the project moving forward his or her value to the stakeholder team cannot be overstated. The SMEs in your organization understand the key processes and executional steps required to get the job done. Not only that but they also understand what it will take to motivate their peers to get on board. Get the opinions of individual contributors. Individual contributors in your organization will eventually be the people who need to execute on the internally required steps. Getting their opinions and feedback on what challenges they currently face and what obstacles they anticipate with the process can bring a fresh perspective to your digital project plan. Conduct internal and external discussions. Focus groups surveys interviews and user experience walkthroughs with both internal and external audiences can be extremely beneficial as you begin to define your priorities. Hearing your customers perspectives in their own voices can give you insights you may never have imagined before. When we were preparing for this digital project plan we conducted a series of focus groups with both internal and external audiences to begin identifying functionality gaps and pain points for our users. Complete a competitive analysis. Look at your competitors products as they align to the digital project plan you re trying to implement. Where do they excel and where do they fall short How can you emulate them and where might you be able to fill an industry gap and begin to really shine During our website digital project plan we conducted a competitive analysis to learn best practices and engagement strategies from leaders in the digital space. What did we learn during the discovery phase During this initial research phase you should be learning a lot about your business. You re beginning to hear directly from your customers potential customers and internal stakeholders about what you re doing right and more importantly what you re doing wrong. This is a huge step Now you can start actioning some of these insights. Let your findings guide you in the direction and shape that your digital project plan will take moving forward. You should have a good idea of what tertiary processes you d like to tackle in addition to the original 40 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M WEB DESIGN IMPLEMENTATION TAB project vision and at this point you should be able to start putting together your built-out project plan. 4. Elect a Vendor. Vendor selection is one of the most grueling and important steps in the entire digital project planning process. Selecting the primary and secondary vendors for the entire process can make or break your project. Create a request for proposal (RFP) and reach out to your potential vendors. Write out a detailed overview of your digital project plan and an extensive RFP. When creating this RFP for our website project we were sure to be clear about our process and end goals as well as our needs and wants for our new website. In return we required proposals to include clear pricing a detailed view of each vendor s corporate culture and how they would execute on our project plan to enhance our digital vision and portfolio. These requests were extended to our primary digital platform and design vendor as well as to our secondary vendors for desired functionality o Online scheduling forms o Live Chat o ATM Locator plugin Give each proposing vendor a score. To select the best vendor fit to help you bring your project vision to life you should create a scoring system to rank each vendor based on the cultural fit and delivery plan they provide. We needed someone to help us bring our new digital experience to fruition so we utilized a scoring system to choose our primary vendor as well as the tertiary vendors. We took into consideration their presentation customization options like a custom content management systems (or CMS) and development team. Ensure that your vendor has process clarity. While a flashy presentation and lofty goals are impressive it s critical to ensure that your vendors have the chops to pull off a project of the magnitude you re implementing. Our vendor in particular expressed to us their extensive project process clearly defined project roles and well built-out timelines which impressed upon us their ability to excel. 5. Ensure Structural Alignments. Alignment between the structures of teams among your primary vendor tertiary vendors and internal teams is critical for seamless execution of your digital project plan. Lay out your internal structure and responsibilities. Defining who your internal teammates are and what they ll be responsible for will give you significantly more clarity when it comes to communicating expectations with your vendors. When we were executing our website digital project plan our internal resources member knowledge product knowledge and security compliance were critical to our success. As an example the following team responsibilities were among those we defined Mortgage Team consulted to verify copy products and processes when it came to the member journey when applying for a home loan. Human Resources Team consulted to determine the content stories images and jobs shared externally on the careers and culture sections of our new website. Marketing Team consulted to ensure the new website followed our brand guidelines color feel voice and vision. Communicate and understand external vendor structure and responsibilities. Communicating what your internal teams are capable of to your vendors and making sure the appropriate resources are in contact internally can help 41 22 00 11 77 C U B U S I N E S S . C O M C R E D I T U N I O N B U S II N E S S B U S N E S S FF EE BB RR UU AA RRYY WEB DESIGN IMPLEMENTATION streamline execution. Our primary vendor had teams in place to collaborate with our internal groups. These dedicated project teams included o Designers o Project Managers o Lead Copywriters o Senior Developers 6. Define Project Plan Phases These elements help form a common visual language between designers and stakeholders and help spearhead conversation around how we wanted to appear to our customers. Rounds of design and information architecture approvals and adjustments Template creation for the site like the homepage careers page mortgage pages etc. including all site content Design & Development This is where the magic happens. The vendor development teams bring the digital vision to life across two content types Back-End Web Development o Functionality of the site code navigation Discovery This phase was all about learning. It animation content management incorporated steps one through three above. We used o Integration of 3rd-party vendors this phase to learn about Ourselves Front-End Web Development Our customers o CSS basic style and structure of Our potential primary and tertiary vendors the site o Flexible content blocks Planning The planning phase included laying out the o Navigation optimization via menu actual plans we would later be executing on. The major blocks phases of the project are outlined below. Within each o Photography imagery and visuals phase we created a work breakdown structure (or WBS) to assign specific tasks for each team department Quality Assurance The quality assurance (QA) phase SME or vendor partner. We planned for follows a specific path Core Project Team SME Feedback Executive Team All Staff members. Information Architecture (IA) o Map content for user personas (as defined Each group took a turn performing QA on the new website prior to launch with a special focus on the in step 1). o Begin planning calls to action that would following areas Information Architecture speak to each persona. Navigation o Utilize architecture recommendations Design from our primary vendor to continue this Links planning. Vendors Style Tiles (design deliverable) Content o Typefaces Copy o Colors Functionality o Any other interface elements that Security communicate the essence of the visual Accessibility brand User Experience Following a digital project plan template when defining your own can make all the difference. Our digital project plan outline sample is shown below 42 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M WEB DESIGN IMPLEMENTATION Cross-Channel Branding Launch It s time to show off all your hard work We decided to roll to 100 percent of users as opposed to choosing a tiered launch experience. There s a lot involved in a tiered launch so consider doing your research if you re thinking about one. The next few weeks and months are used to collect MaryAbigail Dills is VP of Marketing at Solarity data and feedback to ensure our new website is Credit Union. everything the members need and were asking for. We want to ensure that our users have a seamless simple experience. We hope these tips and outlines have provided you with some perspective as you begin to approach your own digital project plan. Each company has its own culture needs strengths and weaknesses meaning each project will be unique. With the proper planning strategy and people involved your digital project will be off to a great start Don t let this valuable offer pass you by. C R E D I T U N I O N Jump on the CU BUSINESS Express to help your credit union GROW for your members employees and 43 community. 1. Each member gets CU Business monthly eMagazines. B U S I N E S S F E B R U A R Y 2 0 1 7 Sign Up Your Entire Crew for Team Builder C U B U S I N E S S . C O M MO RTG A G E L ENDING BY JEFF KLINE MEMBERS Development Company Collaboration in Action Rather than being viewed as the competition fellow credit unions should be thought of as allies. If ever there was a way for CUs to compete with the nation s top banks cooperation is it. Discover what gains are to be had from collaborating with other credit unions. T hose of us who work on behalf of credit unions learned terms like cooperation one member one vote and mutual self-help in the early days of our careers. Starting with no capital people of ordinary means pooled their savings and earned dividends while those who needed to borrow had a ready resource to draw from. Of course the financial industry has become much more complex than it was a century ago both for the for-profit sector and the cooperative community. But the premise behind our cooperative model continues to work today. Sadly our industry doesn t always practice collaboration at the professional level often out of fear of giving away a competitive edge. Yet it s rare for credit unions to truly compete with each other. There s plenty of market share to go around. Even with record shares of more than 1 trillion U.S. credit unions have less than a tenth of the deposits of the nation s top four banks. Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local state regional national and international structures. Sixth Cooperative Principle unions to work for the good of their current and prospective members is an exceptional experience. In the past year MDC has gained 10 new owners with others in the pipeline evidence that collaboration is still a very good idea supported by many credit unions. Members win when credit unions work together and our three newest members clearly agree. Wayne Gross president CEO of Bethpage Federal Credit Union in Bethpage N.Y. says his credit union decided to partner with MDC based on its expertise and personal experience with management. We look forward to working collaboratively with MDC s owner credit unions which have demonstrated 44 2 0 1 7 C U B U S I N E S S . C O M Collaboration Brings Greater Value. At MEMBERS Development Company we help credit unions pool their resources ideas and expertise to offer members not only affordable products and services that enhance their financial well-being but also the convenience of today s technology. For me working in the credit union community has always been gratifying but partnering with some of the nation s largest credit C R E D I T U N I O N B U S I N E S S F E B R U A R Y MORTGAGE LENDING TAB a proven track record of innovation explains Gross . James Nastars president CEO of Meritrust Credit Union in Wichita Kan. says the deciding factor was teaming up with MDC and its owner credit unions on a special project. Very simply it s knowledge he says. We benefit from the combined research and development of nearly 50 progressive credit unions and in turn we are able to deploy our resources to help bring meaningful initiatives to reality. For Denver-based Public Service Credit Union the key attraction was its ability to add value to the industry the credit union and ultimately its members. Partnering with MDC gives us scale not only to help us compete with the deep pockets of large traditional financial services competitors but also with those who are taking aim from outside the industry says Todd Marksberry president CEO of Public Service CU. Member engagement is a top priority. One of MDC s most recent initiatives centers on understanding member engagement. Our research shows that engaged members result in a 23 percent increase in profitability and relationship growth. Conversely disengaged members have a negative effect costing the credit union as much as 13 percent in income and product usage. Among the key factors that help engage members are providing a satisfying experience in all the channels they use and offering personalized service that takes into account their wants and needs. Member experience Like all consumers most members use a variety of access points to do their banking. So whether they visit in person make a 45 C R E D I T U N I O N B U S II N E S S B U S N E S S phone call go to the ATM use their smartphone or sit at a desktop it s vital to ensure they can easily move from one channel to another. At MDC we ve found that engagement drops by 30 percent when any channel a member uses isn t up to par. That means credit unions need to not only pay attention to how a member accesses his her account but also provide a familiar look and feel across all channels. Personalization MDC s research shows that members who feel their credit union knows them are much more likely to feel engaged. And if they re engaged they are less likely to switch to another institution and more likely to talk up the credit union with their friends and family. Yet a 2015 study by IBM and Econsultancy revealed that only 22 percent of consumers say the average retailer understands them as individuals. People also are apt to make purchase decisions in favor of brands that send offers that apply to them but the study reported some 80 percent of respondents say the marketing messages they receive aren t relevant to them. Personas One way MDC and its owner credit unions have been working to overcoming this hurdle is by creating personas for different generations of members. Along with our other research personas help us better appreciate members needs and wants. Using Millennials as an example we know they tend to be the least engaged with their PFIs. Not only are Millennials put off by inferior technology but they also tend to be annoyed by promotional 22 00 11 77 C U B U S I N E S S . C O M FF EE BB RR UU AA RRYY MORTGAGE LENDING offers that don t relate to their interests. And yet Millennials desire personalization more than any other generation At 83.3 million strong this age group has supplanted Baby Boomers as the largest generation. Clearly this is an area where personalization can improve member engagement. As financial cooperatives credit unions historically have had a major advantage over banks. Because their members are also their owners more opportunities exist to build deep relationships. But as new technologies remove some of the natural touches members receive at their credit unions CUs will have to work harder to cultivate member connections especially with younger generations. But all of this takes time and money. By pooling their resources MDC s credit unions are able to imagine what s next in financial services. Our collaborative approach encourages participants to jointly explore possibilities and then research and develop projects that make sense. That s a huge benefit. For most credit unions it would be too costly and time-consuming to do this on their own. But isn t that what collaboration is all about Jeff Kline is chief executive officer of MEMBERS Development Company an R&D CUSO of 40 credit unions and partners. Learn more the power of credit union collaboration at membersdevelopment.com. 46 C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M L ENDING SOLU TIO NS BY A. REX JOHNSON O It s Time To Go All In agree it s the magic bullet solution. Chances are change will--and should--take place however it doesn t always work. Why Often because there was no buy-in from the management team or employees. They were never sold on the idea and didn t believe it would work from the day the changes were announced. 3. Employees who ve attended Lending Solution schools. (This is one area in which I have a lot of experience ) They get really excited about everything they ve learned yet many of them tell me that almost none of it will ever be tried at their credit union. They will never do this or let us do that. We would sure like to do these things but we were told before coming to school that we shouldn t expect management to agree to implement everything. One example that I hear quite a lot has to do with incentives Offering incentives might really improve results but we will never be able to try it out and see if it works. ne of the best things credit unions have going for them is knowing what results they are likely to realize if they continue to do what they have always done. And credit unions get lots of unsolicited advice telling them what they should be doing. I have given them lots of advice over the years too so I should know. Of course there s nothing wrong with asking for advice I ve looked for advice too. I will occasionally take a golf lesson which never seems to help but I continue taking random lessons because I m desperate to improve my game. Maybe someday something will click and my swing will magically improve. The truth is there are credit unions that desperately need help. Nothing they ve tried has worked and they are ready to listen to anyone try anything. They operate from a sense of urgency and feel they must do something--anything--NOW And it seems that everyone is ready to offer advice even when they haven t asked. Who is offering unsolicited advice 1. Examiners give unsolicited advice. There are regulations we must follow of course but most of the advice examiners offer has nothing to do with regulations it s simply one examiner s best suggestion. Should you listen to those suggestions simply to maintain good relationships with the examiner 2. Board Members and other executives who go to conferences. Attendees often come back with solutions that some expert presented at a conference and well if it worked for that other credit union I bet it will work for us too. You know you ve got a real problem if several Board Members hear the same message and they all 48 TURN ON YOUR LENDING DEPARTMENT withTEAMBUILDER. 4 LENDING SOLUTIONS www.cubusiness.com teambuilder buy C R E D I T U N I O N B U S I N E S S F E B R U A R Y 2 0 1 7 C U B U S I N E S S . C O M LENDING SOLUTIONS TAB All In approach Here are the steps you need to take Step 1 Start with the NCUA s financial performance ratios better known as FPRs . You can go back five years and look at each year s trends such as Delinquencies Charge Offs Return on Assets (ROA) Loan Growth Loan Yield Loan Income Other Income Makeup of the loan portfolio broken down into Mortgage loans (low yield) Unsecured loans (high yield) Car loans (low yield to A & A members) Asset Growth Share Growth Membership Growth Earnings after Expenses Average Loan Balance Average Share Balance Note Credit unions that usually have the lowest loan balance and share balance usually make the most money because they are serving the underserved. Once you have looked at these line items ask yourself if your trends are going up or coming down. Step 2 Once you have determined the last five year s trends look at Whether your earnings are going up or down What is happening with loan growth many credit unions are growing loans yet generating less loan income. Look to see if loan yield has dropped dramatically loan yield is far more important than loan growth. So what s the answer I believe it s something called All In which means getting everybody at the Credit Union--Board Members CEO s senior and middle management and all employees--to buy into your ideas support your cause and believe that what they do matters. Those organizations that go All In usually get great results. An example of this is an employee who comes up with a great idea and brings it their boss. The boss listens and before offering any explanation and giving it little thought quickly answers We are not going to do this we have tried it before. That supervisor may not realize how hard the employee worked on putting the plan together or that he didn t deserve having his idea so cursorily denied. Nor did he bother to consider that his thoughtless response meant this was probably the last initiative he would see coming from that employee. Would the idea have worked We don t know but chances are that because it came from an employee and not from management it had a better chance of flying. The employee would have done everything possible to make it work including energizing his coworkers he probably would have gotten their total buy in. Credit unions have to understand that total buy in or as we say All In is one of the keys to successfully managing change. So how does a credit union get started on an 49 C R E D I T U N I O N B U S II N E S S B U S N E S S FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M LENDING SOLUTIONS TAB Examine delinquencies and charge offs Are they going up or down Determine if your CU has been rejecting more loans taking less risk and more focused on getting A and A members very low rate car loans from indirect lenders. Step 3 Examine your current Cost of Funds. Are they less than 0.50 percent or below 0.25 percent Are your members happy With such small returns how much longer do you think they will keep their money at your CU Step 4 Review income gains and where it is coming from Are there big savings in your Provisions for Loan Loss Most credit unions have extremely low delinquencies and charge offs. They were able to increase their earnings by not having to fund charge offs due to low delinquencies. That is not going to happen as we go forward. Are there big savings in your Cost of Funds As members want more that will most likely not continue either. Are you still offering excellent service with reduced staff If you plan on making more loans and open more accounts you are going to have to start hiring more people. Member service in credit unions is not what it should be. Ask yourself how important loan growth and loan yield are to reaching your goals. Can you continue to operate the way you have been Would maintaining the status quo sustain your business I believe that without loan growth of at least 10 percent per year and a loan yield of at least 07.5 percent per year after charge offs you are likely to have problems moving forward. I know that the last eight years have been extremely difficult for credit unions and that they did what they thought they had to do in order to continue serving their members. A lot of past CU problems came from mortgage loans and the huge number of foreclosures 50 C R E D I T U N I O N B U S II N E S S B U S N E S S short sales deeds in lieu etc. The first advice examiners gave CUs was to tighten up rewrite policies lower the amount they loan to members cut expenses freeze salaries etc. Putting money into the insurance fund took away a lot of CU earnings. Many credit unions cut back training. Boards of Directors were told what they could or could not do by examiners. Credit unions had to sign letters of understanding and provide examiners with a lot of new reports. And new rules were coming in faster than ever. Corporate credit unions were being merged into other corporates. We were all concerned and many believed the sky was falling. So what was wrong with this strategy Sam Walton who founded Walmart was fond of saying When everyone is moving in the same direction the real opportunity is moving in exactly the opposite direction. I think it s great advice and Sam Walton was one of the best businessmen that ever lived. Unfortunately most people don t follow his advice. They want examiners to tell them what they need to do turn the faucet down or off. And who paid the price for all this Credit union members--also known as the CU s owners--that s who. Members were being turned down like they had never been turned down before. Everyone who makes loans it seemed had a new box they lived by and unfortunately the new box was a lot smaller than the old box. Members who had always paid their credit union were now being denied. Why FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M LENDING SOLUTIONS TAB 1. Perhaps they had a delinquent loan somewhere not necessarily with the credit union but somewhere. 2. Their debt to income ratio was too high. Credit unions refused to count income that was not verifiable even when they knew it existed. 3. Their Fair Isaac score was too low why They had some small collections such as medical bills student loans etc. They lost their home because they lost their job. It didn t matter that they also paid everybody and were now back to work. They had to go bankrupt because of illness in the family or some other major unexpected expense. There were lots of reasons and I could go on and on however one factor most members had in common was that they continued to pay their credit union. But because of their lower Fair Isaac score they didn t have a chance. Remember they were not behind in payments to their credit union. Members won t forget that the door was closed when they most needed help and will remember being helped when they were most in need. If you turn down someone who never missed a payment they may never forgive you. It s time to go All In and get back to what we do best. The loan interview provides you with a lot of opportunities. Are employees simply collecting data and passing it along to someone else for decisionmaking or are they taking advantage of every business opportunity Employees should be encouraged to conduct a quality interview every time they sit down with a member to discuss any type of loan and any employee who fills out a loan application for a member should have an ownership stake in the decision-making process. You do not want employees taking loan applications without telling you how they recommend proceeding. Focus on the following to get started serving the underserved and increasing your CU s loan growth and loan yield so you can continue offering members low rates and employees competitive salaries 1. Interviewing Skills Teach your employees how to take and analyze loan applications. You will never make as many loans as you should if the employees taking the applications are only asking the questions written down on the form. Of course simply making sure employees fill out every loan applications completely would be a huge improvement and would make the decision maker s job much easier. Make sure you are spending enough time with members who come in to apply for a loan. Everyone is in a hurry and wants to get members in and out as quickly as possible but don t be too quick to say yes or no. The loan process is not a horse race Remember you re dealing with your members and should be coming up with solutions they might not have considered themselves. 2. Questions you should be asking members What motivated them to come in and ask for a loan How they answer is critical and should be the first thing you focus on. Why did they come in today to request a loan Why did they choose your CU How did they pick this loan amount 51 C R E D I T U N I O N B U S II N E S S B U S N E S S FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M LENDING SOLUTIONS TAB Do they like their job Is it likely the job will continue Is the employer laying people off If they have student loans where did they go to college Did they graduate Will they be making more money What is the condition of their car How many miles does it have on it If they are trading in a car they purchased 6 months ago why are they trading it in after just six months Did they put money down when they purchased the car they are now trading in Are they upside down Are they putting any money down on the car they are buying Do they own their home Do they have a mortgage if so did they make a down payment Has their house gone up or down in value Do they have equity in their house Can you pay off their house or car and save them money Where is their checking and savings account if not with you Would they move it over to your CU Are they willing to set up direct deposit and give you all their business What questions not on the application should you be asking i.e. did they recently move 3. Closing Loans Ever since my training days at Household Finance I ve never forgotten that a loan well closed is half collected . Understand that most members will make their payments on time and a small percentage of members who have missed payments with other lenders will also test you. If they ve gotten away with missing a payment before they will likely try it at your CU. However the promise of future credit is very important. If members with delinquent loan payments know up front that they will be able to get future credit if they pay on time they will probably will which means you ll 52 C R E D I T U N I O N B U S II N E S S B U S N E S S be happy and so will they. If you are lucky enough to have had more than one child you quickly learned that they are not the same. And neither are your members. When you close a loan you will have to spend twice as much time on marginal members than members with perfect credit. Care enough to get involved. Do you or does anyone in your credit union ever observe your employees closing loans Are loans for A members closed the same way as loans for E paper members I will close this session by telling you the following We control our destiny. Leave your ego at the door let your numbers speak for themselves. Make a commitment to be the best of the best not just good. Educate everyone--Board Members CEO s and staff--by letting them know that your CU s goal is to go All In . You will love the results. Change is what you must be all about not making changes should scare you most. In our next article we will give you real examples of credit unions that made big changes who went All In and got incredible results. One credit union we work with went from having a negative income of 5 000 000 to a positive income of 7 000 000 simply by retraining staff and learning to take appropriate risk. Their loan to share is now 96 percent delinquency has been reduced by 50 percent and charge offs have been FF EE BB RR UU AA RRYY 22 00 11 77 C U B U S I N E S S . C O M LENDING SOLUTIONS TAB reduced by 75 percent. They ve increased their capital ratio from the 07.7 percent range to the 10 percent range in five years and their assets have grown 35 percent in three years. Their 2013 ROA exceeded two percent after all expenses. Perhaps what is most interesting is that the CU serves members who live in an area with high unemployment and a higher than average foreclosure rate yet it managed to overcome every obstacle. Even better they helped create a lot of jobs and pay for 75 percent of their employee s undergraduate and graduate degrees. They have virtually no staff turnover and serve the underserved well. Tune in to our next article where we will give you the formula they used to turn their business around a formula you can easily duplicate. CU BUSINESS magazine prides itself on being the best of the best and wants to provide you with ideas that work and that you can easily adopt. Remember Every day is a good day to make loans let your members know. Be aggressive. Approve 90 percent or more of your loan requests let us show you how. A. Rex Johnson is the Founder Owner of Lending Solutions Consulting Inc. (LSCI) Don t let this valuable offer pass you by. C R E D I T 53 Jump on the CU BUSINESS Express to help your credit U N Iunion U S II N E S S O N B GROW S B U S N E S for yourF EE BB RR UU AA RRYY 22 00 11 77 F members employees C U B U S I N E S S . C O M and community. Sign Up Your Entire Crew for Team Builder PSCU brings together credit union members and credit unions themselves. Greg Barnes Sr. VP Marketing One Nevada CU He says She says PSCU was built to serve members the same way we were. Karen Rosales CEO Arlington Community FCU Let s talk about the value of being a PSCU Member-Owner. Since 1977 PSCU has been owned by credit unions and is for credit unions. Today over 800 credit unions claim ownership of PSCU and benefit from payment products and services that enable them to compete with much larger payments issuers. By serving as an extension of credit unions PSCU remains the catalyst to conversations that matter. See what else our Member-Owners are saying at pscu.com cuso. pscu.com cuso 844.367.7728 Editorial Calendar 2017 Editorial Closing Dates 30 Days Prior To Publishing Money January February March April May June July August September October November December Payments Credit Debit Cards Car Wars Auto Lending Mortgage Lending Mobile Banking Security Branch Business CUSOs Executive Hiring & Compensation Auto Lending & Lleasing 2 Mortgage Lending 2 Payments 2 Business Lending THE ONLY A LL-D I G I TA L A LL-B U S I NE SS RE SOURCE F OR CRE DIT UNIONS