134 James Hunter CUES Emerge DEI Lending July 2022 By James Hunter Lisa Hochgraf 00:04 You're listening to the CUES Podcast, episode 134. Lisa Hochgraf 00:09 Thank you CUES podcast listeners for tuning in. As you know, on this podcast you can hear from a wide range of cross-industry experts discussing trends and topics relevant to you. Lisa Hochgraf 00:20 My name is Lisa Hochgraf, and I'm CUES' senior editor, as well as your host for this episode. Lisa Hochgraf 00:26 I think you're going to enjoy hearing from today's guest just as much as I enjoyed talking with him. Here at CUES, we first got to know James Hunter well when he was a finalist and then runner-up in the CUES Emerge program in 2020. His project focused on how credit unions can help members avoid predatory lending. Lisa Hochgraf 00:44 James earned his CCM, the Certified Credit Union manager designation, upon completion of the education component of the CUES Emerge program in 2021, and again this year, James has been a CUES Emerge mastermind, helping to guide CUES Emerge participants through the program during both years. Lisa Hochgraf 01:03 James is also the chief diversity officer of $243 million New Orleans Fireman's Federal Credit Union. He comes to that role having served previously as a credit union chief lending officer, and a senior vice president of mortgage lending, as well as a board member for Inclusiv. Lisa Hochgraf 01:21 In the show, James not only talks about how the CUES Emerge program helped to propel his career, but also about how his previous experiences helped direct his current work. I think you'll find insights you can apply at your own credit union. Lisa Hochgraf 01:35 So let's get started. Lisa Hochgraf 01:38 Welcome to the show, James. James Hunter 01:40 Well, thank you for having me, Lisa. How are you? Lisa Hochgraf 01:42 I'm doing so well today. I'm so glad to have you on the show. Before we get to talking about your experience with CUES Emerge, with DEI, with lending, I'd like to help our listeners get to know you a little bit. I was wondering if you might have a professional quote or a mantra that you live by that you became to share? James Hunter 02:00 Absolutely. I think that there's one that resonates in my mind very well. It comes from James Baldwin. He states that anyone who's ever struggled with poverty knows how extremely expensive it is to be poor. James Hunter 02:12 Wow,that's powerful. Tell me a little bit about how that applies to how you live and how you work? James Hunter 02:18 Well, in my daily duties, I use that as my guiding principle, to realize that bad things happen to good people. And it's my job to realize that once those things happen, some people lose their way. And I want them to understand that there is an opportunity for them to get back on course, and get back into the right behaviors and values that have given them that will give them a chance to live their best financial future, and also be a part of the American dream. Lisa Hochgraf 02:43 Very inspiring. And it aligns well with credit union philosophy in my mind too. James Hunter 02:47 Indeed. Lisa Hochgraf 02:49 So let's start off now by talking about your pathway through the CUES Emerge program. As I understand it, you were first a program participant, and then you've also been a mastermind. Would you walk us through what you did first with your own project? And then with helping other participants? James Hunter 03:05 Yes, absolutely. This is actually my second year serving as a mastermind. And I'm gonna say this in advance. My experience has been nothing short of amazing. I've built many relationships. Every time I go somewhere, people say, "You're the guy from CUES." And I also have become a thought leader on serving underserved and persistent poverty. So all of that is a direct reflection of what CUES has done for me, giving me that platform. James Hunter 03:32 My personal narrative that I gave to the CUES competition was how to credibly overcome predatory lending. And I use the cooperative approach of credit unions to uniquely come up with ways to help people bridge that divide by education, and pairing it with the right products and coaching, you're able to help people get back into a positive reality of people feeling good about their finances, and start living the best financial future. That was the platform I used for competition. And I still use that right now because it has shown and proven to be a very good method to help people get from where they are to where they want to be. Lisa Hochgraf 04:13 That's a great mission, James and listeners, I'm going to put a link in the show notes to James's presentation for CUES Emerge so you can listen to his story and check out all the details of his project. 04:26 The second part of that, as you mentioned, you know, what is it what have I done for other people as a mastermind? I've taken that position where I help people step outside their comfort zone. Many people involved in the competition are very nervous about this. This is the first time being in some kind of a competition. And I want them to realize that there is no competition. It's all about inspiring them to help them understand what they can bring to the table that may be the true answer for what kind of problem that impels all of us. I also also try to help them understand how important it is to network and make memories because when you fast-forward and look back at it, the people you've met, the relationships that you build is invaluable. I'll tell you about a story real quickly. Lisa Hochgraf 05:10 I would love it. James Hunter 05:11 As soon as I finished the competition and realized that I was the runner-up, of course, I was not the happiest camper. But at the same time, as I told you, it wasn't a competition between me and someone else. It was between me and me, me and my shadow. James Hunter 05:23 A week later, I get a phone call. And our credit union received for the first time CDFI money, community development, financial institutions get money for being CDFIs, for doing a mission, and serving the underserved. And we received a grant for over $657,000 based on the work that was done off of the information I provided for my project. And that right there, that catapulted me from being a person that was in in the role to the person who was on top of the world because we won. Our members one. Lisa Hochgraf 05:59 That's great perspective, James, I really appreciate that. It sounds like you've taken away a lot from your participation in the CUES Emerge program. James Hunter 06:08 Absolutely. Lisa Hochgraf 06:09 So let's move on a little bit to talk about what you're doing now as the chief diversity officer for New Orleans Fireman's Federal Credit Union. How did you come to be in this role? What were your stepping stones along the way? 06:22 Well, along the way, I would call it life. Throughout my entire life, I've been always one that is, looked to see it in a room, who's the oddball out, who's the person who is not being recognized, who the person that needs to be included in the conversation, which goes into my career of working in banking, trying to always give people the consideration they need and making them feel important from that to join a credit union where I was working heavily in mortgages, working with people trying to get them to be first time homebuyers. Working in the deep south with Hope Federal Credit Union, where we were able to do over $60 million of lending in two years, to 90% first-time homebuyers. James Hunter 07:06 Hleping people build equity by realizing that the best way they can do that is by being a homeowner and having integrity and pride in what they do. Those are things that helped me get to this point where I realized that this is what I've been doing all along I became the chief lending officer for a credit union and I was able to help implement strategies, policies, and help get people to realize how we can start walking the walk instead of just talking, which goes back into where I'm at where I'm at right now, with Fireman's Federal Credit Union. This is an opportunity where I get to build a platform with all these different things that I've learned. And I call them a pot of gumbo, my quilt of tricks and understood things to bring equity, and to a credit union that's already doing the work of diversity and inclusion. The one things you can always look at when you look at DEI is that, yes, people are always looking to be diverse. They're always looking to be inclusive. But the most part that's understood, misunderstood is the equity part. Having equal access and resources to training, workplace environment, right products or services. These things don't come easily. So I feel it as an obligation to try to make the best environment I can for the people who work here. So they can feel good about what they do for them as they serve. Lisa Hochgraf 07:06 wow Lisa Hochgraf 08:25 Yeah, your position is especially interesting to me because of your experience in lending. So I've been thinking about, reflecting on how a lot of chief diversity officers are perhaps a little bit more focused on the internal work of diversity for the organization, then maybe on the external work of equity and products or making sure that the credit union is serving the underserved. How does your position pan out? Are you doing work on both sides of that, the HR side sort of and also the outside products and services side? Talk to me about your goal for the position. 09:01 It is a hybrid role, where I look at the internal and work with their executive team to make sure that everyone from the people who do the cleaning of the building to the people who run the building are diverse, that we represent that in our hiring practices, and that we try to have a better way of doing things. One thing that I'm working on now is making a diversity team for the credit union. So once we have a platform of individuals in the credit union who can advocate for different ideas and conversations that need to be had that can help stir the pot and help us advance our education about each other. That stuff is going to take place. But it's deeper than that because externally we have members who are struggling. Lisa Hochgraf 09:45 Tell me a little bit about your credit union. I gather the core membership was originally firemen. But who's who are you serving today? And also how long have you been in the role? And how does that impact what you've been able to do so far and what your next goals are? 10:02 Well, our membership is based of firemen who founded the credit union. But it stretches way further than to zones that are outside of the realm of firemen. Over 60% of the people that we serve are people of low to moderate income means. And we look at them as ways to help bridge the financial wealth divide by making their lives easier and better by giving them affordable products and services that are going to help them get to that point. I've been in this role right now since December of 2021. But as I mentioned earlier, I've been doing this for the better part of my life. And I actually, ironically, when I was given a second place runner-up opportunity to take advantage of the prize from CUES. I used that to help qualify myself in DEI by getting certified in DEI to Cornell University. Lisa Hochgraf 10:58 So you took the CUES, e Cornell course on diversity, equity and inclusion. 11:03 I sure did, which I think is an amazing opportunity to give you a good foundation of some great ways to bring about good conversation and change throughout the organization. But as I mentioned, my job is not just that. It's more also making products and services with our executive team to help bring justice and equity to people. Because if you don't have equity, you're not really doing a good job at diversity, diversity and inclusion because a lot of people behind the starting gate, and then we feel it every day. I mean, right now, across the nation, inflation is at an all-time high, the highest it's been since 1982. 69% of Americans have less than $1,000 in their savings account. Lisa Hochgraf 11:49 Yeah. James Hunter 11:50 Right now, people are paying $250 more in bills, groceries and gas. That is important to understand. But as you drill down to the level of being in the state of Louisiana and Mississippi, the states we operate within, at the Fireman's Federal Credit Union, we have a situation is really haunting us. We rank 49 of 50, respectively, according to the News and World Report's for the best states to live in. We suffer when it comes to crime and corrections, education and opportunity, and infrastructure. That right there means that that's a lack of jobs, which have a higher crime, earlier death rates. It just persistent poverty mindset. Did you know that 52 out of 64 parishes in Louisiana are classified as persistent poverty counties? Lisa Hochgraf 12:40 No, I did not. And that's a big number. 12:44 Yeah, by definition, that means that any county or parish that is 20% or more of its population living in poverty over the past 30 years. That means that when the Feds increased rates recently, and increased the basis by 50 basis points, we just got to understand just how more expensive it is to be poor. Lisa Hochgraf 13:03 Mm hmm. Yes, that that percent difference might not matter to someone with more income than some of the people you're trying to help and serve right now. Is that a fair assessment? 13:13 That's a very fair assessment. Now there you look at people who are trying to make ends meet, and they realize that they're just trying to do what's right, but then they don't know what what's right. And they get themselves involved in predatory lending. Lisa Hochgraf 13:24 Yeah James Hunter 13:25 That right, there is a debt trap for people. One in four people in Louisiana rely on payday loans to make ends meet. Lisa Hochgraf 13:33 Yeah. Talk to me a little bit more specifically about the products and services that your credit union offers now, that help with this and what you'd like to see the credit union move to doing, move to adding in the future? 13:48 Well, right now, our credit union does a wonderful job and making good products. For example, we have free checking accounts. Believe it or not, there are people that are still going to places and cashing their checks every payday, which is money that can be going back into their pocket. We also have free financial counseling, which provides anyone who wants to step into the right mind frame and understand the behaviors and know what they need to do to get from Step A to Step B to live the best financial life. We have reliable car loans that allow people to get up to 100 over 100% loan-to-value on a vehicle to get a reliable vehicle. We also have a savings component with the car loans, that allows the person to make the payment on their car loan, but a portion of that goes to savings so in case of emergencies, they're able to tap into that money and use that to get the car fixed. Lisa Hochgraf 14:40 So you're helping them build a contingency fund. 14:43 Exactly. Lisa Hochgraf 14:44 Yeah. James Hunter 14:44 We also have payday alternative loans that are given to individuals to help them break the cycle of predatory lending, and help them pay off those lenders and pay us at a lower rate over a longer period of time, which allows them to put money towards principal and pay it off and also get the education they need to start living and understand what they have to do to get into a better financial situation. We also have a first-time homebuyers program that allows a person to go up to 100% loan-to-value with the FICO score as low as 580 with no mortgage insurance. Lisa Hochgraf 15:18 So James, tell me a little bit more about those lending programs, lending programs where you can I think you said for the car loans, you could lend even a little bit more than the car would be valued at. And you talked about loans that would not require mortgage insurance. How do you make those possible? And how do you make those safe and sound, so to speak, for the rest of the membership? 15:41 Well, what we do is we look at the opportunity that lies in front of us, and we ask ourselves, what is it that's out there that we can use to help leverage that? We use loan loss reserves as a way to help offset that. I mean, we add the provisions to our bottom line to account for the potential for loss. But we also are not afraid to give people an opportunity. We put into a pilot program where we allotted a certain amount of money for people to take advantage of the first-time homebuyer program. We monitor that very closely. We look at how people are performing. We make sure that they go through the education piece to understand what it's like to be a homeowner, some of the detriments that come across that can be roadblocks to being a homeowner. we put our effort into making sure that people are being helped and given a chance. And what I've experienced is that these individuals would rather eat ramen noodles than not pay us because they know that no one else will give them that opportunity to chance that we've given them. Lisa Hochgraf 16:44 builds loyalty. James Hunter 16:46 Absolutely. Lisa Hochgraf 16:48 So one of the questions I think credit unions that are listening might be asking is, do I have to be a CDFI to do this? Is your credit union as CDFI, a community development financial institution or a low-income designated credit union> 17:01 Yeah, our credit union is a CDFI. And no, you don't have to be a CDFI to get involved in this. You just have to have the spirit of servant leadership and look to want to live the credit union philosophy of people helping people to understand creative ways on how to network with credit unions and others on how to get grassroots. What's going on in your community, up to the upper levels of where you are, so you can find ways to creatively resolve them, understanding what their needs are. Lisa Hochgraf 17:29 Yeah. So that's great. So you're saying that any credit union that wants to get into doing this can look for more ways to work with members that are of lower income? And that's exciting, because then there's no hurdle, there's no application required. You can just think about it, and set something up that works well. Lisa Hochgraf 17:47 So you've listed a lot of things that New Orleans Fireman's Federal Credit Union already has in place. Do you have some vision for products and services that are already in your mind that you'd like to help implement? Or like you were just saying, is it about talking to members, and finding out what they need, and then designing products that respond to them specifically? 18:09 I think the latter part is where I said, each area you live in is unique. And issues that people are faced with are gonna reflect what's going on. I think it's important to get down to the grassroots and realize how you can help the people in your environment, your area. Once you understand that, you can take that to understand what you can do to make products and services to help offset that. I'm a firm believer that if you have the right product, paired with coaching, that you can help people break their debt cycle and achieve financial accessibility. Lisa Hochgraf 18:45 How do you do that exactly? I mean, you probably have quite a lot of members, thousands of members. How do you talk to them? Or do you survey them? Or do they come into the branch and when they're doing something else, then you talk with them? How do you learn what their current situation is like and how you might be able to help them? 19:02 Well, you I got a firm statement that you people where they are. We talk to people at different grassroots organizations. We offer free financial counseling. We're going to places for a period of time, and we'll just talk about what's important with a certain topic because they won't ask the questions. What's hindering you? What is this impeding you from being your best financial person, your best financial future? And we ask the questions readily, and we listen for the common ground, the common themes resonate from that. We go into religious organizations and we ask questions about what is, what the members want. We take every opportunity we can to find out what it is that makes a person tick. If we understand what they value, if we understand what motivates them, we understand what they are trying to achieve, we can help because we listen. That's so much of a lost art these days. Lisa Hochgraf 19:57 That's wonderful. It sounds like you're both taking opportunities of when members interact with the credit union. And also, you're working with community partners, like nonprofit organizations and churches and other places where your members are living the other parts of their lives when they're not dealing with their money directly. Umm. James Hunter 20:15 Exactly. That's a great definition of meeting people where they are. Thank you. Lisa Hochgraf 20:18 Yeah, yeah, like that a lot. And the listening, we can do articles and articles and articles about how to listen better. I'm glad that you're so focused on that. Lisa Hochgraf 20:27 Before we wrap up, um, I want to be respectful of your time today. You're sharing such good information, I want to ask you one more question sort of about the chief diversity officer side of things. On our CUES Net forum on the web, where members get together and they talk about things, there's actually been a thread lately about, so we're forming up a DEI committee and how do we do that? Like, how often would should we meet? And how should we structure this? You said, you're forming up a committee right now, a team to focus it on DEI, internally. What is your approach to that so that others can consider that for what they might want to do? James Hunter 21:05 Well, I think it's important to look at it like a slice of pie. I want to I want to cut that pie, every angle that involves any attribute that involves someone in my credit union. I want to get a sampling of all the different uniquenesses out there, and differences that exist. I want to make sure that when it's all said and done, everyone feels like they're being looked at and considered. James Hunter 21:28 Someone gave me a great example of this. It says diversity is being invited to the party. Inclusion is being asked to dance. I want to make sure that I'm actively looking at inviting people and asking them to dance at this party that we're forming. And if you look at it like that, you can't go wrong. Because it's all about servanthood, about making sure you make people feel welcomed. If you do that, people can be their most unique, authentic selves. They can realize what they bring together, the table, and their sense of belonging becomes that much stronger. If make that climate available, and you make sure it's held accountable throughout the organization, that you will find people that will run that group that don't have to be at the top level, because they know that they can have brutal conversations and be honest, and be respectful in their words, in the way they organize meetings, and how they grow as people because, you know, some of the best things I've ever learned are people who are doing the job on a day-to-day basis. And I give them the opportunity to speak freely with respect. You come to find out, wow, I never looked at it from that perspective. I never looked at it from that lens, you know, with DEI, you look at things where it's like the iceberg where they say 20% is visible and 80% is invisible. I never knew that person had that trait. I never knew that person could do that actual function. You come to realize what people bring to the table. You know, diversity is the one thing that we all share. We need to celebrate it. Lisa Hochgraf 23:00 Well said, James, I love these ideas. And I want to thank you so much for all of this great information. So as a parting moment, I wonder, is there a question that I didn't ask you that you wish I had? And then of course, what is your answer to that question? James Hunter 23:16 I think you alluded to it, and I want to elaborate just a little bit more on it. What do others do to get involved in this process of trying to bring equity to diversity and inclusion? That is the question that I pose. And I look at different ways by saying that, if you consider yourselves wanting to live that credit union philosophy of people helping people, ask yourself what can you do with like-minded people to make a change? Look at grassroot organizations you can get involved with to find out what it is that's causing them this heartburn and see how you can solve for it. But that's solving forward with just making diversity and inclusion part of it. What can you do to be the equity injectors, because we already you can be that injector, with our resources that we have, by our influence that we possess. And I'll give you a good example. There's not credit union, but it also is cooperative. In Chicago recently, a local nonprofit announced that they were going to pay the college tuition for more than 4,000 public school students. Lisa Hochgraf 24:17 Wow. James Hunter 24:18 Just recently, Evan Spiegel and his wife Miranda Kerr, announced that they're going to pay off student loan debts for all the new graduates of the local junior college. That's the equity that's missing that's going to help catapult people to a better position, that's gonna break a wealth divide. There's going to be that inclusion part that's going to make everyone be able to get where they have to be even quicker. Imagine if we had more people doing that, more credit unions doing it. I want to... Lisa Hochgraf 24:47 Being the equity injector, right. I love that phrase. That's incredible. So if I'm understanding what you're saying, you're saying a lot of students graduate from college and it's hard work for all of them. However, some of them graduate with less debt than others. Some of them graduate having had to take loans for a lot of their years. And so if you can erase that in that particular inequity, those students start off on the same foot with the opportunity to go get jobs and build wealth and live their financial lives as best as they can. Is that reasonable understanding of what you're what you're saying? James Hunter 25:21 That right there is an amazing assessment. It gives us the justice that I'm seeking, as I look to do my work that I do with credit unions, in particular New Orleans Fireman's Federal Credit Union. I want to be the equity injector. I want to find ways that we can creatively come up with the resources and tools to help individuals get what they need so they can stop worrying, but also have a peace of mind and live the best financial life. James Hunter 25:48 You know, I'll share with the public. You know, I'm an example of this at its finest. I come from the streets of Chicago. I come from an impoverished neighborhood that I didn't even know was impoverished because my mother did her best to shield me from it. But it was all said and don where I grew up was still considered the housing projects of Chicago. I was given a scholarship to any high school in Chicago I wanted to go to, and I chose a school that gave me a chance to increase my opportunities for being successful in my life. And I thank the people who gave me that opportunity every day because they didn't have to do that. They saw me being a person who had potential. And the worst thing I think you could ever do in this world was was your potential. And he took a chance and gave me that opportunity. And I feel that it's part of what I do every day to give back. Whether it be monetarily, whether it be spiritually, whether it be mentally, or just inspiring people to realize we have an obligation to people who want to do better. Imagine that this world was giving a chance to people who need that. There's enough sugar everybody be sweet. Lisa Hochgraf 26:59 You're very inspiring James and I hope credit unions out there will be looking at how they can help people realize their potential, be on the pathway to their potential by erasing inequity that they see and that they have influence on. This has been so great. Thank you so much, James, for being on the show. James Hunter 27:17 It's my pleasure, Lisa, thank you. Lisa Hochgraf 27:21 I would like to thank you, our listeners for taking time out of your busy schedules to listen to today's episode of the CUES podcast. And many thanks to James Hunter for sharing such amazing perspective. Lisa Hochgraf 27:33 A link to James's CUES Emerge presentation plus shownotes and a full transcript of this episode can be found at CUmanagement.com/podcast134. Lisa Hochgraf 27:44 You can also find more great credit union-specific content at CU management.com. Lisa Hochgraf 27:50 Find out more about the CUES Emerge program at cuesemerge.com. Lisa Hochgraf 27:55 CUES members have access to invaluable membership benefits to further enhance their development. Visit cues.org/membership to learn more. Lisa Hochgraf 28:05 Thanks again for listening today. Lisa Hochgraf 28:07 CUES is an international credit union association that champions and delivers effective talent development solutions for executives, staff and boards to drive organizational success.
Podcasts
Learn directly from industry experts on a variety of topics.
Sponsored by Fiserv
Want to compete better with fintechs? Reduce friction. Want to make more loans? Reduce friction? Want to become more appealing to young people? Reduce friction.
The opportunity that lies in reducing friction across the credit union is a key theme in this episode of the CUES Podcast. Our guest is Bill Handel, general manager and chief economist at Raddon, a Fiserv company. Fiserv, based in Brookfield, Wisconsin, is a CUES supplier member and the sponsor of the show.
“How do we build that relevancy within those younger generations?” he asks. “It's not just mortgages. It's everything.
“We have this historical mantra of 'Do business on my time, in my place and with my processes,'” he explains. “The older generation says, ‘Okay, the bank hours are here, and the bank locations are here, or credit union locations are here, and (I) have to go through these steps to get this process done. (The) younger generation says ‘no,’ and they want to do it differently. … And that's the thing that the credit unions need to spend more time on is how do we reduce friction?”
In the show, Handel lends his expertise in analytics and the economy to identify some specific areas in which credit unions might benefit most from reducing friction. The first is the purchase mortgage market. Another is home equity lines of credit, including hybrid HELOCs, which give consumers more choices about how they borrow.
Buy now, pay later is a great illustration of this notion of reducing friction, Handel adds. “… Merchants are willing to fund to BNPL because it makes people more likely to buy today as opposed to tomorrow, right? In some ways, it's very akin to indirect lending in the sense that if you create that incentive and put that incentive in front of the consumer, then they might buy it today as opposed to walking out and then maybe coming back tomorrow to buy. That's what indirect lending does.
“I would argue that the hybrid lending, the hybrid HELOC, can potentially serve that same process here on the consumer lending side because what it does is it helps you to eliminate friction,” he explains. “The idea is that if you've got a home equity line of credit, which is essentially your way to buy everything, and then you can carve off pieces of that and treat them like that fixed-rate loan.
“This is not a new product, but it really has never taken off in significant ways,” he adds. “We do think that there's more opportunity in that space.”
The show also gets into the impact of the pandemic and the long tail of COVID, including:
- How Main Street has suffered
- Growth in the nonresidential real estate market
- The impact of hybrid work
- The Great Retirement
- Mobile deposit acceptance
- Branch network optimization
Links for this show:
Transcript Podcast 132 Cybersecurity Is a Discipline May 2022 Tony Covington 00:04 You're listening to the CUES Podcast episode 132. Tony Covington 00:08 Thank you CUES Podcast listeners for tuning in. As you know, on the CUES podcast, you can hear from a wide range of cross-industry experts discussing trends and topics relevant to you. Tony Covington 00:19 My name is Tony Covington, I'm the Vice President of Business Development for TalentED powered by CUES. I'm also a former NFL player and have over 20 years of experience in the nonprofit sector with several national organizations. I'm very excited to be your host for this show. Tony Covington 00:34 With the geopolitical events around the world, we're all hearing a lot about cybersecurity lately. We're hearing that the likelihood of attacks is higher than usual. And we're also hearing that financial institutions are prime targets for bad actors. So I think you'll be very interested in hearing from today's guests. Tony Covington 00:53 Franklin Donahoe is chief executive officer at Lynx Technology Partners, a cybersecurity consultancy that's also a CUES Supplier member. Franklin has over 30 years of experience in data information cybersecurity, business and technology risk management. Plus, he served in the United States Marine Corps. He also serves on the board of Harborstone Credit Union in Lakewood, Washington. Tony Covington 01:19 Julian Waits is the senior vice president and executive in residence for the cybersecurity firm Rapid7. Previously, he worked as the general manager of the cyber business unit and public sector at Devo, a cloud native logging and security analytics firm. He also serves as chair of the board of Cyversity, which strives to achieve the consistent representation of women and underrepresented minorities in the cybersecurity industry through programs designed to diversify, educate and empower. Tony Covington 01:50 So let's get started. Tony Covington 01:54 Welcome to the show, Franklin and Julian Franklin Donohue 01:56 Thank you for having me. Julian Waits 01:57 Good to be here, Tony. Tony Covington 01:59 Thank you both. We really appreciate it. We're really excited about today's show. Before we get to talking about cybersecurity and how to effectively staff it today, I'd like to help our listeners get to know you both. I was wondering if you might each have a professional quote or mantra that you live by, that you could share with us, Franklin, would you start for us? Franklin Donohue 02:18 Sure. Thank you, Tony. I guess I would say you know, control what you can, know your limitations and follow through on your promises. Those are really those are really things that I think are important, especially doing what you can that's under your control, not trying to do more influence in areas that you're not qualified to get the help you need. Don't be afraid to ask for help. Julian Waits 02:48 From me, trust God and integrity is everything. Tony Covington 02:52 Trust him and everything else will fall into place. And I couldn't agree, couldn't agree more and to the control. I call it "the controllables" Franklin, controlling your attitude, your effort and your output. Those are the controllables and anything outside of that is futile because it will do nothing but frustrate you. Franklin Donohue 03:09 That's right. That's right. Tony Covington 03:11 Okay, Franklin, I'd like to start by talking about cybersecurity. First, I'm wondering, why is cybersecurity important to organizations every single day? Franklin Donohue 03:20 Well, you know, the the world has changed somewhat, but not really, right. We still have people who were robbing banks, but just in different ways. There are still people who are committing fraud, but in different ways. Employees have been stealing trade secrets and communicate, you know, information from companies for a long time. You know, we call it insider threat now as if it's new, but there's always been an insider threat. It's just executed differently. And to some degree, it could be seen as being easier. We have things in digital format. We have people who are sharing information online because they're transacting, not using cash, they're sitting at home shopping on Amazon or walmart.com, or whoever. And they're doing these things, even their health care, that's done over the internet. So I don't physically have to steal information, but I can I can steal information from afar, and it's far more anonymous. It's important to everyone because we're all affected. The threat actors are more coordinated. Organized crime is more organized, and it's more profitable. Tony Covington 04:34 Are there any additional factors that can heighten the cybersecurity piece? Franklin Donohue 04:38 I think the impact to businesses as well as individuals. I mean, I think we talk a lot about you know, there was a breach here reach there at Company X, Y or Z, but real people are affected by this. Their information is stolen. Their bank accounts are emptied. People are filing IRS claims on their behalf and then getting returns that they otherwise would get. Identities being stolen and, you know, credit scores, and livelihoods and reputation can be destroyed. And now we have, you know, modern technology that can make it look as if I am some place that I am not doing something that I am not, saying something that I have not said. And so that type of technology requires us to authenticate and understand people more than we have in the past. Tony Covington 05:30 Yeah, it's amazing to see it happen on a global scale. But, you know, I think the mom-and-pop situations that happened on a local level, it's the elderly getting attacked with scams on the computer, you know, little phishing things, or they get a new television and an app pops up because they connected to the internet, and all of a sudden, their banking information is compromised, their credit cards are compromised. So you know, and that's just on the local level. So it really is important, to be on point, pay attention to what's going on on a big level when you're talking about banks and such. Tony Covington 06:06 I've got a two-parter here. Part one, what are some things you recommend organizations do every day to support cybersecurity? And part two, what are some key things you recommend organizations do cybersecurity-wise when concerns are high? Franklin Donohue 06:21 So I'll flip the question a little bit here. I see cybersecurity organizations, companies, etc., I see them as service organizations to companies. I do get that asked that question in that context a lot. It's like what well, what can we do to support our service here? Well, your cybersecurity function is a service organization. So it's actually two-way but when I look at it from my seat, it's really the cybersecurity technical and others within the IT department and security departments understanding the business, being a good business partner, just not a technocrat or techno speak, or you know, someone who's talking, you know, all the sexy terms and things about vulnerabilities and what happened and how someone could could possibly get in into the environment, but making it relevant, not every aspect or part of the technical environment is equally important, unless, and that's where the technology comes in this world as firewalling or access controls and zero trust and all the things that we like to talk about in the cyber community. What is important to the business? What's important to the customer? What are the assets that we should be protecting in a cost-effective and responsible way? And oh, by the way, there's compliance, you know, there's there's regulatory, you know, you've got the NCUA and everybody see that's bringing down people's necks every day, not that they're actually, you know, breathing down people's necks, but they do have requirements and for good reasons. And, and Rodney Hood speaks about this quite often in his role, as well as others. So we need to be aware, as security professionals, that we are providing a service that should meet the needs, right, and we should do it in a cost-effective way. Now, what was that? What was the second part of your question? Tony Covington 08:17 What are some of the key things you recommend organizations do cybersecurity-wise when concerns are heightened? Franklin Donohue 08:23 I think it's really understanding the issue. I've been in roles where I've had a board member or a person in leadership come and say, Hey, I read this on the internet, how does it affect us or a buddy of mine from this particular company, and then they heighten a concern, which may be legitimate, but we start chasing things that may or may not be relevant. What we need to do is when there is a concern, first of all, we need to identify it before everyone else, which is sometimes difficult, understand how it can apply to our company, credit union, bank, understand that right to the company itself. And then, if we do have gaps, be honest about those things. There can be a tendency to want to not talk about the situation until you have a solution, right? That's not the thing to do. So escalate, communicate what you know, be honest about what you don't know, but have a plan in order to close those gaps. So sometimes, you know, I say over communicate, right? And then people tell you, Okay, that's enough, right? But communicate what you know, be honest about the communication, have a plan to meet those things where you don't have the information and act quickly, act quickly. Tony Covington 09:43 Do you think organizations are taking cybersecurity seriously or the threat seriously? Franklin Donohue 09:49 I think it's very much like policing or any type of security whether it's national security or local security. I don't believe that people get it unto til it's in their neighborhood, right until it affects them in some way or someone that they know, or someone in there or a company that's in their industry, right? They don't quite feel the potential of the effects until it happens to either one of those in those areas. So I think they take it as seriously as they they believe that the risk is imminent. And that's where, in cybersecurity what we've done over the years, is we've told these very interesting stories about breaches, and we say, you know that it cost x millions of dollars to remediate. And if we get ahead of this thing, you know, we won't have to deal with this. It's a cost-benefit. But it is oftentimes theoretical, or is viewed as theoretical, because it hasn't happened, you know, my house hasn't been broken into. But if my neighbor's house was broken into, I might get that security system that my wife's been yelling at me about, right. It could be it could be something like, similar scenario. Tony Covington 11:03 Understood. My grandma used to call it, the same thing that makes you laugh, makes you cry. So you know, you got to be you got to be careful out in those streets. Tony Covington 11:14 Okay, let's turn to cybersecurity staffing. Julian, what are some things, what are some key things organizations should keep in mind when they are hiring people to do cybersecurity work for them, whether it's a staff member or an outside consultant? Julian Waits 11:27 Oh, I guess I'll add to one of the points that my colleague was making here, meaning, the first thing is, you know, I'm a big believer, and finally a cynic. He always says start with why. So cybersecurity, as has been said, is a discipline, right? What is it a discipline supposed to do? It has three purposes for businesses, charitable organizations or government entities. First and foremost, it's about protection, and the three things that need to be protected are my liabilities from having to pay money, my reputation, and depth of money from me or my IP. Those are the three things that we cover in cybersecurity. And so if you start with that, the real question is, what's the type of risk we need to manage in the organization? And then from there, what are the disciplines that we need to put in place? And then what are the type of people that we need to manage the risk? The key thing to always remember about cybersecurity is it's fundamentally broken. You know, in this market, anybody who fundamentally thinks they can buy a technology that's going to stop threat actors from coming into your environment? You know, Franklin's exactly right. You want to detect it if you can, but the stuff that you can really detect is only the stuff that's been seen before, or looks really close to what's been seen before? And if that's not the case, then it's all about how do I respond to it and respond quickly enough so that the breach doesn't become material? Because again, every environment, if anyone who's listening to this has a device, and it has ever touched the internet, it is compromised, period. The question is, Is today your day? And so the way you deal with that, is first you protect the things that are most important to what it is you're trying to do. If you're a government entity, you're military, well, first thing I want to protect, I don't want anybody to know what I'm doing before I do. Because that ends up in disaster. Feel people lose their lives. If I'm a bank, I gotta make sure I've got a complete fort around all the confidential information for for my customers, their their identity, information on how to access the systems that they need to get their funds or move their funds around. And then more specifically, their personal information that may not be used to steal from the bank. But all of a sudden, I've got a Social Security number. I've got an address. I've got a birth date. Let me go open some new credit cards now, because as Franklin said, on the internet, anybody can be a dog, meaning, you know, you're just one click away from being able to take over somebody's identity. So to the specific question of Who do I hire? I don't know how you answer that question, right? Because most people I know who are in cybersecurity, and I would say this is the vast majority, never expected to be in cybersecurity. We usually we're IT people or we were governance people or we were doing other stuff. And oh, by the way, you know, gee, we need the security stuff. And it starts with somebody who has a great curiosity. If you're not curious, then you're not going to find the problem, right? Because remember, you can't stop everything from coming in. So the first thing I need to be is aware I need to be I need to be visually attuned to what's happening in my environment and I need to be curious. And then I need to be smart enough to understand you know, if a mature organization, there's some processes I've already put in place. So I need to follow those processes and make sure I can communicate extremely well. One of the most important things in cybersecurity professionals is not technology. It's their ability to communicate, one that there is a problem, two, as best they understand it, what the severity of that problem is, and then three what's the remedy--the action plan we need to put in place to resolve the problem. And so outside of that, there's not a cookie cutter sheet for cybersecurity people. They need to be smart, curious, and can communicate well. Tony Covington 15:14 That's very interesting. Because that's not what you think of, you know, when you say, Okay, how does someone get into that space? What ardoe they major in? So yeah, that's interesting. Those are three key things that I've taught. Julian Waits 15:25 Tony, I was a jazz performance major in college. Tony Covington 15:28 Understood, understood. Tony Covington 15:33 All right, I'm interested in learning about what Cyversity does, and how it helps organizations with their cybersecurity staffing needs. Julian Waits 15:41 Sure, so So Cyversity is exactly what it says. It is where cyber meets diversity, equity and inclusion. We have been around now for just over seven years. Initially, we were the International Consortium of Minority Cybersecurity Professionals. And the way the organization started is quite simple. A group of us, Franklin was actually in that group, who have been in a cybersecurity field ever since we used to call it information assurance. Frankly, am I dating us a little bit? Franklin Donohue 16:14 Yes you are. Julian Waits 16:14 So, yeah, so we'd go to trade shows and stuff. And you know, as it related to women or men of color, we'd virtually be non-existent. And the whole goal was, how can we find a way not to exclude anyone, but to bring more inclusion to it and what drove it more than anything else Tony, is today alone in North America, there are over a million openings for cyber or IT-related fields that support cyber. Globally, that number is well over 2 million. And for some reason, we can't find enough white guys to fill all those jobs. And so we got to go find some other people to help fill in the gap. Because we just don't have enough people in the fight. So it is a numbers equation, and we need to get more people there. And as I stated before, a key goal of Cyversity is to bring people who wouldn't normally be aware or even think of cybersecurity as a place that they can have a career. There are so many different disciplines in cyber. I mean, I can't even enumerate them all. And most of them don't require that you have to have any coding skills whatsoever. So you know, the key thing is, is what we've done in the past, right? And for good reasons. We've always taken you know, really technical skills related to computer. And we always make it akin to mathematics or akin to very analytical skills that you normally have to have. But to be a good cyber professional. You don't have to be an ace in math. What you have to be is curious, smart, able To visualize what's happening in your environment and communicate effectively. That's the premise for any job, especially those in cybersecurity. So at Cyversity, our whole goal is we want to bring everybody to the park. Tony Covington 18:03 Wow. So if listeners want to get involved with Cyversity, or hire graduates, what should they do? Julian Waits 18:08 www cyversity.org. Come see us. We have multiple programs. We're helping people meet, you know, the one of the greatest stories, Tony, that puts me to tears every time there's a woman by the name of Marilyn that I met several years ago, actually out of black hat conference. At the time, she was a retired Army nurse working in a hospital system. And she was she was approaching 50. And decided she wanted to be in cybersecurity. She's now one of the senior people in the cyber staff in the same health care facility where she used to be a nurse, and she's in her mid 50s. And so this is the point about, anybody can do this as long as you I mean, you got to have a goal, you got to have a focus. And then what we provide most importantly to people, other than education and scholarships, is mentorship through Cyversity. People like Franklin have provided mentorship just like they did, as you mentioned, with one of your family members early on. A key component to what we do every day is we have to remember that we have to pay it forward, not just for the next generation, but for those people who also sit next to us who can get in this fight and help go against the threat actors. Tony Covington 19:18 Wow, that's amazing. I'm a huge believer in lifting as we climb. So thank you for that. Before we let you guys get out of here, we close with a segment called message in a bottle. And what that is, is what is the message that you would leave for your younger self? Franklin you first. Franklin Donohue 19:37 I would say, I'll try to be concise because I've made so many mistakes. I just wish I could go ... but you know this is a tough this is a tough question. One is I've had a personal and professional board of directors in my life. And those are my mentors that I've confided in to help me personally and professionally. And there's a great deal of, especially from a younger self, we sometimes not all of us are blessed with the humility that we need to get through all of life. We either through lessons, learn that humility, or we never learned that lesson and something happens. But, you know, it takes humility to become a leader. And it takes a great deal of humility to become a mentor as well. You, sometimes as a mentor, you, you realize that you don't know as much or don't have the wisdom or have the answers. And sometimes that's not part of being a mentor is getting the answers but helping someone get to those answers. But I would say, you know, early on, get people in your life that care about your view, your future, and you yourself as as an individual, your development as a human being, and your development as a professional. Tony Covington 20:33 Excellent, excellent. Tony Covington 20:36 What about you, Julian? Julian Waits 21:03 Embrace love. Learn to love when people care for you and they give you great advice. Learn to love when you make mistakes and you can learn from them and move forward. And most importantly, learn to learn enough that you can share everything that you've learned with someone else, as you start from that early life going through. Tony Covington 21:23 Hmm, giving yourself some grace. Like goodness. Franklin Donohue 21:28 That was great. Tony Covington 21:29 That was that was absolutely phenomenal. And and here here on the mentorship piece. I didn't get my first mentor until I was 50 years old. And was that me? Or just, you know, my grinding nature to just try to figure it out on my own. But I was thankful for my first mentor and a couple of mentors that I have gained since then. And I'm like, man, I really went about this the wrong way. I sure wish I would have reached out to these individual. Julian Waits 21:54 We offer life, you know. Tony Covington 21:57 Well, that's awesome. Well, thank you both so much. This has been absolutely wonderful. Thank you both for being on this show. And we look forward to...we have to do this again, gentlemen. We have to do it again. Franklin Donohue 22:09 Absolutely. Franklin Donohue 22:09 I would love to, just not with Franklin. Tony Covington 22:12 Wow. Julian Waits 22:14 I'm sorry. [laughing] Tony Covington 22:19 That's awesome. Well, thank you both. We really appreciate you. Julian Waits 22:22 Alright, God bless. Tony Covington 22:23 Take care. Tony Covington 22:25 I would like to thank you, our listeners for taking time out of your busy schedule to listen to today's episode of the CUES Podcast. And many thanks to Franklin Donahoe and Julian Waits for sharing such great perspective. Tony Covington 22:39 Links to the websites for links technology, Rapid7 and Cyversity plus shownotes and a full transcript of this episode can all be found at CUmanagement.com/podcast 132. Tony Covington 22:52 You can also find more great credit union-specific content at CUmanagement.com. Tony Covington 22:58 If you liked this podcast, you may be interested in learning more about First Line of Defense, a fraud prevention education program offered by CUES. Check it out at cues.org/firstline. Tony Covington 23:11 If you're a CUES member, you have access to invaluable membership benefits to further enhance your development. Many membership benefits are available virtually. Make sure to visit cues.org/membership to learn more. Tony Covington 23:26 Very near and dear to my heart, TalentED, powered by CUES, works with nonprofits to develop the leadership potential of their executive teams, board members and staff. Learn more about the TalentED offerings at talented.org Tony Covington 23:40 Thanks again for listening today. Tony Covington 23:42 CUES is an international credit union association that champions and delivers effective talent development solutions for executives, staff and boards to drive organizational success.
Transcript Jeff Shewfelt and Bill Kiss Mergers
April 2022
By Jeff Shewfelt and Bill Kiss
Lisa Hochgraf 00:04
You're listening to the CUES podcast episode 130. Thank you, listeners, for tuning in. It's amazing to me that it's 30 episodes beyond our 100th episode. And thank you so much. We appreciate that you tune in to hear our show.
Lisa Hochgraf 00:20
As you know on the CUES podcast, you can hear from a wide range of cross-industry experts discussing trends and topics relevant to you. My name is Lisa Hochgraf, and I'm Senior Editor for CUES and its Credit Union Management magazine. I will be your host today.
Lisa Hochgraf 00:35
On today's show, we'll be talking about mergers. There's a lot of debate in the credit union world today about whether mergers are a good thing. Some feel mergers are an opportunity for the kind of growth and economies of scale that allow credit unions to deliver better in-person and digital service to their members. Others think they are something to turn to only as a last resort, because such a combination results in one fewer credit union and less personal service.
Lisa Hochgraf 01:03
Our guests today are CUES members Jeff Shewfelt and Bill Kiss, the co-chief executive officers of G&F Financial Group, a credit union in Burnaby, British Columbia, that has 5 billion in total assets under administration. Jeff and Bill have undertaken a lot of mergers, and they've decided against some too. They believe that serving people not financials must be at the root of everything credit unions do, including mergers.
Lisa Hochgraf 01:30
They also believe that credit unions must do their good work faster all the time. And sometimes mergers enable doing just that.
Lisa Hochgraf 01:39
I think you're going to get a lot of insight from listening to Jeff and Bill's ideas about mergers.
Lisa Hochgraf 01:45
So let's get started.
Lisa Hochgraf 01:49
Welcome to the show, Jeff. And Bill.
Bill Kiss 01:52
Great to be here
Jeff Shewfelt 01:53
Glad to be here.
Lisa Hochgraf 01:54
Thanks so much for being here today. I like to start our shows by asking our guests to introduce themselves a little bit to our audience. And the way we usually do that is by having each guest share a mantra or quote they live by. Jef,, I wondered if you kick us off with your mantra or quote.
Jeff Shewfelt 02:12
Sure. I mean, our industry is going through a lot of change. Our organization has gone through an awful lot of change. And within our credit union, we we really try to do things with each other, with people and not to people, I think would be something that we really focus on. It is important that our whole team is involved in our evolution at G&F.
Lisa Hochgraf 02:31
Yeah, I could see how this idea would apply internally to your staff and also externally as you're serving members. I think it's gonna play into our merger conversation today, too. How about you, Bill? What quote or mantra would you cite as something that you live by?
Bill Kiss 02:46
The one that comes to mind for me is: At the end of the day, you'll never wish you'd done anything slower. You will always look back and say, "I could have done so much more, more quickly if only I knew what I knew afterwards."
Lisa Hochgraf 02:58
I love that I sometimes have a conversation with one of my I'm a dancer. So one of my teachers about why didn't I think of that sooner? He says well, because he didn't. But I'm not very satisfied with that. I kind of wish I had thought about it sooner.
Lisa Hochgraf 03:11
Thank you both for getting us started. So Jeff, and Bill, let's get started by talking about why the two credit unions in this merger felt it was the right time back in June of 2020 to talk about merging,
Jeff Shewfelt 03:25
think it's a really good question that we annually get together with our board and talk about strategy in the future. And it starts with an environmental analysis and looking at what's happening. You know, credit unions and our credit union is definitely facing increased demands by our membership. And you have to consider both the physical distribution of services with the online distribution. And for our credit union, we're based in the Lower Mainland, we're somewhat on the west side of the Lower Mainland. And housing is very expensive in in Vancouver itself. And there's been a migration for a long time of members moving east into the lower main mainland Fraser Valley, it's called. And even when I joined, we had only two branches and members started to move east and we had to move to help them. So we were covering the west side of the Lower Mainland of Vancouver, but our members were continuing to go east.
Jeff Shewfelt 04:16
And for us, it posed the question, "Do we continue to open branches and head east and we knew and had been partners with Aldergrove Credit Union for decades collaborating with them. Our teams have been very close. Well, they ended up really being the right solution because they had a nice distribution of branches that started where ours ended. So instead of maybe investing all that capital in new branches, by partnering with them, we were creating a great distribution of branches around the Lower Mainland. You didn't have redundancy. You weren't doing it for the sake of consolidating branches and cutting costs of labor. You were creating an enhanced network for your branches. And then you could take that capital that you're going to invest in the branches and redirect that to the digital capabilities we have. And they need to really change the online experience for members. So that started it. And our board asked Bill and I to reach out to the CEO, and see if there was an interest in that. We had that initial dialogue, and then their board met. And that kind of started our journey.
Lisa Hochgraf 05:23
Jeff, helped me put this in context, would you tell me just a little bit about the size of the two credit unions, how many branches each had, at the time of the early merger discussion.
Jeff Shewfelt 05:32
G&F had 18 branches and Aldergrove had about seven branches to east of us. We are now combined about $4 billion. It was like three and a half and 1.2 billion There were 220 employees at G&F, roughly 110 at Aldergrove. So we're just kind of two to one in terms of our size. But it really did create a a nice new credit union as we move forward.
Bill Kiss 05:58
So to put that in perspective, I think in the Canadian landscape, we're on the large size of a mid sized credit union here or a small, large sized credit union. And the more traditional reasons also came into play here as Jeff sort of alluded to is you have the need for improving digital channels, the technology investment that's required as we move forward. And it's just becoming more and more overwhelming for smaller organizations to be able to keep pace, to be interfaced into the payment network channels and all of the other areas there. And then the regulatory environment keeps getting more onerous, the implications on there. So there's a need to grow as an organization at the end of the day, if you want to be able to make sure that you're handling all of those areas and the expectations of consumers correctly.
Lisa Hochgraf 06:39
These are great perspectives. I like this vision of combining efforts so you can direct the extra towards becoming more digital. At the same time, can you address the concern that we hear, at least here in the U.S., that mergers create a situation in which a large credit union might not be able to serve the personalized needs as well as multiple smaller credit unions?
Bill Kiss 07:02
Certainly, we have a core belief that the value of credit unions is in their local mess so you want to preserve that at any cost, regardless of size. So do they have to be mutually exclusive? We don't think so. At G&F, we've been on a journey where we have been progressively getting larger over time. But yet the check that we've tried to put on ourselves is we don't lose that localness. We're still appealing to smaller credit unions should they wish we want to be the first choice, if they choose to consider another credit union for partnership, or we want to be at least out there in terms of that's what we've been able to portray to the public. We don't lose those sorts of things. So that localness, there's many ways to try and preserve that and, identifying it's the needs of each of those local communities, and trying to make sure that we don't lose where we came from,
Jeff Shewfelt 07:48
It may come as a surprise to many, but there were 300 credit unions in British Columbia at one time. I think there's about 37 or 38 left right now. But in our DNA is over 40 credit unions. And that's like 60, 70 years of boards and management teams of credit unions deciding at some point that they couldn't meet the needs of their members, and they needed to do something else. So our DNA and we cover the province of British Columbia, we have people from the electrical industry, hydro, rail, beer make beer makers, communities are going to be different cities of the Lower Mainland. So it's very diverse in our background. And probably the most interesting thing is when you visit branches and you talk to a member that's proud that they were at Credit Union C, they joined 30 years ago, but it's not like they say I'm sure wish we were still at credit union C. You know that they're proud of the credit union they joined, but we don't really hear a lot of negative in that journey. When it happens, there's definitely an emotional issue as people maybe change the name of their credit union and see it expand. That's probably one of the biggest things you face with the members. But ultimately, when you reflect on it, there are very few that didn't say that brought extra value to them.
Lisa Hochgraf 09:01
That's a good outcome to have the member saying that they're pleased. And I like this idea that you're talking about sort of the long-term vision that collaborations and combinations are have been a longtime part of your history. And so this latest merger with Aldergrove is an extension of what you've already been doing, bringing together credit unions to better serve local markets. It's a great perspective.
Lisa Hochgraf 09:24
So let's talk a little bit more about mergers as a big-picture strategy for both credit union health and for member service.
Bill Kiss 09:32
Absolutely. At the end of the day, it's all about the members and making sure that you're not only remaining relevant but hopefully thriving, and you're providing better opportunities to meet the evolving needs of the members as consumers' needs evolve. And that's what's been really difficult to keep up with because with the Apple Store innovations and with all of the online services that are coming in here, the expectations of table stakes just keep rising every year. So that that piece and any other critical piece is the employees. That's what you're there for. They're the ones who are serving. So it's still down to people even know you're investing more in the digital channels, which seems to be not so much from that member-related service. But it's the combination of the two.
Bill Kiss 10:12
If we think back to the what we were talking about earlier, is we're both a branching strategy and a digital investment. We are often asked is it either or, and no, it's both right now. Every time we're opening a physical presence, people still want to know where their money is, they still want that relationship, if they have it. It's been rumored for many years, almost my entire career, that branches are the past, but there's still an opportunity for him. It's a different kind of branch. It's a smaller branch. It's a less investment in your workforce. So as we redesign our branches, it allows us to invest more on the digital side. So making sure that the people are along for the ride. And that's what was most important is making sure they understand why we're looking at this, they understand is communication, communication, communication is what's the role for them in this new organization? And how do they feel involved going forward?
Jeff Shewfelt 10:59
For me to add is. So we talked about our strategy, and we're talking about it all the time. And Bill was kind of looking at our growth, you know, the last 10 years and, you know, half of our growth, when it comes to assets and members is because of merger. But half is organic. It's building a good branch network that serves our members well. We know that the branch itself is often the first point of contact for a member We have invested there, although our branches are smaller, as you can imagine, and we're very cautious in the investment we make on the branch. But a lot of our new members come through that channel. So it's been pretty much a balance between organic growth and expansion and merger.
Lisa Hochgraf 11:37
So interesting. Well, let's talk a little bit about what the board's role has been in these mergers. And what happens to the boards after the merger, because there will be sort of two boards there for an overlap period, I think.
Bill Kiss 11:51
So you have to make sure that they're on site ahead. You can't just wait for these conversations to start, you have to have had part of your strategy earlier establishing this why? What's going on in the environment around you, as you do your environmental scan? What's the best way to deal with these, and where's the world actually going? So that you realize that a merger is a key component, as Jeff was saying, the organic growth has to be there, if you don't have the organic growth that reason to be, then you aren't relevant. So you got to make sure that there's a value proposition that members see why they should come deal with you. But in order to keep up with this pace, which is just getting faster and faster all the time, you have to make sure. So having the important works in the strategy sessions and other opportunities for the board so they can understand the why of what you're trying to accomplish. And then when you become to the conversation of an actual merger, that just becomes the what and the how that you're trying to engage going forward.
Lisa Hochgraf 12:41
And what about what happens to the board afterwards? Tell me, can you give me an example from one of the mergers you've experienced of how the merger of the boards can go really well.
Jeff Shewfelt 12:51
it really depends on the specific merger, that's for sure. You know, there are so many dedicated people that have volunteered time. In Canada, there is compensation for directors, maybe a little more than theirs in the U.S. But know that there are people that have supported and sat on these boards for an awful long time. And it's getting harder and harder just in society to get people to volunteer or to give us their time. And so in some ways, people that have been on the board are looking for a good path for their credit union, for their members, for their staff. And when they have found what they think is the right solution, they tend to step back. But it also depends on the size and was with all their growth, they were about about half of our size. We are in the same geographic area, give or take. There a little bit of differences between the city of Vancouver and out in the farming community in the valley. So what we did was the boards agreed that there'd be representation from the two credit unions, that over about three years, that thing goes back to just open call for directors. Because, you know, over that time, we should become maybe a little bit more homogeneous. But in the initial part, it's important to hear those voices that may have a say, or may have a connection to the community or members that we may not have known being more focused on the western part of the Lower Mainland, in our case, then when you get out. I mean tip to tip, it's about 100 kilometers, or maybe a little bit more. And it can be quite different in those geographic areas.
Bill Kiss 14:20
And as we talk about boards, the other thing that's important to recognize is it's tough to be a director of a credit union and it's getting harder and harder. There's so much more that you need to know. There's so much more complexity to the environment that we have to face. So there are specific skillness, skill sets. It's tough to be a generalist, you almost need individual board members that have skill sets in particular areas, from a governance standpoint, from a technology standpoint, as well as from people standpoint. So it's very important that you create the new board for the organization that has the right x of all those skill sets.
Lisa Hochgraf 14:52
I love the idea of director education because of course that's a large chunk of what CUES does, bringing along talent at all levels of the organization. I also think, Bill, that I'm really starting to get a fuller perspective about your mantra, your idea that you have to do things faster, because what you're describing is an environment that's changing all the time. And to keep up, you're growing and digitalizing and educating people. And now we're going to talk about how you talk to people. So Bill, can you describe how you involved employees in the merger process?
Bill Kiss 15:24
That's absolutely critical. The communication that goes out there, of course, everybody wants to know how things impact them. So culture of an organization, our organizations were known for working together. We were very strong believers in collaboration, seeing at the time, if you don't need to merge how much benefit you can get within the credit union system. And Aldergrove and G&F were working together for about 10 years previously in various collaborative capacities. So that gave the opportunity for certainly the CEOs and the executive teams to work together, but also other employees throughout the organization and specific departments. And the boards even got together from occasions. So you're not starting from scratch, you're entering, you're hitting the ground running, where there's at least a basic familiarity and a basic liking between the two organizations.
Bill Kiss 16:09
And then when you actually get into the process, we did cultural assessments, and we did some reads to see exactly where individual employees were at what were their values, what was important to them, and try to align what they liked about their previous organizations and what they hoped for the new organization. So that was a fascinating exercise to go through as you work with that. And in after the merger, we went into "roots and wings" sessions. So those were, from the root side, you're honoring your past, you're recognizing the great things where you've come from, and all of the accomplishments of the organization. And then the wing side is the future about where you can go, what you can benefit from doing together.
Bill Kiss 16:46
So we held five different sessions where all employees attended one of the sessions, we had a good mix between the organizations and throughout those days, you went through evolving from the days where you provided some basic facts to everybody. So they started from the same page, and they had the same level of understanding. And then you got into fascinating discussion about what the hopes were for the organization, where it might be able to go, truly listening to everyone, because we can now in hindsight, go back and refer when we're taking some new steps back to those roots and wings sessions and establishing the ties how it agrees with what some of the comments and discussions were during those sessions.
Jeff Shewfelt 17:22
Part of our process when we're we're in dialogue with another credit union, greatest steering joint steering committee that has directors from from both credit unions. And interestingly, it was a director of Aldergrove Credit Union that one of the first things he said is how do we really know we're like? We should be doing a cultural assessment. And that sent us on that journey that Bill talked about.
Jeff Shewfelt 17:43
Our credit union did go through a pretty important merger in 2004. And it was two $300 million credit unions with I don't know, 60, 70 employees. And technically, we were very good at it. But actually, there was no dialogue about culture at the time. And on reflection, that was probably one of the biggest learnings we had from from that journey. And it's been a long time, really, since we've had another merger. Aldergrove was the first. So, now 17 years later, but that was still in our mind that you had to think about culture
Jeff Shewfelt 18:14
And in over the years, it even starts at the board level. And our board has been in dialogue with some other credit unions just to talk about opportunity. And one case, specifically, it didn't take an hour for our board to realize that we're way too different than one of the other credit unions were talking to. And they said, Look, this does not make sense, because we're just too different. It was very insightful to go through the process that Bill spoke about. We did have two subsequent, smaller mergers for two small credit unions in BC and their team one was eight and one was 13. You know, relative to our new 330, it was small. They're small, but you still have to make sure you're engaging those employees that they're feeling again, that they're part of something and that we're not doing something to them. So.
Lisa Hochgraf 18:58
Back to your mantra, all about people. We don't do to people we do with people and for people. Yeah, love it. So we talked a little bit about this at the beginning when we were talking about how you reach out through branches in local places and try to serve local needs. Talk to me a little bit about this particular merger, what the member said both of G&F and of Aldergrove during the process of setting up the merger and what they're saying now that the merger is complete.
Jeff Shewfelt 19:26
They were different. G&F had grown through a couple of mergers I spoke of and, and a lot of people had come into the G&F family through different credit unions. So it was almost an expectation from the membership of G&F saying, you know, my kids are moving east or they can afford a home. When they going to open a branch there? So there was an expectation and not a lot of reaction from the G&F membership or staff to be honest. We've had these dialogues for a long time, but it was very different for Aldergrove. They were very rooted in their communities. You know the name. The biggest thing to overcome is the passion, which is great that people have and the emotional attachment to their credit union. And so it was different for the Aldergrove membership, you know, to some of your questions, people are worried about being too big, that you're disconnected from the community. And you need to find a way that you still remain part of that community. And part of it's probably changing your role of your branch management team and regional managers that, you know, they have more responsibility for connecting into the community, because it's harder, maybe for the CEO to cover that large an area. But you definitely have to be there and be part of it and equip your entire team to be part of the community.
Bill Kiss 20:39
Both before and after the actual merger, it's an interesting process that we observe is that members of the other credit union go into the other one's branches, and they kind of mystery shop them, just to check it out just to role play in there. And then the experience that they've received is pretty good. So that's where we're very fortunate that both from both credit union's perspectives, the member experience that you get from the moment that you enter the door is very strong. So I think that gave them some comfort, or at least the friendliness and a willingness to help from that perspective.
Bill Kiss 21:07
And another thing that happened, of course, in the Lower Mainland here is we had merged an effective date of August the first and then, in the fall, we had an atmospheric river come into our area, and it started some flooding within the farming communities around Abbotsford, especially. And it was very devastating in very severe areas. And it gave G&F the opportunity to really get down to the grassroots and help out those organizations that were not only the actual floods themselves, but can access was cut off through roads and it took some time to repair those. So food delivery channels and other things were in there. And this is where we really had the opportunity to give back to the community. And when you started looking at the capacity that we were able to give back, it was more than double what we were able to do individually before. So you could really see the benefits right there when it came down to something truly meaningful, where you could make a difference in the communities where we were. So that was very rewarding. And the members certainly really appreciated that.
Lisa Hochgraf 22:01
I am sure.
Jeff Shewfelt 22:01
We actually called this Better Together, this was project better together because it wasn't about saving money. It was building this expanded network and connection to community. And you know, it wasn't about reducing costs. It truly was being able to invest more, expand. We have a new branch going into a market in the Fraser Valley that Aldergrove had wanted to go into and couldn't afford to do it. Now we'll be doing that together. And as Bill said, we we made very significant community investments to help with the floods that took place last fall.
Lisa Hochgraf 22:30
I love this. This is a great story.
Lisa Hochgraf 22:33
So I want to be respectful of your time. And it's just about time to close the conversation. But I always like to close by asking you what did we not talk about? What did I not ask that you would like to tell our listeners?
Jeff Shewfelt 22:44
Maybe, how do you look at the merger? How do you, how do you assess a merger and in our case, we use four lenses. We looked at the benefits to the employee, the benefits to a member the benefits to the community and then ultimately the financial strength of the credit union and its ability to invest in the future. And with all the growth particularly those four lenses, every decision we made had to go through one of those lenses to make sure that we're making the right decision for for those four constituents.
Lisa Hochgraf 23:16
That's wonderful. Thank you so much, both of you, for being here today.
Bill Kiss 23:19
You're welcome.
Jeff Shewfelt 23:19
Thanks for having us.
Bill Kiss 23:20
We enjoyed it.
Lisa Hochgraf 23:23
Thank you for taking time out of your busy schedule to listen to today's episode of the CUES Podcast. And many thanks to Jeff Shewfelt and Bill Kiss for sharing such great perspective on credit union mergers.
Lisa Hochgraf 23:35
To read the show notes for this podcast and get a full transcript, please visit CUmanagement.com/podcast 130. You can also find additional credit union specific content on CUmanagement.com.
Lisa Hochgraf 23:50
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Lisa Hochgraf 24:12
Thanks again for listening today.
Lisa Hochgraf 24:15
CUES is an international credit union association. CUES champions and delivers effective talent development solutions for executives, staff and boards to drive organizational success.