How CUNA Mutual Took A Long, Hard Look At Itself

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Since joining CUNA Mutual in 2005, President and CEO Jeff Post has been leading a review of the staid old insurance provider in ways that perhaps only an outsider to credit unions and the organization can. Recognizing that just because you dominate the market doesn't mean you satisfy the market, the review has led to realignments of product lines, the opening of a large, national customer service center in the Dallas/Ft. Worth area, some difficult self-analysis about its customer service, and even more painful staff reductions.

Below, in the first of a series, Mr. Post answers questions I posed about the overhaul. Along the way, his advice becomes good advice for any credit union that has also seen tremendous growth but likely hasn't looked under the hood in a while - and which may not want to.

1. What led to the review of CUNA Mutual's operations, and would you have launched it regardless of what the balance sheet might have showed?

Post: CUNA Mutual had a strong balance sheet when I joined the company. This afforded me with the proper time to complete a full 360-degree assessment of the company-understand what customers were saying, what employees were saying, get input from credit union leaders, examine trends and results, and look at the opportunities we had in the future.

I've used this analogy before: I can give you directions to get to Chicago ... ONLY if I know what your starting point is. Before we could build a plan for CUNA Mutual's future, we needed a comprehensive understanding of our current state. In direct answer to your question, we undertook an overhaul of our operations because our assessment found opportunities for significant expense savings. These savings can now be applied to lower rate levels, higher reimbursement rates, or investment in other products/services to support credit unions.

2. Where did you start, and was that decision driven by CUNA Mutual's specific situation?

Post: I started with CUNA Mutual's customers; my belief is you always start by understanding what your customers need and expect from you. I understand what makes insurance and financial services companies successful. Even though I had been a credit union member for more than 20 years, what I didn't have when I joined CUNA Mutual was a strong understanding of the credit union market or the credit union movement. So it was essential that I spent time listening to and learning from our customers-both about CUNA Mutual as well as about the credit union market.

3. Can such a review be done by an insider, or does it require an outside perspective?

Post: Either approach can work as long as you leave your biases at the door and keep an open mind. I think credit union leaders opened up to me because they are interested in seeing their insurance company, CUNA Mutual, survive and thrive. They also understand that CUNA Mutual plays a key role in keeping the credit union movement strong.

4. What, specifically, are you seeking in such a top-to-bottom review? In terms of redundancies, given that the same process may have different names within the organization, how do you identify them?

Post: CUNA Mutual has a strong history. We have great name recognition in credit unions. And credit unions want us to be successful. We had a number of positive building blocks to work from. However, I was convinced the company could be much more-and that would require building a new company ... a company more effective, more efficient, easier to do business with, and with best-in-class products across the board.

How do you improve efficiency, effectiveness, etc.? I think it starts with the board and senior executives establishing a clear and aligned direction for the company. In our case, we developed four foundational initiatives to drive more than $200 million in improvements in our company in a three-year period. Our senior leaders will personally drive some of this improvement. However, the majority of the improvement will come throughout the company-managers working with employees to identify how we can conduct our business better, use new models, utilize partners, increase productivity, and eliminate redundancies.

No organization - especially a large one like CUNA Mutual - should expect to fix expense or redundancy issues overnight. With clear direction and goals, you can identify quick wins. More importantly, we're working to establish a culture where we continuously improve-where employees regularly identify and eliminate redundancies, improve efficiencies, and demonstrate innovation in solving problems.

5. When someone hears "operational review," the first thought is "expense review." Is that, fundamentally, what the process is, or is there more to it? Are there abstract issues identified that do not have a budget line but still are important?

Post: There's much more to it. Do we have the right structures, technology, people, and processes? Can we partner with outside organizations to improve quality or reduce costs? These are just a few of the areas that need to be reviewed in addition to looking at expenses.

Does CUNA Mutual need to improve expense ratios? Absolutely. Our improvement plan, though, is much more than identifying expense reduction opportunities. For example, in Investments, David Marks (Chief Investment Officer) grew his investment team. He actually added expense. He and his investment team are changing our investment portfolio, adding new investments, and the result is $25 million additional NET investment income improvement from our general account-that means after the increase in expense. And this was achieved without increasing risk or the duration of our investments. This particular operational review indicated we needed to spend more on our investment team ... and the result would be a greater overall return for the company.

In our customer service areas, the operational review is about completely changing how we deliver service to our customers. We're investing in technology, a new operations center, and training for our staff. Again, spending more money at the outset. We're also working to reduce costs and eliminate redundancies. If we were simply reducing costs, we wouldn't have invested in technology or broken ground on a new center. Our review, though, has indicated these changes will drive improved service and make us more competitive in the long-run from a cost standpoint.

I could give you more examples. It goes back to understanding your current situation, identifying the kind of organization you must become, and having the courage to make those changes - even when those changes are significant.

In the next installment Mr. Post will respond to more questions about CUNA Mutual's self-analysis, including offering some advice to credit unions considering putting themselves on the couch.

Frank J. Diekmann is Publisher of The Credit Union Journal and can be reached at fdiekmann

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