It's Time to Shape Up

In tough times, real change is necessary.

August 1, 2010

Most people are active, strong, and spry for the first part of their adult lives. They have lots of energy for work and play. They see a better future ahead of them and work hard to “get ahead.” As they age, they tend to slow down. They’re more comfortable with their lot in life and don’t worry so much about improving it. 

At some point, however, most people realize their lack of effort is hurting themselves and they usually commit to doing better and working harder. They realize diligence is necessary to bounce back when they relapse—to prevent ending up where they started.

Subscribe to Credit Union MagazineFact is, those people who do make permanent lifestyle changes to be healthier and happier people, fare much better dealing with Father Time than those who do not.

Credit unions and the executives who run them go through a similar process of evolution. They start off with great enthusiasm, purpose, and vigor. It’s understood that success isn’t a sure thing and that hard work, commitment, attention to costs, and sound decisions are critical to survival and success.

As they grow and become more successful, the enthusiasm becomes more “ho hum” and the commitment to efficiency and hard-nosed decision making wanes. Comfort with the status quo sets in. The credit union gets “fat” in terms of process, costs, and good, strong day-to-day management.

Then things start to go wrong. The economy turns sour and many members lose their jobs. Members don’t borrow, investments go bad, returns go down, and loan losses mount.

The value of collateral decreases, making good loans bad. The costs of regulation go up—way up. Return on assets goes way down, and reserves do, too. Now it’s time to shape up!

But the credit union doesn’t know how to change quickly. It needs new members, new services, and more income. It needs to cut costs and increase productivity. 

Change is tough, and what you have to do to make real change is even tougher. Here are some considerations:

• Look at overhead and back-office costs—all those things you have to do but that don’t create revenue or help you directly serve members. Cut them drastically. Outsource, collaborate, automate—whatever it takes. There are credit union service organizations (CUSO) and cooperative centers for many of these.

• Bring in new members from demographics that will use services that generate revenue, such as fee income and short-term loans. 

• Cut personnel costs and increase productivity. Increase accountability and standards for performance. Demand high performance and commitment to a high standard of service. Expect supervisors to provide regular feedback to staff on their performance and to provide careful documentation. Replace
low performers with people who want to excel. There are lots of good employees looking for work right now.

• Examine facilities costs and all the “stuff” you buy to run your credit union. Chances are, you buy from the same suppliers all the time. Get bids on supplies, equipment, and other purchases. You will save money. Suppliers need your business and will sell for less.

• Look at marketing expenses. You need to market, but be sure you get good value for your money. E-marketing, for example, costs a lot less than print or media.

• DO NOT try to save money by cutting back on compliance or com­pliance training. Be sure, however, that you get good value for the dollars you spend. 

Don’t try to do it all yourself. There are resources out there to help you. Remember, it’s often hard for those who’ve built something to effectively change it. You might need to get someone you trust from the outside to help you.

JOHN FRANKLIN is executive vice president and chief operating officer for the Credit Union National Association in Madison, Wis. Contact him at 608-231-4266.