Why, how and where credit unions are widening their executive searches
As the financial services landscape expands its range of products and services, delivery channels, technological reliance, and new entrants and competitors, some credit unions are responding by widening their executive recruitment outside the movement.
For example, $2.2 billion/190,000-member Chartway Federal Credit Union, Virginia Beach, Virginia, has established as part of its value proposition a willingness to attract employees from different industries, says CHRO Kim A. Ross, a CUES member who worked for CarMax and Hilton before moving to the CU in October 2018. Of the six members on Chartway FCU’s executive team, four have experience from outside CUs.
“In the current economic environment, with a 50-year low unemployment rate, the credit union world is pretty small,” Ross says. “As each credit union grows, you need new talent and innovation. To survive, you have to continue to bring in new ideas.
“Attracting people from outside the credit union world brings different perspectives,” she adds. “Credit unions have to have the ability to attract people who bring in new ideas and to take advantage of the value of diversity. How can you think differently so you can differentiate?”
For much of the past century, financial services have evolved slowly, which has fostered hubris and complacency, contends John Oliver, president of Laurel Management Systems, Palm Springs, California, and lead faculty at the CUES School of Applied Strategic Management. He will also be the lead presenter for Director Development Seminar in September. But in recent years, the breakneck pace of change has brought to the industry both upheaval and fierce competition and an opportunity to appeal to current and future executives inside and outside the credit union sector eager to execute breakthrough strategies.“The old business model no longer works,” Oliver says. “We are losing our share of the pie at an alarming rate, and we have all these challenges before us: a robotic revolution, digitalization and data analytics. It’s all absolutely fascinating, and we need to market some of that excitement to leaders who are ready to spearhead strategic change.”
Talent War Advantages and Challenges
Every business these days is competing for executive talent in an employment market so fiercely competitive that recruitment is described in military terms. Credit unions may have a secret weapon in the war for talent, but they also face some uphill battles.
Especially for younger executives, credit unions have a compelling message, Oliver suggests. “The social responsibility and cooperative nature of credit unions is not well known, particularly among the consuming public and potential executives. We read all the time that younger generations are drawn to organizations that ascribe to social responsibility. Credit unions should be promoting that far more than they currently do.”
Credit unions looking to widen their leadership talent search may need to market themselves to executives in other industries, agrees Peter Myers, SVP of CUESolutions provider DDJ Myers Ltd., Phoenix. Many consumers and executives still don’t understand what credit unions are and what they have to offer. The credit union philosophy is tailor-made for cost-conscious younger consumers who favor companies committed to social good.
“Credit unions can position themselves with the message of opportunities for young managers and executives to grow their skills, do good and earn a decent wage,” Myers suggests. “And they should be looking to what other companies are doing. Amazon is hiring MBAs before they start grad school.”
If they want to position themselves as desirable employers in the wider market for leadership talent, credit unions may need to counter the perception that they are less advanced than other financial services providers. From Oliver’s view working with both community banks and credit unions, there is no difference in the level of sophistication between the two in terms of management, board governance and business model, but that mistaken belief may persist among managers and executives unfamiliar with credit unions.
Taking a wider view, Oliver suggests that credit unions may need to rethink their brand and positioning at an industry level. “We’ve been talking about the ‘credit union difference’ for years and years. We’ve been talking about ourselves as a movement, not an industry. We’ve been talking about people serving people,” he says. “But none of those things have sufficiently registered with potential new members or in the recruitment of executives. I think the word cooperative would resonate more than the name credit union. Generationally, people seem to understand cooperatives more so than credit unions.”Another perception to unpack when seeking to recruit from banks and other industries—Oliver thinks credit unions should look especially to the latter—is that “the whole financial services sector has come across as a bit dull, unfortunately,” he cautions. “In reality, the times that we’re facing right now are vastly more challenging, but they’re also vastly more interesting.”
Seeking a Good Fit
It’s not unusual for boards launching a CEO search to express an interest in finding candidates from banks and other business sectors, Myers says. “But we have yet to see, in the searches we’ve helped conduct, a non-credit union executive make it far into the process. We’ve found leaders from other industries who check all the boxes, but boards tend to default to candidates with credit union experience and an understanding of the business model.”
Myers recommends that boards take some time before beginning CEO recruitment to prioritize the technical and leadership skills they’re seeking. Every organization wants a good leader, he notes, but upfront discussions will ensure that all directors go into the search with a shared understanding of the financial engine that powers their credit union as a foundation for evaluating whether an executive from outside the movement would be a good fit.
Credit unions have been more open to widening their executive and management talent search for positions other than the top leadership role, especially in HR, retail delivery and facilities management—operational purviews that are not unique to credit unions, he adds.
Several executive and management positions, such as those in finance and HR, rely on skills and experience that are readily transferable across financial services and other industries, agrees CUES member John Melcher, chief people officer of $758 million/70,000-member First Commonwealth Federal Credit Union, Lehigh Valley, Pennsylvania.
For credit unions widening their leadership talent search to other industries, key attributes to seek out include a strong emotional quotient, business and financial acumen and agility, and a passion to learn, says Melcher, who made the move to First Commonwealth FCU from a community bank. Executives with those skill sets and outlooks should be able to add true value to their new organizations even in the early stages of their tenure.
The ability to contribute positively to the credit union’s culture should be at the top of must-have attributes, says CUES member Dan McCarthy, CHRO of $483 million/70,000-member Del-One Federal Credit Union, Dover, Delaware.
“I think every industry can sometimes get too caught up in industry experience when they hire to fill positions. It’s not like you’re born with credit union experience,” says McCarthy, who joined Del-One FCU in April 2019 from his previous post as COO of a regional real estate development and construction company. “I am the firmest of believers that you hire first for cultural fit, second for talent, and then third for industry and technical skills. Talented people who are a cultural fit can be top-level contributors in any organization.”
Ross says some of the key competencies to seek in outside candidates include a wider breadth of expertise across their discipline, a proven ability to collaborate, a data-driven mindset and “a true passion for the mission—to be able to buy in and lead with the credit union’s mission at the core of every decision.”
When widening their leadership searches, credit unions should reshuffle the attributes and expertise at the top of the list in executive position descriptions, Oliver suggests. Innovation, creativity and experience overseeing new technology are especially prized today—and in good supply across business sectors. An outsider view of the challenges and opportunities before credit unions might also help to expand the industry’s purposeful fostering of a reputation as conservative and stable by adding transformation to its toolbox.
“I don’t think the benefits of our future will accrue to people who think it will look like our past. We need to hire people who are equipped to look at change management as a key competency,” he says.
Recruiting executives from other industries can supply fresh perspectives to help credit unions, many of which have relied on uniform business and cultural practices, to break out of that mold and pursue novel strategies. As just one example, executives who are new to financial services may ask, “Is this the kind of culture that will resonate with the workforce of tomorrow?”
Traditional management styles tend to gravitate to either militaristic bureaucracy, which sends the message, “Do as I say because I’m in charge,” or paternalistic bureaucracy, which conveys “Do as I say because we’re a family and you’ll be looked after.”
“The bottom line of both styles is ‘Do as I say,’ and I do not believe today’s workforce responds to that message as a management style,” Oliver says. “Recruiting from other industries can help to infuse the leadership team with executives who practice a more inclusive management approach.”
Be Open to New Ideas
When credit unions welcome industry newcomers to their management ranks, they should be prepared to consider their ideas for adapting business practices and operating procedures, Myers says. For example, one source of tension in boardrooms and C-suites today arises in discussions about pricing philosophy: Are credit unions committed to offering the best possible rates to members, or are they leaving money on the table that could benefit the broader membership and build the necessary infrastructure to deliver on members’ expectations and to compete effectively?
“Those two perspectives aren’t mutually exclusive. You can make a business case for raising prices and still do right by every single member,” Myers says. “Executives coming in from other industries with differing perspectives and backgrounds feel that tension.”
“Maybe the first crack at new ideas from these executives isn’t something that the credit union is ready to implement, but you’d be amazed at the conversations that grow out of those ideas. They may lead to tweaks or to categorical change,” he adds.
Executives who come to credit unions from other business sectors have a lot to learn, from the intricacies of a heavy regulatory burden to the nuances of the cooperative model that drive decision-making. They also have a big challenge in front of them, Oliver says.Leading culture change is among the most difficult of responsibilities to hand over to new executives, he cautions.
To that end, new managers and executives should have the opportunity to focus on learning the big-picture strategic issues facing their organizations rather than emphasize day-to-day operations. “They’re going to be surrounded by people who are good at the day-to-day stuff. We need visionary leaders in this sector who are much, much better at the big stuff,” he contends.
From Oliver’s perspective, credit unions are hiring more outside leadership talent, but “not to anywhere near the extent I would like to see.” There are both practical and philosophical reasons for an increasing willingness to widen recruitment. On the former front, a significant driver is a growing wave of CEOs and other executives nearing retirement. More senior leaders will retire over the next decade than in any decade that has come before in the credit union sector, he cautions.
“That raises the question, What have we done to prepare the next tiers of leadership to take the over the reins at a time when our industry is faced with more challenges than ever before?” he notes. “I would argue: Not enough.”
Beyond the compelling requirement to expand recruitment to fulfill demand, Oliver cites the need “for bigger and different thinking.” One of his client credit unions recently hired a business intelligence/data analytics executive from a major grocery chain, which he views as a great addition to the leadership team, given the expertise built up in this industry for analyzing which brands sell and how to position products and offer incentives to enhance sales.
That example illustrates why credit unions might want to look outside financial services when recruiting executives, he adds. “Financial institutions have tended to hire the same types of people, and now we need a different type of thinking.”
Oliver was approached by a credit union executive at a recent conference where he sounded a similar warning. The executive told him, “You’re not really telling us anything new.” Oliver agreed wholeheartedly and added, “The question is, when are we going to do something about it? We’ve been very reactive over the past quarter-century. It’s time to recognize and address the most pressing issues facing our industry.”
As just one example of those issues, Oliver notes that in 1970, traditional financial institutions extended 60% of all credit in the United States. Banks, credit unions, and savings and loan associations “were the financial engine that ran the economy,” he notes.
“Today, that rate is less than 20%,” Oliver adds, citing a statistic from the Office of the Comptroller of Currency. “It’s scary. When do we wake up and recognize that our role in society is changing? We need to start proactively trying to control our destiny rather than letting it happen to us”—and leaders with a new perspective might provide the spark to move in a new direction. cues icon
Karen Bankston is a long-time contributor to Credit Union Management and writes about membership growth, operations, technology and governance. She is the proprietor of Precision Prose, Eugene, Oregon.