How credit unions can apply the same agility of their pandemic response to ongoing execution
When credit union leaders could finally take a step back and consider all the changes made in short order to serve members and protect staff amid the COVID-19 pandemic, they may have surprised even themselves with the agility and flexibility demonstrated in that response.
The challenge moving forward is how to apply the same adaptability to confront competition and disruption in the financial services sector and to seize new opportunities. Given the tendency among some credit union leaders “to hang their hats on stability and conservatism,” the nimble response to the pandemic across the industry could be a dramatic watershed moment that facilitates more acceptance of the ongoing need for organizational agility, says John Oliver, principal with CUplanner, Palm Springs, California, and lead faculty of CUES School of Applied Strategic Management™.
“Strategic agility is what markets are demanding. The notion that we might have to reinvent ourselves is tough to deal with, but the pandemic has pointed [out] that need even more,” Oliver says. “I hope the mentality has shifted with the realization that we can innovate and serve people in different ways, especially with the speed of evolution in shifting consumer behaviors likely to be a permanent trend.”
Look Beyond the Knowns
In acknowledging the need for change, credit unions will have to accept greater degrees of risk, Oliver notes. “Any change involves risk. Strategic change involves risk. There has got to be an acceptance of that risk, and step one in building that acceptance is an understanding that there is even more risk in not changing. There is no such thing as the status quo if the world is changing around you.”
Oliver advocates for the use of discovery-driven planning, a phased process that taps into institutional knowledge and business intelligence to begin to steer strategy. Even with all the daunting unknowns in the current environment, “there are lots of things we still do know, so we can ground these discussions in the comfort that we all get from those obvious facts,” such as data on the markets the credit union serves and its internal structure and technology capabilities, he says.
Building on that foundation, leaders move on to what they can comfortably assume about the future based on industry data, technology trends, competitive trends and the likelihood that COVID-19 will at some point be controlled.
The next step is to consider “a limited set of likely and less likely alternatives to get a bit more of a strategic spectrum of what could these be,” he explains. An example is the question of whether members who’ve embraced digital channels during the pandemic will ever return to branches.
Then leaders think about the outer limits of those future
possibilities, both the most positive potential outcome and the worst-case scenario. Finally, they turn to “what is completely unknowable,” a discussion that can be deeply uncomfortable, Oliver acknowledges. But it can be reassuring that “unknowables do tend to migrate toward the knowable as crises become resolved.”
In short, “you can control the knowable, you can prepare for the likely, you can be aware of the unlikely, and you can acknowledge the unknowable”—all in a reasoned discussion, he concludes.
Foster Digital Passion
On the member service front, management teams must find a faster approach to identifying needs, finding solutions and laying out those solutions, suggests Tim Harrington, president of TEAM Resources, Tucson, Arizona, who offers four strategies toward that end:
Better facilitate the upward flow of information and ideas from frontline staff and other younger employees who tend to embrace the latest technology.
Restructure C-suite positions—and perhaps the people in those positions—with a greater emphasis on advancing technology delivery. “Consider, ‘Do we have people in the top five or seven positions who are digitally passionate?’” he suggests. “If not, restructure to get people up there who have that digital passion, because change doesn’t take place if you’re lukewarm about it.”
Quicken the pace of gathering input on what products, services and delivery channels members want and need. Surveys may be one source, but interviews and group sessions—these days via remote meetings—typically offer more detailed perspectives
on which financial services members and prospective members are using and what they find appealing about other service providers.
Roll out products and services more quickly and modify them based on member feedback. “You can’t take forever to put a product out. You have to get it out probably sooner than you would like to, but once you get it out, it doesn’t mean it’s done,” Harrington says. “Whether it’s an automated lending product, a debit card or a mobile app, you have to continually fine-tune it based on the data about how members are using it.”
The shift toward increasing technological reliance is changing the skill sets managers and executives wield on a regular basis. For example, for chief lending officers, “underwriting skills won’t be as important as their ability to automate as much as possible operationally and to analyze the use of that automation,” Harrington says.
Although some organizations continue to rely on reviewing loan applications manually with the rationale that analyzing each member’s situation is a valued service, Harrington cautions that this approach may just seem slow to members.
“You have to be nimble in setting up the underwriting parameters as quickly as possible and then in continually analyzing the results. Is it too conservative? Is it too aggressive?” he says. “Market conditions keep changing, so you have to keep looking at it to see if it’s still working.
“Keep in mind, however, that consumers don’t want technology. What they want is to get whatever they are looking for faster, easier and maybe cheaper,” he adds. “It’s about convenience and speed, and technology is usually the answer for that.”
Maintain Forward Momentum
Since $5.7 billion Redwood Credit Union, Santa Rosa, California, began implementing its pandemic response, President/CEO Brett Martinez has been compiling a list of changes his staff put in place with surprising speed that will become permanent fixtures in its operations:
Improved distributed call center system. In previous disasters like major wildfires and extended power outages, the credit union had relied on backup call center support. But that service was overwhelmed by demand this spring, so Redwood CU figured out the technology to reroute calls to branches so successfully that the credit union reduced average wait times to its lowest ever.
“Going forward, we’ll still have a backup call center, but we’re also going to continue to use the resources we’ve developed to make sure that when somebody calls us during peak times, we’re answering the phone,” Martinez says. “The technology we implemented was basically in place, but we were able to move on a dime and take it to the next level.”
Video annual meetings and staff interactions. Redwood CU set up a proxy system for its annual meeting this spring, but in 2021 and beyond, it will invite members to an annual video conference, “which really opens up the annual meeting to all of our membership, not just the ones who are close to our main office and show up every year,” Martinez notes.
Shifting annual meetings to a virtual setting is one of those changes that might have been more difficult without a pandemic, he adds. If Redwood CU had just stopped holding live meetings, there might have been pushback from the 100 or so members who typically attend, but in the current environment, the move is viewed as a positive change that can be permanently implemented.
The sudden shift to remote operations has also helped employees improve their video chat skills, which had previously been a longer-term strategic goal as the credit union was building a second back-office location.
“We wanted our employees to get really good at video instead of driving from this office to that office for meetings, but we thought it was going to take a while for everyone to make that transition,” Martinez says. “We’ve been telling our staff, ‘You’ve got to turn on your camera, because there’s more connection and engagement than when you just talk by phone.’”
The CEO regularly uses video meetings himself, including a monthly advisory session with dozens of non-management staff representing employees from 24 locations, including 19 branches, four back-office centers and an auto dealership. “Face-to-face is nice, but video is faster and more efficient. And we can still see each other’s faces so we can engage. So even when we go back to the office, we’re not going to fill up meeting rooms regularly.”
Printed documents. Like many other businesses, Redwood CU maintained a big network of printers across its locations. “We’ve been trying to move away from them and go all digital, but everybody was holding onto the printers,” he notes. “Now everybody’s working from home with zero printers and zero issues. So, as people come back to the office, if the attitude is ‘Let’s start printing stuff again,’ nope, we’re not going backwards.”
Apply Members’ POV to Problem-Solving
Many credit unions applied aspects of agile methodology in developing their pandemic response, notes Anne Legg of Thrive Strategic Services, San Diego. They assigned teams to create “user stories” to define problems, and those teams worked in short development cycles to craft solutions honed in iterative fashion based on user and member feedback.
The same approach can be used in longer-term strategic planning and execution, Legg says. A key agile tenet is to stay centered on users’ needs—to identify the problems members are trying to solve from the members’ perspective rather than in terms of credit union products. That typically comes down to four problems members look to their credit unions for help in solving, she suggests:
- “I have a shelter problem,” not “I’m thinking about a mortgage.”
- “I have a transportation problem,” not “I need an auto loan.”
- “I have a travel problem,” not “I want to apply for a credit card.”
- “I have a rainy day and/or retirement problem,” not “I’m looking for information about your short- and long-term deposit products.”
Shifting perspectives might steer a credit union looking to solve members’ transportation problems to bring together several departments to figure out how the auto loan process works and doesn’t work: the tech team to identify pain points in online and mobile applications, marketing to look at how offers are made to members, and lending to tackle rates and terms.
“Put your member hat on and figure out, ‘Where are the friction points?’” Legg advises. That investigation might turn up gaps in how members shopping online or at car lots connect with their credit union. A common disconnect is mailing preapproval certificates to members who’d prefer to apply online for an auto loan.
Once those friction points are identified, the team should prioritize problems it can fix quickly over those that require a longer runway. In the preapproval certificate example, the solution might involve sending the offer via email with an interactive link and making sure call center and branch staff are trained to respond when members accept the offer.
“There are going to be a lot of small yes/no projects that you start working right away,” Legg notes. “You set up very tight deadlines. What can you do in two weeks? What can you do in one week? You’re not waiting for 30 days, 60 days or half a year. You start solving all of these problems quickly, and you start making and accomplishing goals, which allows you to move faster strategically.”
The most common obstacle in applying a more agile approach to strategic execution might be getting managers and staff used to change.
“You’re asking for your leadership team and everybody else to be nimble, and that’s not something that credit unions are usually known for,” Legg says. “Plus, if you’ve always done it one way, you know how that works. It feels a bit awkward to have to say, ‘What if we thought this was the solution and it didn’t go anywhere near the way we expected?’ That’s OK. That is part of changing culture and becoming more flexible, adaptable and able to pivot.”
Stress-Test Leadership Capabilities
There has been no one-size-fits-all path through the pandemic. While many credit unions shifted member service exclusively to online channels and drive-thru access at branches, that wasn’t an option for $1.2 billion Michigan First Credit Union, Lathrup Village.
“We have a lot of lobby traffic, and we don’t have that many drive-thrus because the vast majority of our branches are in supermarkets,” says President/CEO Michael Poulos. “We did set up an appointment process to try to regulate the flow of branch traffic. But one decision we made early on was that we would not do anything that would send an overt or covert message to our members that their money is not available to them around the clock.”
Michigan First CU had worked through pandemic response planning in the past as part of disaster preparedness, but no tabletop exercise could anticipate the fear and emotion evoked by the COVID-19 outbreak, Poulos notes. Some employees were deeply concerned about their health and safety and that of their colleagues, which prompted a recognition of the need to over-communicate about the credit union’s response.
Having made the commitment to keep branches open to members, managers set about procuring the personal protective equipment employees would need to provide in-person service and dealing individually with special circumstances facing staff. Some needed to stay at home with their school-age children and were able to obtain financial assistance through the CARES Act to replace their paychecks. A few quit their jobs rather than work directly with the public.
“I will say that the vast majority of our team members came to work every day. They adjusted with the [protective equipment] we made available to them. It was a case of adjusting and adjusting and then adjusting some more,” Poulos says.
Michigan First CU’s leadership team met daily in a face-to-face meeting to talk through any unexpected issues, and Poulos provided regular updates to the board so directors understood the credit union’s response—while maintaining their commitment to governance without taking on operational issues. The board met via WebEx in April and May but went back to an in-person meeting in June, with about a third of directors joining remotely.
“What we did find is that when we do WebEx-type meetings, the interaction isn’t as good or as smooth as when we’re in the same room,” he notes. “We got through those meetings, but I think the desire has always been to go back to face-to-face.”
For all the disruption the pandemic has caused, it did afford credit unions the opportunity for some “real, live stress testing”—not of the balance sheet, but of leaders’ ability to respond in a crisis, Poulos says.
“We discovered that we have a lot of strength that we might not have recognized. We saw our management teams perform well over a couple of months, day in and day out. It was actually quite impressive,” he adds. “It’s reassuring as a CEO to know that we’ve got that kind of depth and strength in the leadership team. If they can handle something like this, there’s pretty much nothing they can’t handle.”
Adopt a Cyclical Approach
Like everyone else, credit union leaders would love to get back to business as usual, but they need to resist assumptions that their pre-COVID strategic plan is still a good blueprint for the future, says Michael Daigneault, CCD, CEO of CUES strategic partner Quantum Governance, Herndon, Virginia.
“I hope they will be as strategically nimble as they have shown they can be operationally nimble,” Daigneault says. “For many credit unions, it’s not just about analyzing whether they need to change their strategic plan but whether they need to change their process of strategic planning and thinking.”
Credit unions still adhering to a more traditional strategic planning calendar of developing three- to five-year plans with annual check-ins should consider a more cyclical approach, he recommends. Cyclical planning incorporates strategic planning and thinking into management responsibilities and the board’s governing duties, so that leaders are holding ongoing strategic discussions.
That doesn’t mean a credit union changes its strategic plan at every board meeting or even every year, Daigneault notes, but that the board and management are open to adjusting the strategic plan as necessary when crises like a pandemic arise or in response to shifts in the economy, competitive environment or society.
Scenario planning can be a helpful tool as part of cyclical planning, he suggests. In the current crisis, for example, leaders can consider responses to several possible futures: What if the economy bounces back fairly quickly? What if the recession takes on a more U-shaped elongated pattern? What if we end up in a depression? How will the credit union’s strategic plan shift in each of those scenarios?
This more flexible approach reflects the difference between strategic planning and strategic thinking. Strategic planning is about analyzing how to break down organizational goals into a set of steps and metrics. It is possible to get overly immersed in that analytical process, which might account, at least in part, for the credit union movement’s risk-averse, conservative nature, he suggests.
“Strategic thinking is more about synthesizing. It involves intuition and creativity. It’s about creating some sort of vision or direction and then moving in that direction,” Daigneault says. “Both are important functions for credit unions, but the format in which they do them has been changing. If anything, the COVID crisis has caused more and more credit unions to realize that they can make changes much more quickly than they’d expected.
“When is it appropriate to do strategic thinking, strategic planning and perhaps changes to strategic plan? The answer is: All year long. It can happen at any time,” he adds. “The environment doesn’t care about the timing of the traditional strategic plan cycle. The environment changes when the environment changes.” 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.