BONITA SPRINGS, Fla.-Problems in strategic planning at credit unions often begin at the top, and then are compounded as they are filtered to the rest of the organization, if they filter down at all.
But there are strategies for strategic planning that can significantly improve its effectiveness, according to Michael Hudson. And those are strategies that credit unions avoid at their own peril, he observed.
Hudson, who said he is often struck by how rarely board chairs and CEOs take time to sit down and speak to each other, spoke to the issue of "Leveraging the interdependence of strategy and culture to create credit union success."
That interdependence, said Hudson, who is president of Credit Union Strategy in Rehoboth Beach, Del., requires rethinking three things: mindset, questions, and directions.
"With mindset, I want you to think about how you respond to ideas," Hudson told CUES' CEO/Chairman Exchange. "With ideas, some people think, 'How would that work for me?' Others say, 'That wouldn't work for my credit union.' With questions, you need to be asking the kind of questions that will put your credit union on the pathway to the next level of success. And the third thing to think about is directions; thinking about some of those decisions that it's time to make for your credit union. These are the things that are really important, but are hard to do."
Hudson said that in his work with individual credit unions he has been exposed to some "fantastic" cultures, while other credit unions appear never to have given their culture any thought.
"In my mind, strategy and culture matter more in credit unions now than ever before," he said. "At the high, strategy and culture matter, because if you go on a retreat and define the best culture on the planet, and then you take it back and your people don't own it, then it doesn't matter."
FOM Changed, Board Didn't
What many boards and CEOs fail to realize, he said, is that changing fields of membership have changed the members being served, even though the board's demographics have never changed. "That has changed the demographics of our employees, too. Older employees see new employees as 'them,' the ones who don't get it; the ones who say the new employees don't understand the culture."
When Hudson asked a room of about 200 people how many served a single FOM, just one hand was raised. Putting a slide in front of the audience that showed the standard lifecycle of a business (start-up, growth, maturity, decline), Hudson said credit unions fall under "maturity."
"The goal is to continue the growth. To grow your credit union today what do you have to do? Something different than what you used to do."
As an example, Hudson cited Apple and its newest product line. "Instead of being a computer company selling computers, they created an iPhone and changed the way you live your life. The iPhone is a game changer."
The challenge, he noted, is no secret: financial products and services are generally viewed as commodities. "A credit card is a credit card is a credit card, unless you can show me why it's different," he reminded.
"Who ever thought you'd have books and music right here in the palm of your hand?" Hudson asked. "That's a business model innovation. I carry in my briefcase more than 500 books, all on my iPad. Are you starting to think about how to change your credit unions business model? You've got some people saying 'I've got to have bricks and mortar.' And others are saying, 'No, put it on my smartphone, or I will not do business with you.'
When Hudson again polled his audience for how many believe their credit union has a great commitment to culture, about 25% of hands were raised. It's at those CUs, he said, where "you live it and you breathe it. You match words and actions, your talk and walk go together. You define your culture, you build it and you sustain it.
"When you don't have that commitment, there is a mismatch. The words and actions don't match. What's the first thing to be sacrificed? Trust. When that disappears, the organization falters and it starts to flounder. People don't know what they are doing or who to trust? The employees feel it first, then the members start to feel it. Do your employees know why they work there? Do you think employees at Amazon know why? In Amazon's case, it's the slogan: 'Amazon, and then you're done.'"
Hudson urged every CU to keeping in mind three primary points when it comes to strategic thinking:
* Think differently. "How do we define the business we are in? Get everyone to write it down at the next business meeting or planning session. How many of you have looked at your business model carefully? We've got to have the infrastructure to deliver something differently."
* Define Your Difference. "What makes the credit union different and better than the relevant competition? What do you have that makes you stand out? It's not your brand or your logo."
* Decide What Not To Do. "Given our resources and our market, which opportunities should we pursue to grow our business?"
The Tough Question To Ask
The hard question every credit union must also ask itself is the most fundamental, Hudson said: "What's the value proposition that your credit union is bringing to the market you're serving? What makes me want to sign up? I love this industry, but the fact we're a credit union is not enough. We have to take people by the hand and make them see here is the value proposition? Can it just be we give higher rates on deposits and lower rates on loans? No."
Hudson added that despite the democratic nature of credit unions, not everyone can be treated equally any longer, and he is a strong proponent of risk-based pricing. He further noted that every CU must realize that "selling is service."
The standard business model of "build a branch and they will come" no longer works, he said. Instead, Hudson advocates:
* Analyze the data. "When you look at the changes in the roles of board chairs moving forward, one of those roles has to be analyzing the data. Where are those members coming from. One thing is that boards are not reflective of the membership? Are there any 18-year-olds on the board?"
* Spell out the focus that makes you different or distinct from other businesses. "Identify the way each business leverages their knowledge, people, locations, systems, process, capital, etc to capture a distinctive defensible and sustainable competitive advantage. Does your CU have that? When someone says they are a member of your credit union, do they have to explain why?"
Not Leaving Their Square
All of that, however, still means overcoming some basic human challenges. "I've been in planning sessions with clients and a segment of the board says, 'This is what we're going to do.' They are in their square and they aren't leaving it. They have done no research, no data evaluation, and they are ready to jump to implementation."
After a decision is made, Hudson said it's time to define, develop, take action, evaluate and redirect.
"That's the essence of the strategy process," said Hudson, who after polling his audience found about 20% said they have ongoing strategic discussions. "Put a 15-minute session on it on your agenda every month, and rotate it among board members. Boards must think more strategically," Hudson reminded.
Strategic planning, reminded Hudson, is a 7-10-year process (vs. tactical planning, which is 3-5 years or operational planning, which is within one year), should include social media, even if many of the board members to whom he was speaking never use it. "Whether you choose to play in this arena or not, you cannot afford not to be paying attention to social media," he said. "Are you paying attention to Yelp? Have you set up Google Alerts for your credit union's name, your name, your board members' names, and your management members' names. Social media can break a business. You've got to monitor it."
As a final reminder, Hudson noted that strategic planning is all well and good, but it's mostly worthless if it doesn't filter down through the organization. "If I talk with a front-line employee in most of your organizations, chances are they have no idea what your strategic direction is," said Hudson.
"But people want to be part of something bigger than them."
Hudson said every CU should answer:
* What do you stand for? "It's not a sign on the wall. Does every employee know what you stand for, and do you communicate it on an ongoing basis?"
* How do you do things? "What is your core approach to people, promises and problems?"
* What don't you tolerate? "Do you stand up for what we say and believe by taking the necessary actions to demonstrate that we live it?"
"A lot of credit unions see their annual meeting as time to set financial targets and goals for next year. They don't address the big picture," said Hudson. "How many of you after your annual planning session make a concerted effort to go back to your credit union and share the strategy with everyone? It's frightening how few hands just went up. If you've defined your strategy and long-term vision and know where you're headed, there's a mismatch if the employees don't know."
