Advice On Measuring Success, Members, The CU, & More

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Several experts had advice for attendees at Mid-States Financial Strategies Forum here. Below is a look at some of the information that was shared.

Productivity Vs. Success

Are productivity and success related? Credit union industry pioneer Ed Callahan, former CEO of Patelco Credit Union and chairman of NCUA, said the answer, not surprisingly, is yes, but the data supporting this response sparked a lively, pragmatic account of what drives industry profits.

According to Callahan, there are two key success factors for credit unions in attracting and retaining members: rates and convenience. He added pointedly that he uses the term "convenience" to mean convenience for the member, not convenience for the staff.

Callahan also stressed that the culture of the senior team is vital to success, and that it should promote productivity, efficiency, innovation and cooperation. He recommended making productivity pay off by implementing salary and bonus provisions so that profits directly benefit employees. Productivity is more than a cluster of measurements, he asserted. To maximize productivity requires that the CEO demonstrate a drive to take action and commitment to staying the course, he added.

Creating High-Performance CUs

In remarks aimed at how to create and sustain a high-performance organization, Nathaniel Boughton, president of The Performance Consulting Group, presented models for understanding the marketplace and creating effective companies.

"Strategy," declared Boughton, "can be either evolutionary or revolutionary in creating high-performance organizations." Which theme is dominant can vary during a company's lifetime. However, regardless of the current phase, corporate leadership can control the development of the organization's culture and behavior and must nurture an environment marked by effective and consistent execution in many capacities.

Using models to illustrate how companies achieve success in the marketplace, Boughton presented research showing that only 25% of growth initiatives create sustainable revenue. The findings also indicate that certain "best practices" are common among best-in-class companies, including a drive for results, people development and conceptual grasp/big-picture awareness.

Measuring Member Segments

Robert Lawhead, president and CEO of Raddon Financial Group, demonstrated to participants that productivity is measurable.

Lawhead advocates that every credit union segment its membership and measure their profitability, using both inside data and industry figures.

He urged credit unions to understand what are the demographic characteristics of profitable members? How can credit unions cement the customer relationship and promote cross selling? What is the cost of inactive members? "Moderate" and "convenience" users of credit cards may actually be a drain on profits, Lawhead warned.

The Economic Forecast For 2005

CUNA VP-Economics and Statistics Mike Schenk offered his insights into the economic outlook and planning for 2005 as well as the election's impact. "How will the election influence 2005? Not much," he answered.

Setting the stage for economic analysis with a look back at the nineties, he observed a 10-year economic miracle characterized by "consumers spending like crazy," government spending restraint, strong business investment and expansion of world trade. A "weird" downturn followed, with a $7 trillion decline in stock market wealth, 9/11 introducing a series of national challenges and relatively ineffective policy, yet he noted consumers kept spending.

Schenk's forecast for credit unions included slower savings (and asset) growth, healthy loan growth and an increasing loan-to-share ratio, continued high asset quality and healthy (but lower) earnings with stable net worth ratios. He also reported ominous signs of a housing price bubble, though the extent varies by location and market.

Three Perspectives On Biz Services

Larry Middleman, president and CEO of CU Business Group, which offers small business services that credit unions can then offer their members, discussed best practices in business services from three perspectives: the business owner, the credit union, and balance sheet management.

In marketing to small business, being connected with the community is the most important step to success. The credit union and its CEO must create a vibrant presence, he advised.

"Networking only with other credit unions is not the answer. Then we are just talking to ourselves. Get in front of your potential clients by networking with business organizations outside our industry," urged Middleman.

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