LANGLEY, B.C., Canada—A fundamental, cultural shift within First West Credit Union here is helping to chop costs across the enterprise and improve its efficiency ratio.
At the same time, the funds are being redeployed into a broad number of initiatives aimed at driving new growth at the (CDN) $7-billion CU.
Most of Canada’s credit unions have expense ratios in the 75%-90% range, even as the big five banks in the country operate far more efficiently, including RBC, which leads the way with a 47% ratio.
In the case of First West, less than five years ago its efficiency ratio was at a high 88.8%. By 2011 it had reduced that to 76.2%, and it is currently at 73.8%.
“Historically we have dismissed bank efficiency ratios and said their values aren’t in the same place as ours. But I wonder if that isn’t an excuse for us not to be as efficient as possible,” suggested Brian Bevilacqua, communications manager with First West. “Why do banks seek efficiencies? To benefit their shareholders. Who are our shareholders? Our members. Are we being a bit disingenuous in not also talking about efficiencies as much as we should.”
First West began talking about efficiencies by starting at the top with a new expense tracking systems that monitors every line item. “We required employees to submit a mini-business case any time they wanted to make a big purchase,” said Bevilacqua.
The second big step it took was reviewing its procurement practices. “We realized we weren’t keeping our suppliers as sharp as they could be,” he said.
Over the past few years First West has cut $50,000 out of expenses for group benefits, $79,000 in statement printing costs, $200,000 in office furniture and a significant $500,000 in telecom costs (with the latter Bevilacqua said the credit union found it had 130 different telecom contracts).
Cost-Cutting Culture
But expense management driven by senior management alone wasn’t sufficient, said Bevilacqua “Everyone in the credit union needs to be involved in finding efficiencies. We realized we needed to transform our culture.”
To that end it began putting staff through Lean/Six Sigma training to begin uncovering small, incremental areas for improvements. About half the First West staff has now completed that training.
“So far we have seen some significant results; we estimate we have saved $600,000 and 15,602 hours of employee time since introduction,” said Bevilacqua. “The second key thing we did to address efficiency in our culture was to address expenses. Expense reduction is not the most exciting topic to talk about with employees. We wanted to create a culture where employees were comfortable bringing forth an idea. We offered an iPad 3 to anyone who could bring in a suggestion to save us money.”
Expense Enforcer’
A series of internal videos modeled on Reebok’s “Terry Tate: Office Linebacker” spots that use an employee named Terry Thomas dressed as a hockey goon and titled the “Expense Enforcer” have been used to inspire staff to help reduce costs. “We achieved about $250,000 in expense reduction in a simple campaign that had almost no budget. I would suggest many of your employees have ideas—it’s a matter of making it fun and comfortable,” said Bevilacqua, noting one employee’s suggestion has led to savings of $75,000 annually on just coffee alone.
The funds have been redeployed at First West to introduce new accounts, new technology, an overhauled website, to build new branches and to invest in 30,000 hours of employee training. It has also donated $1.8 million to local communities.
“We’ve 12,400 new members in past two years by shifting our spend and investing in things that matter,” said Bevilacqua. “If we want to have a sustainable movement in the future, being more efficient enables us to do more of what makes credit unions what they are.”
