Many credit union management teams and boards of directors soon will sit down to do their strategic planning for 2009 and beyond. Whether in their own offices or a remote location, regardless of asset size, all will be confronting internal and external issues related to competitiveness and long-term viability. On this page and the pages that follow, Credit Union Journal provides insights and tips on strategic planning from experts across a number of disciplines. What do you think? As always, Credit Union Journal invites and encourages your feedback.
BOOST INVESTMENT INCOME
Name: Steve Coale
Title: Managing director
Company: Amherst Securities Group, LP
Info: www.amherstsecurities.com
Advice: A slumping economy will lead to more deposits, and CUs will have to look more toward investments to maintain spreads, and strategy sessions should address how the investment portfolio can become a more important earning asset for the balance sheet.
HOUSTON–“The bottom line is that loan demand is not ticking up anytime soon,” observes Steve Coale. “Deposits are going to continue to come in, and investment portfolios are going to get bigger and bigger. That trend is going to carry into and through 2009.”
Coale contends that when deposits increase, CUs try to “loan themselves out of the situation.” But with lending expected to remain flat, CUs are going to have to address investment strategies during 2009 planning sessions.
“Credit unions...don’t take the time to learn how the investment portfolio is a very important earning asset for the balance sheet,” Coale said, adding Amherst is positioning clients for what it expects will be rising rates at some point in 2009. “Credit unions should have a fairly high concentration of agency annual adjusting ARMs. We would also include the AAA, private label, annual adjusting ARMS with probably a 30% mix of one-and-a-half to two-year, fixed-rate, high cash-flow CMOs.”
Even though Coale predicts there is a 60% chance the Fed will cut rates another quarter point before year’s end, rates will rise next year, he said, and recommends avoiding longer-term fixed-rate investments.
Coale also warns against callable agency bonds. “Many credit unions load the boat with callables. We don’t recommend callables.”
A deposit influx has CUs keeping money in overnights and CDs, Coale said, which is not producing the yields needed. “One of the greatest concerns we have with (CUs) is the lost-income opportunity by not making the most of an investment portfolio. It’s an invisible loss the board never sees.”
TARGET THE BANKS
Name: Jim Schneider
Title: CEO
Company: Schneider Sales Management
Info: www.schneidersales.com
Advice: While long-range goals are essential, make sure 2009 planning discussions address current opportunities to take business from banks. It’s time to focus and pick targets, and that goes for branch expansion, too.
GREENWOOD VILLAGE, Colo.–“A lot of our credit union clients are targeting banks that are having trouble,” says Jim Schneider. “I am seeing this more and more and hearing that now is an opportunity to take customers and staff from banks that are struggling in the lending area. Credit unions are picking banks and going after them.”
Schneider believes the time is right to target banks because they are “distracted. Especially the regional banks.”
Many of Schneider’s clients are emphasizing service quality with their marketing approaches, which do not directly claim credit unions are better than banks. Some of the banks’ service levels are going down due to cutbacks and lean staffing,” Schneider said. “We’re seeing credit unions employing service guarantees.”
Schneider suggested bank cutbacks also affect staff satisfaction, making it time to persuade talented employees to come to the CU in 2009.
“Where they know there are good people, credit unions are targeting bank employees on a one-to-one basis, talking to them when they see them in the community.”
But zeroing in on the banks is just one strategy, according to Schneider, who also sees the importance of focus in the overall approach to growth, especially branch expansion.
“Rather than considering several branch expansions over the next couple of years, credit unions are looking more toward one, good branch expansion that can serve as a model for future growth, taking into considering optimal location as well as design,” he said, adding CUs should not just throw “stuff against the wall...Let’s rethink this ‘grow, grow, grow’ at any cost mentality. Let’s grow smart.”
LEVERAGE TRUST
Name: Nicolette Lemmon
Title: President
Company: LemmonTree Marketing Group
Info: www.lemmontree.com
Advice: Strategic plans should address the opportunity a difficult economy presents to stay in front of members with a message of trustworthiness, and should not include marketing cutbacks to meet bottom-line concerns.
TEMPE, Ariz.–“In a potentially recessionary time, you need to revisit where members are coming from in terms of their community, monetary, and social issues,” suggests Nicolette Lemmon. “What are the threats facing them–joblessness, cutbacks, gas prices? They also have obligations, such as loans, to take care of.”
Lemmon believes it’s time to “get into the minds of members”–stepping away from just looking at products and services–and determine what’s going to help members trust the CU to assist them with those threats and obligations and survive a difficult economy.
Some of that knowledge comes through market research, MCIF database analysis, and focus groups, she said. “I think you’ll find there is a huge amount of trust built up in credit unions now,” Lemmon suggested. “There is a large core of members and people who assume credit unions are trustworthy, and that needs to be part of credit union messaging.”
That means marketing budgets should not be slashed to accommodate shrinking margins. “Those businesses that continue to market during a downturn and stay in front of customers are the ones that thrive and take off once the marketplace turns around,” Lemmon said. “So the strategy for 2009 could be to grow at the same pace as 2008. It might mean holding your own for the time being...In terms of costs, it’s not about slashing but making sure you maximize every dollar you have in the best way.”
For 2009, Lemmon reiterated, the trustworthy financial message plays well with consumers. “It will help with retention and attract those looking for an honest financial that understands their needs.”
PLAN FOR SUCCESSION
Name: Todd Lane
Title: CEO
Company: Executive Compensation Solutions
Info: www.ecs-m.com
Advice: With a large number of CEOs approaching retirement age, CEO succession planning and retention should be seriously discussed during 2009 strategic planning sessions.
LOS ANGELES–“We are estimating about 3,000 credit union CEOs will be reaching retirement age in the next five years,” explains Todd Lane. “We think it’s important that credit union boards begin planning for that change.”
That’s why succession planning needs to be part of 2009 strategic planning discussions, Lane insisted. “Boards need to create plans for ways the credit union will quickly and effectively address this upcoming shift,” Lane said. “I think too many credit unions wait until the CEO announces he is retiring, or he retires, before taking action. That’s not strategic.”
A credit union needs to determine where the replacement will come from and then build plans around the decision. “Will the talent come from inside the credit union?” Lane asked. “If so, does the credit union have the leadership programs in place to bring up that candidate? Or will the talent come from outside?”
If the credit union is to attract and retain top talent, Lane suggested structuring an attractive benefits and retirement package. “The packages have to provide supplemental retirement benefits. A supplement to the 401K and pension, if the CU has a pension program.”
Developing a long-term benefits package is one of the most important steps the credit union can take today, Lane emphasized.
“Strategically this is the right thing,” he said. “Not doing so creates risk. There will be no consistency in leadership if the CEO is jumping every three to five years. Retention of executive talent ought to be addressed in strategic planning sessions with the same level of importance as growth and ALM strategies.”
START BY USING YOUR KNOWLEDGE OF MEMBERS
Name: Arp Trivedi
Title: VP of strategic planning
Company: DEI
Info: www.dei-corp.com
Advice: Strategic plans should be centered on the credit union knowing its members and its market well to make the most of promotional dollars in a tight economy. Strategies should also reduce organizational complexity to allow for the highest operational efficiency.
CINCINNATI–With the economic challenges facing credit unions, understanding the types of members that are bringing in the most profitable business is necessary to help any credit union spend marketing dollars wisely and grow, offers Arp Trivedi.
“I want to know who my best members are, and I think credit unions are understanding this through MCIF data,” Trivedi said. “But what they may not be doing a good enough job of is asking, ‘What do these members look like from a general market perspective? What type of lifestyle or psychographic category do they fall into? Now let me go find these same consumers in the marketplace.’”
Trivedi feels the strategy should be discussed most critically during community credit union planning sessions, “But everyone can utilize this logic to understand who are their best performing members and how to find more of them.”
A streamlined organization also drives growth, according to Trivedi, who recommends discussing aligning the credit union under three “simple” buckets: sales and service, enterprise-wide support, and accounting and finance.
“You have to be designed to compete, and now is the time to do it,” advised Trivedi, pointing to economic pressures facing the financial industry. “Sales and service is anything that touches a member or fulfills a member request. Enterprise-wide support are those functions that run the gamut of the business, such as IT and HR. And then, of course, by the nature of our business, we have to have accounting and finance functions.”
Trivedi contends that often credit unions have not simplified organization structure due to “personalities and territories. For one reason or another we’ve made these really difficult organizations and we don’t really need to. No matter how large you are, this structure applies.”
Strategies around differentiation should be discussed as well, Trivedi suggested. But differentiation should mean more than standing out in the local marketplace.
“You should seek out relevance as opposed to just differentiation. Ultimately you want to position yourself so when members pick up the phone to call someone about a financial problem, they call you. Even if you don’t always have the answers, you want to have made your institution so relevant to your members that they call you first. You want to be top of mind. Standing out today is more about relevance and engagement.”
BEGIN WITH FOCUS ON NET INCOME OPPORTUNITIES
Name: Dennis Dollar
Title: Principal partner
Company: Dollar Associates, Birmingham, Ala.
Info: www.dollarassociates.com
Advice: Strategies to increase net income should be a high priority with credit unions and CUSOs may be the way to improve the bottom line, advises Dennis Dollar, who also sees merger preparedness, business lending, and membership growth as important discussion topics within 2009 strategic planning sessions.
BIRMINGHAM. Ala.–“The economy is certainly the backdrop upon which any strategic plan will be painted,” says Dennis Dollar. “With the tough market on loans and investments right now, credit unions are looking at any way to increase income, and is there perhaps some opportunity in the CUSO area. If you look at the highest-producing credit unions in the country from an ROA perspective, they are usually quite active in the CUSO market.”
Dollar acknowledged that many CUs seek CUSO arrangements to drive economies of scale, which is beneficial in today’s tight economy. But many credit unions are solely owning CUSOs and not looking necessarily at managing expenses, he said. “It’s about return on investment...CUSOs allow credit unions to extend some of their services beyond their field of membership.”
Dollar said he has not been in a planning session this year that did not include talk of CUSOs.
“Credit unions are making lists of the types of products being offered through CUSOs and then doing some strategic thinking as to whether there is a market for that product in their communities,” Dollar said. “I have seen clients that have put everything on the table from investments, to insurance, to real estate, and auto buying and leasing.”
Talk also has turned more seriously to business lending strategies, Dollar said.
“Business lending is back on many agendas. I think over the years many credit unions have said, ‘We’ll hold that as a future issue.’ But as markets get tougher and margins tighter, business lending is something many realize they should look at.”
Dollar reminds that his company does not “prescribe” a CU’s strategic plan, and works with credit unions to develop what’s best for their needs. But what should at least be discussed, given market conditions are mergers.
“Strategically, a credit union has to determine its position on merger,” Dollar urged. “Are they open to a merger. Closed to it? Are they willing to take a merger as long as it does not reduce their net worth? I encourage all of my clients to at least have a strategy on mergers, if for no other reason but to empower management to know which types of merger opportunities to bring back before the board and which ones to disregard.”
NEW ON DASHBOARD
MADISON, Wis.–CUES and Strategic Radar of Conshohocken, Penn., said that PSCU Financial Services, Financial Service Centers Cooperative and Credit Union 24 are the latest to join in their collaboration aimed at gathering insights from more than 50 industry leaders on 12 important trends and strategic success factors shaping the industry. New market developments and learning from the group’s work is published via a web-based “dashboard” that provides a medium for continuous dialog on strategic issues and market insight, according to CUES. Subscribers to the dashboard also receive weekly e-mails highlighting new developments affecting the future of the industry.
For info: www.cues.org and click on Strategic Radar under the Quick Links drop-down menu.
PLAN FOR WHO YOU SERVE–AND DO NOT SERVE
Name: Barb Kachelski
Title: SRVP and COO
Company: Credit Union Executives Society
Info: www.cues.org
Advice: Strategic plans can only be effective when the credit union clearly understands who it serves–and does not serve. Once those hard decisions are made, the organization’s entire efforts, from marketing to community involvement, must reflect those choices.
MADISON, Wis.–“It’s back to basics,” insists Barb Kachelski, “which is always a good idea for strategic planning. The credit unions that are enjoying strong performance are the ones that have clearly identified who they are working to serve and work to differentiate themselves to that market.”
Conversely, credit unions having the “hardest times” are those attempting to be “everything to everyone,” she suggested. “Once you know the customer or member you are trying to appeal to, it becomes pretty obvious what you need to do from a strategic standpoint.”
Kachelski recommends that in 2009 CUs identify who they do not serve, as well.
“If you cannot say who you do not serve, then you really don’t have a strategy,” Kachelski contended. “That sounds harsh, but if you are looking at any successful company, large or small, they know who they were formed to serve. Putting who they serve into a negative makes credit union leaders think harder about their objectives. Because it’s pretty easy to say who you serve, but that’s not clearly making the difficult choice of who you do not serve.”
Once the CU makes those strategic membership decisions, those choices must “ripple” through the organization,” Kachelski said. “The decisions should be reflected in marketing messages and in the things the credit union does in the community. It needs to show up in all the plans they have for next year.”
Kachelski recognizes that it’s difficult for CUs–and it takes a strong leadership team–to make hard choices and exclude members and markets. “I think a lot of times, as a not-for-profit, the thinking is that you take on all-comers. So focus is a special challenge for every not-for-profit. It’s a balancing act. Some do a good job of it. Some don’t.”
A tight economy has put a premium on deciding whom to serve, said Kachelski. “We’re seeing a lot of credit unions increasing productivity measures,” she said. “With margins being so small now, this is a chance to see if the house is in order. Maybe some things are not quite as efficient as they should be, and these issues really didn’t show up when times were better.”
SEMINAR SERIES SET
SAN DIMAS, Calif.–Looking for insights for 2009? WesCorp has released the remainder of its 2008 schedule for “Beyond the Balance Sheet,” a monthly, web-based, 30-minute seminars. Each program in the series is complimentary and can be accessed by registering at www.wescorp.org. All programs are viewed on WesCorp’s website, either at the actual time of the webcast - the second Tuesday of each month at 11 a.m. Pacific Time – or any time thereafter. The remaining schedule: Sept. 9, “On Being a CU In Today’s Marketplace,” with Tom Glatt, Sr., CEO of Continental FCU; Oct. 14, “Tapping The Power Of Your Brand,” with Teresa Freeborn, CEO of Xceed Financial Credit Union and Kevin Lytle of WesCorp; Nov. 13, “Living the Credit Union Values,” with Tom Decker, National Program Director with the CU Center for Social Impact Management, and Dec. 9, “Dwight Johnston–Up Close And Personal,” with WesCorp VP-Market & Economic Research Dwight Johnston.
PUSH INTO MORTGAGES
Name: Dennis Hedlund
Title: President
Company: iEmergent
Info: www.iemergent.com
Advice: Capitalize on banks’ subprime woes by increasing mortgage lending activity to attract new members and establish long-term relationships. Emphasize credit unions’ sound lending practices and leverage the CU’s presence within the community. But move quickly, as the window of opportunity to take mortgage business from banks will likely be short.
DES MOINES, Iowa–“I believe mortgage lending is a key driver of long-term relationships,” suggests Dennis Hedlund when asked about CUs planning for 2009. “When it comes to developing and expanding a business over time, a credit union really needs to have mortgage lending as a franchise driver.”
No time is better than the present to build the strategy into plans, Hedlund recommended, because banks are not focused on mortgage lending with the subprime crisis creating a lot of internal strife. “There is a window here, but it will not be long,” advised Hedlund. “The big banks are not going to give up their market share willingly and just walk away.”
The message to consumers should be around credit union soundness and “how they run their business with good, common sense...Take the high road to get the business from banks,” Hedlund said.
Once the credit union gets the mortgage, Hedlund insisted that it must make sure it has plans in place to build long-term relationships. “You need very clear strategies around how you will use that mortgage event to build a strong relationship,” Hedlund said. “You don’t want that member refinancing elsewhere when banks begin to refocus on mortgage lending and offering aggressive rates. You don’t want them leaving just for rate. If they do, you will lose a key relationship driver.”
One way to capture mortgage business today is to “out-local” the banks. “Right now you can play the local card, especially since banks are seen as these gargantuan services companies.”
Hedlund said the strategy won’t strap the marketing budget, either, saying credit unions should reach out to employers, and get involved in more community events. “It will cost you more employee time, but not a great deal of money.”
To make efficient use of advertising dollars and attract more mortgage business, Hedlund recommended closely examining local markets to determine where mortgage lending is growing.
“You want to know the size, density, and growth rate of mortgage lending in different neighborhoods,” Hedlund said. “When I speak with financials, very few can ever tell me about mortgage growth rates within the city. But this is very important now with this short window...You really have to be focused on where you are going to expand.”
USE ACTIVITY BASED ACCOUNTING
Name: Michael J. Kohl
Title: President/CEO
Company: Kohl Advisory group
Info: www.kohlag.com
Advice: You can’t address costs unless you know what true costs are. Make sure the credit union addresses activity-based costing to gain a sound understanding of what is driving expenses.
SCOTTSDALE, Ariz.–“In traditional cost accounting you ask people to keep tabs on the time they spend working on something,” says Michael J. Kohl. “And when you’re done, you may have the cost for the effort, but you may not have more than a mound of paper.”
That’s why in strategic planning, Kohl is an advocate of activity-based costing, or “ABC.” Using ABC, functions such as originating a loan are broken into activities–application, approval, funding, etc. “By costing out these activities and finding why a particular loan type cost more than another, we are not only able to tell it’s a high-cost product, we can say why.”
Kohl believes credit unions underutilize ABC.
“They do not utilize activity-based costing to the extent that they should,” Kohl said, adding that ABC is his company’s “mission. We have credit unions from $75 million in assets up to the $35-billion Navy FCU using ABC. Those who use it say it explains why they are incurring costs. You can’t very well manage something if you don’t understand why it’s costing what it is.”
Kohl says ABC exposes “non-value-added activities,” citing a very common example of how CUs can unknowingly waste money.
“Having two people open the contents of ATM envelopes is non-value-added,” explained Kohl. “If the member says he put in $100 and both employees confirm there was only $80, if the person is a long-standing member, you’ll give it to him anyway. If the person has shown a pattern of claiming problems with deposits, you won’t give him the money. You were going to take the same action whether you had two employees in the room or one. You just doubled the cost of opening that envelope.”
Kohl said that when credit unions spend more on an activity or product than they realize, it’s not a result of a “blind spot. It stems more from a certain mindset. You need to be aware that efficiency and effectiveness often contend with each other. When that happens, effectiveness should prevail. If you use a new loan origination process that’s a lot less expensive but misses highly profitable loans, then it’s costing the credit union more to be efficient than effective.”
TO ACCOMPLISH MORE, DO ‘LESS’
Name: Deedee Myers
Title: CEO
Company: DDJ Myers, Ltd.
Info: www.ddjmyers.com
Advice: With concerns about the economy and pressure to drive growth, many credit unions are in a rush to take action. But it’s time to slow down and do the things the credit union does best. While each CU will determine its individual strengths, 2009 strategic planning sessions should begin by addressing sustainability, followed by profitability or growth.
PHOENIX–“Less is more,” offers Deedee Myers, who is concerned that the daily media attention on the struggling economy is prompting credit unions to take on too many initiatives. “Sometimes what I see is that we try to do too many things at once.”
Myers believes it’s time to “examine our competencies and peel away the layers of complexity and see where we want to go. We often offer all of these products and services without taking a look inside at what we are best at.”
An advocate of Michael E. Porter, Myers agrees with the strategic thinker that sustainability, profitability, and growth are keys to business success, and said strategic plans should be built around two of the three. “Pick only two, because it’s impossible to sustain your success by focusing on all three at once.”
To determine what the credit union excels at, Myers suggested “slowing down and hitting the pause button. It sounds simple, and that’s fine. Rest for a day or two. Really think about what the credit union has been doing. How have we been working? What do we want to do? How will we know if we’re successful. Are we healthy and balanced? I am really concerned that as an industry we may be moving too fast and too far, and will stumble.”
Myers’ concern about credit unions moving fast stems from credit unions reacting to the tight economy with new programs, products, and offerings.
“The time is right to determine what our core talents are and how we are going to apply them to either sustainability, profitability, or growth,” she said. “If we don’t slow down, take inventory, and repurpose, we’ll be like the little mouse in the cage running around the wheel, feeling exhausted at the end of the day.”
CONN. LEAGUE’S STRATEGIC PLAN DRIVING SEVERAL NEW OFFERINGS
MERIDEN, Conn.–The Credit Union League of Connecticut has completed what it said was an “in-depth and comprehensive” internal strategic analysis, based on direct input from member credit unions that has resulted in the implementation of a new strategic plan. One result: the formation of “The Connecticut Compliance Solution.”
“In addition to a low-cost, scalable subscription package, all affiliated credit unions have access to a full-time compliance answer person and regular compliance-related updates and newsletters as part of their dues,” the CULC said.
According to the CULC, it has leveraged several key strategic partners in order to address six core areas of support. “This new plan will allow us the opportunity to allocate valuable additional financial resources to programs that support small credit unions, and bolster training and education opportunities for all credit unions, without having to increase dues,” said CEO Dr. Anthony L. Emerson.
Emerson added he expects the plan will result in the CULC seeing an increase in re-affiliations.
A FORMAL PLAN HELPS DEFINE EVERYTHING CU DOES
Name: Bill Minahan
Title: President
Company: BCI
Info: www.bcihq.com
Advice: Make sure the credit union does more than talk about strategic planning. Produce a written document that outlines where the CU wants to be five to ten years down the road and how it will get there.
MILWAUKEE–“In working with credit unions for more than 25 years, one of the things we have noticed is that they often don’t have a strategic plan,” said Bill Minahan. “They have strategic planning meetings and they may talk about strategic planning, but I can’t tell that we’ve ever had someone come to us and say, ‘Here is our strategic plan. Let’s build what we do around it.’”
Without a clear definition of where the credit union is heading, “problems and confusion can arise,” Minahan suggested, outlining four key points to strategic plan development.
* Develop a formal strategic plan–a written document that defines where the credit union wants to go.
* Define what the credit union is going to look like and where it’s going to be in the next five to 10 years: How big will it be? What kinds of products and services will be offered? What markets will be approached?
* Define markets in terms of growth: Can the CU focus on existing members to get more business? Can more members be reached within eligible groups? Can the charter be expanded? What about merger?
* Define growth approaches to each market.
Growth and how the credit union will approach it is key to any strategic plan, and Minahan provided an example of how to best target new members.
“Let’s say a credit union has five counties in which it is eligible to do business,” he said. “We’ll look at each one of these counties, and each city within a county, and measure them in terms of the population types, number of people, and eligible dollars, and then provide a list of the most attractive communities for branching purposes.”
The approach provides the credit union with a blueprint for expansion and helps find cities that “match the credit union’s culture,” Minahan said, adding that population size is also important. “If the credit union is accustomed to doing business in a city of 10,000, we won’t suggest expansion into a city of 100,000 people.”
Determining the types of members that are most profitable to the credit union today also allows the credit union to go after those individuals as it grows.
“We have several different data sources to draw on,” Minahan said. “One of the newest develops profiles of people within communities based on income levels, education, ethnicity, age, and lifestyle. We can target those groups that we know the credit union is already doing well with.”
Staying close to the types of people the credit union has traditionally worked well with is an advantage CUs need to leverage, reminded Minahan, adding that the small credit unions do this well.
“I still believe the biggest advantage credit unions have is their relationship with members and the way staff treats those members when they come in,” Minahan said. “That builds loyalty.”
MAKE SURE MARKET IS PRIMARY DRIVER OF YOUR PLAN
Name: Gee Gee Kaufman
Title: Director, strategic planning
Company: Raddon Financial Group
Info: www.raddon.com
Advice: The steps involved in strategic planning are as important–if not more so–than finished plans. Make sure the planning process is owned by the entire management team and board, and establish metrics to track success.
ATLANTA–“In my view there are a few steps that are integral to any successful plan,” said Gee Gee Kaufman, who outlined four points credit unions should keep in mind when setting strategy for 2009:
* Challenge the current status and business model.
* Reach consensus on initiatives–everyone has to buy into the plan.
* Establish clearly defined tactical initiatives and action plans, assigning accountability, responsibility, and target implementation dates.
* Obtain consensus, commitment, and ownership across the entire organization on action items.
* Establish measurement and tracking programs with key dates and milestones to determine if the CU is on track or if modifications are needed.
Kaufman contends that CEOs sometimes use planning sessions to facilitate their own agendas, leading to creation of a strategy without a great deal of input from the management team.
“One of our basic strategic planning tenants is that there has to be consensus, commitment, and ownership. You have to build it from the ground up,” Kaufman suggested. “Everyone leaves their stripes at the door, and the input from the SVP of marketing is just as important as the CEO’s.”
The Lombard, Ill.-based Raddon recommends including the board, either directly or through interviews, to produce a plan everyone buys into. If it’s the CEO’s plan simply rubber-stamped by the board, staff and the board are less likely to own it, which could affect implementation, Kaufman said.
“The board also needs to understand metrics that will determine success. You have to have tracking mechanisms to hold management accountable and responsible,” Kaufman pointed out. “You need specific benchmarks as to what will be achieved in quarters one, two, three, and four.”
Some of these initiatives are easily tracked with hard numbers for the year. Others might be tracked with a graduating scale, Kaufman said.
“For example, say a goal is to improve net interest margin. Today we’re at 3%, six months later we want to be at 3.05%, and at 3.08% in nine months. It’s as basic as having certain thresholds and expectations.”
When it comes to earnings, Kaufman says Raddon stresses metrics should be around credit quality, operating expenses, operating revenue, net interest margin, and non-interest income as a percentage of average assets.
Finally, before recommending any actions to be included in strategic planning discussions, make sure the market is capable of delivering.
“I believe firmly that the market will tell you what you can and cannot do,” Kaufman said. “So if a credit union embarks on a strategy to get into business lending and commercial banking in a market that’s highly retail, you’re off to a faulty start.”
Kaufman says Raddon’s forte is helping credit unions understand their markets before devising plans. “We have extraordinary market information regarding our clients,” said Kaufman, who believes Raddon is a leader in helping credit unions understand local markets to produce effective strategies. “Most importantly, it’s about what’s happening in your footprint.” –Ray Birch (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com
