SPOKANE, Wash. — Numerica Credit Union here believes it has hit upon the right balance in managing and eve cutting facilities-related expenses and still delivering service that drives growth.
Jennifer Lehn, EVP with Numerica and chair of CUNA's Operations, Sales & Service Council, reminded, overly aggressive expense cuts have potential for being counter-productive.
"Certain expenses can be cut in the short-term, but in the long term reinvestment will need to take place," she said. "A simple example is expenditures for training and networking. Yes, these can be reduced/eliminated for a short time, but the industry will suffer if the trend continues for many years. At Numerica, we've moved to making branch staffing decisions based on objective, numerical data. For example, we determine if a teller vacancy needs to be filled or held open based upon transactions-per-teller per month historical data. Similar types of metrics exist for loan originations and account opening. We've also been aggressive regarding our contracts. Can we modify what we receive from vendors and save both of us money?"
All those questions must be run through another metric, according to Lehn: "What is truly the effect on the member?" "If you focus too much on where you cut costs, do you lose sight of where you can make money?," asked Lehn. "In an economy like today's, sometimes it does seem easier to cut expenses than increase revenue. However, at Numerica we've been very careful not to jeopardize those areas that strategically are important to revenue in the future. For example, we've actually increased costs related to business services because we consider that a key to future success."
Squeezing out value in a CU is a different story, Lehn said, as value can take many different forms.
"We have increased value of our staff by moving people around to where they're needed most," she said. "That might be from a low transaction branch to a high one, from a branch to the collections or mortgage department, etc. We've also asked staff to assume multiple roles."
On a monthly basis, Numerica generates branch profitability statements.
"This is an investment of time, but we feel this is the only way we can track where improvement is needed and verify our progress," Lehn said. "This year, in addition to tightly controlling staffing levels, we have started originating first mortgages in our branches. Our staff has the time, and members certainly have the need. It's a win-win for the credit union."
For Numerica, the strategy is paying dividends.
"We've reduced our operating expense to assets ratio by approximately 50 basis points, from the 3.2% range down to around 2.7%," she said. "At the same time, we've originated more loans in the aggregate than ever before in our history, increased deposits about 28% annually, and increased membership by 9%. Yes, we had higher than expected loan losses, and the same regulatory assessments as others, but our members have benefited from their association with us in very tangible ways."
