Thursday, December 20, 2007

Strategic Planning for Credit Unions - Keeping up Momentum

Last week I spoke with a member of a credit union management team that I’d worked with doing strategic planning a few years back. We got along well, and I thought the team came up with a great strategy for growing their credit union. She mentioned that there was a new CEO, and that the CEO I had worked with left the credit union about two years ago.

When I asked how the strategic plan was working for the credit union, I was a bit disappointed to find that nothing had been done with strategic planning since the old CEO left. Once again, the credit union’s strategic planning had fallen back into the old model – a brief weekend retreat with the board where strategy is discussed vaguely but with little input (or support) from the management team. Naturally, the credit union had done well with its intitial thrust with our strategies – but I sensed that they have also reached a new plateau and were wondering where to go next.

Dropping the ball with strategic planning – or going back to the less-effective “board retreat” model – may look like a good idea at the time. After all, you will save time and money, and the impact on the organization may take years to become noticeable. Rest assured, however, that – from the outside – it is usually very apparent to me when a credit union is moving forward and when it is just treading water, waiting to be steamrollered by the next unforeseen event in the credit union market. Which kind of credit union do you want to be?

Friday, October 26, 2007

Who Should NOT Be On My Team?

There are some people you may be tempted to put on your strategic planning team who should not be there. This is not because they wouldn’t add some valuable input, but rather, it is because their role (or roles) call for a different relationship with the strategic planning process.

One of the trickiest people to include - or exclude - from you strategic planning is board members. There are some good reasons to have a SHORT strategic planning session with the board. After all, the overall governance of the organization is the board’s responsibility. That being said, most board members have little (if any) relationship to the day-to-day operation of the credit union. What this means, in practical terms, is that board members will not likely have as much information about member behavior as the active management team – and their commitment, while crucial, will not actually cause the real nuts-and-bolts implementation of the plan. I discuss some of the reasoning behind who should and should not be on the team in my earlier strategic planning book, "Simplified Strategic Planning".

What we recommend for board involvement in strategic planning is pretty simple. In between meeting one and meeting two of the process, you should plan to have a board retreat (typically one or two days) where you review the existing data (the worksheets from sections 1-4 will mostly be done by this point – and they are perfect for this) and discuss a set number of issues that will require board discussion. A good idea for this short meeting is for the CEO to canvas the board well before the meeting and create the list of issues himself, possibly in conjunction with the strategic planning team leader. This approach will give the board ample opportunity to provide input to the second strategic planning meeting, where the strategies, goals and objectives will be further refined in order to drive implementation.

Bite Off Only What You Can Chew

In recent strategic planning sessions I've witnessed overly exuberant staffs and boards review a list of goals and objectives they had on prior strategic planning documents. Be careful not to try to overload your organization with too many goals and objectives, because too many of them will be given a less than desirable effort simply in order to check it off the list.

Depending on the size of the credit union, what has recently transpired, or will be forthcoming should be taken into account on strategic planning focus. One client had a terrible situation of executive theft which lead to extensive firings and court cases not to mention, the loss of revenue and write offs for "friend" loans. Another client is pondering a merger and being acquired. These are significant strategic items that need complete focus and a check of where are we now and where will we be in 12 months.

I fully endorse a multi-year strategic plan and focus unless so much is dramatically going to change within the next few months it's hard to imagine have a healthy plan with many goals and objectives until the big issue becomes resolved.

If your credit union is comfortable in your locations, have solid reviews and feel properly position to attack member, asset and loan growth, then this is the time for multi-year focus and aggressive goals and objectives. However, still keep in mind too many projects will not get done properly in a timely manner because the available resources of time and talent of your executives can only be spread so far.

If you are a credit union that isn’t as comfortable as the aforementioned one, you still have a great need for a focused plan to build on the strengths you have in the marketplace. The focus on only a few items to dramatically improve will serve your members better and your team will be able to generate greater success.

-- Russell

Wednesday, October 24, 2007

Giving the Credit Union Direction

Strategic planning is a key tool for putting direction into the management of your credit union. While it is possible for a credit union to survive by focusing on operational excellence in areas like customer service and marketing, you will seldom see a credit union truly thrive without a clearly defined strategy. Strategic planning is a process that requires you to define the future direction of your organization. Without such a direction, you are likely to find your credit union drifting – staying afloat, possibly, but not really going anywhere. In strategic planning, we ask the question “Where do we want to go?”

We answer this big question by addressing the truly strategic issues in your business. Ultimately, these issues revolve around three more specific questions:

-What will we sell?

-To whom will we sell it?

-How do we beat (or better, avoid) competition?

At first blush, these questions may seem easy to answer. In reailty, many of the strategic issues you face as a credit union can be boiled down to one of these three, basic questions. For example, the easy answer to "what will we sell?" is "personal financial services". But how well does your credit union provide all of these services? Many credit unions will struggle to provide "one stop shopping" to their members - and then face escalating costs as they are required to add infrastructure which is only fractionally used. Perhaps there are some services we should provide - and others we should simply make available to our members through a strategic alliance with another organization? Which services should be self-performed - and which should be outsourced - is a truly strategic question for many credit unions.

Monday, October 1, 2007

From the Branch: It's Quiz Time

How well does your staff know your products and services? A client has been reviewing a series of products with his staff so they can better cross sell them. I put them to the test. I put the employees in small groups and asked them to list the five products they had reviewed and what the main features and benefits of each were.

The groups struggled a bit and they decided to go get the manual. I stopped them right there. If you are going to serve your members at your strategic best, the information needs to be well known and not recited from a manual.

It takes too much time, seems too insincere, and it becomes selling for the sake of the sale and not for the sake of helping out the member with a financial need.

When all employees understand the most important products that fit the strategic focus of the credit union, and fully understand the benefits and features of those products, then the credit union has a defined message, member approach, and can really focus on what the strategic competency is.

Test your staff. Take your best selling five products and ask them to list the benefits (what the members get out of using the product) and features (what the product does for the member) from memory. No notes needed. This will give you some insight to your sales process, your strategic focus on the front lines, and how well you are serving your member's financial needs daily.

-- Russell

Thursday, September 27, 2007

Strategic Planning - The Role of Culture


Quite a few executives I’ve met would prefer to treat strategic planning as an inorganic black box that, given certain inputs, flawlessly produces expected outputs. Many people who think this way about strategic planning are otherwise brilliant people with strong quantitative backgrounds – which probably explains the tendency to want to treat management as an engineering problem. Now, to be sure, we can often benefit from the objective treatment of our strategic issues as dynamic systems to be tinkered with, but we must never forget that our strategies, in the end, rely upon the behavior of people.

People are wonderful – at their best, bright, creative, and thoughtful. People are also unpredictable, and in groups, their behavior is rarely as manageable as we would like. Within any organization, employee culture can be either and asset or a hindrance to strategy – so it’s very useful to look at steps we can take to create a culture that works with our strategy, rather than against it.

-Robert

Tuesday, September 25, 2007

5 Choices for Market Segment

Market segments fall into categories such as cash cow, dog, star, etc. Once you’ve identified where your market falls in these categories, you have five different options in taking action. Not every market you are currently involved in should have a strategy to grow and expand, in fact, some markets after close analysis might be best to completely leave. Select one market segment you currently serve and decide which of the following approaches you want to take.

1. Expand

Analysis of the selected market segments indicates this market has great net income growth potential, or could be an under served area with minimal competition. When you decide to expand you want to take an aggressive approach to market share growth and penetration. Expansion in a market means you want to grow your share of the market more so than the growth of the market itself. For example, your market share for this exercise is college students for the university you serve. You have determined that there is great opportunity to grow in good income generating products in this market even though the student enrollment at the university is expected to be stable. The market itself is not growing significantly, but your presence and number of members served can expand significantly.

  1. Maintain

Maintaining market share does not mean ignore it and hope everything stays the same. In fact, market share maintenance might take a vigorous defense strategy if a new competitor has entered the market, if the market segment is shrinking, or if due to lack of effort in previous years your name in the market place isn’t top in the minds of the members. The goal for this approach is to expect to hold steady the current position in the market and at least grow at the same pace as the market is growing.

  1. Contract

Credit unions at times offer products and services with minimal benefits to the credit union or the membership as a whole. To contract would be to shrink product offerings yet maintaining more profitable products and services while increasing new income from the market. Selectively eliminating those products and serves is a scaling back yet still growing in net income.

  1. Milk

To milk a market segment is to say you have reached your maximum growth potential, have a solid return on your investment in serving the market and you simply want to have minimal investment of resources while continuing to maximize your returns. Some markets that have been served for a long time and are going through the maturing process are best served by milking.

  1. Withdraw

Withdrawing from a market is exactly what you think; pulling away completely over a period of time. If you are involved in a market that no longer fits your credit union profile, has no growth potential, or is shrinking fast then the best strategy is to look in a different area and begin the process of getting out. Credit unions are not required to go down with the ship, so to speak, and it is the wise leader who knows when its time to make a choice to withdraw before any significant damage is done to the credit union.

-- Russell

Tuesday, September 18, 2007

Strategic Planning - Process Leadership Checklist

These are the things I think you need to have in place before you start your first strategic planning meeting. Keep in mind that the Simplified Strategic Planning process is structured to require a minimum of preparation, so you may need much more preparation if you are attempting another approach to strategic planning.

First, you must have commitment. There are 3 areas where this is crucial: number one, the CEO or president must be committed to support the process and the implementation of the resulting plan. Secondly, the management team also needs to commit to support the process and implementation, and third, both groups - especially the CEO - need to commit to participation in the meetings following a pre-set schedule.

After commitment, you need to prepare your team. Number one, you need to make sure you have the right people selected for your team. Number two, you must assure that the team is adequately trained to participate in strategic planning (although this may be less important if you are using an outside facilitator who is also able to train the team). Thirdly, you need to select a team leader. This person will have different roles, depending upon whether you use an outside facilitator to run your planning meetings.

Once your team is prepared, you need to arrange for your meetings. This includes setting dates and assuring that everyone on the team can attend on the dates you have chosen. Also, you will want to arrange for meeting space, which should be away from your offices and branches, to help separate the team's thinking from day-to-day tactical issues. Finally, you need to assure that the appropriate materials will be at the meeting site - flipcharts, projectors, books, worksheets, and anything else you feel you might need to conduct a good strategic planning meeting.

So here is the basic checklist, in outline form:

Get Commitment
-CEO commitment
-Team commitment
-Participation commitments
Prepare Team
-Select strategic planning team
-Train strategic planning team
-Select strategic planning team leader
Arrange meetings
-Set dates
-Arrange location
-Arrange for materials

-Robert

Friday, September 14, 2007

Beware of Bright Shiny Objects

On a recent board retreat we found it difficult to stay on task as it was easy for certain board members to get distracted. We would be discussing a topic of importance and in the middle of a comment a board member looking outside would suddenly say “Look a fish just jumped out of the water!” And, this was the person who actually had the floor before he was distracted.

We joked that he is easily distracted by bright shiny objects. So are credit unions executives and boards.

Credit unions executives and volunteers some times forget about the credit union’s strategic competencies and see a service or ad campaign or unique approach a competitor is using in the marketplace and they want to do it as well.

Bright shiny objects (BSO) are those things that distract you from your strategic focus, that take your drive in a different direction from the vision, that consume time that could be better used elsewhere.

The BSO effect happens even more so that we are all becoming somewhat afflicted with Attention Deficit Disorder (ADD). A common practice in credit unions with BSO syndrome is to constantly be adding products, finding the new and unique marketing campaigns regardless of the branding of the credit union, and anytime a competitor adds a new service then we have to add that same new service. This diffuses efforts and focus and makes the credit union get away from whatever it is they do best in the marketplace.

I’m not saying never shift your product mix, I’m saying be sure it fits what you do best before chasing a BSO.

Strategic planning retreats are rife with BSOs. Most retreats are at nice places, with ancillary activities planned for the good time factor we feel we owe our volunteers. The problem with this set up is that most executives and boards are being distracted by the beach, the golf course, the fishing charter, shopping trips and what is happening out the window rather than focusing on the focus of strategic planning.

On one retreat a body builder competition was in town and guys in skimpy Speedo-type clothes we doing a pose down for pictures outside our windows. The meeting came to an abrupt halt, we lost momentum, and the BSO factor was high!

In your planning process be careful not to be distracted by what all services and products you can offer just because either they sound cool or the competition is offering them. Stay focused.

On your board planning retreats work to minimize the BSO factor so people are truly engaged in the discussion and know how important their focused energy is to making the credit union develop along its strategic competency.

-- Russell



Saturday, September 8, 2007

Competition and Strategic Planning

Competition is one of those things that makes strategic planning tricky. Without competition, we could set a strategy to get members and know it would work. But all potential members have a plethora of choices for their financial service needs. What this means for you, as a credit union manager, is that all members - and potential members - will evaulate your offerings in the light of competing possibilities. These possibilities may be other credit unions, banks, or, indeed any institution offering financial services.

Let's take a look at why this will affect your strategies. Let's say you design your offerings, based on extensive (and perhaps expensive!) consumer research, to appeal to the average member. In a competition-free market, this is an excellent choice - your advertising will hit home, market penetration will increase, and your members will be happy.

In any market with competition, however, this strategy may lead to deteriorating financial performance. Why? Because competing institutions are likely to pursue the exact same approach - and have a similar appeal to members and potential members. When a potential member sees advertising, for example, from two different institutions that have the same appeal, his or her choices will be driven by other factors. If you and your competitor are both selling great service, this person may choose to join your credit union because you spent more on advertising, or maybe he will choose your competitor because their rates are lower. The problem, of course, is that almost any reason this potential customer may have for choosing your credit union is going to cost you - and your members - money.

Let's look at this same market, but instead of having two institutions promoting service, let's say you promote greater convenience. If everything else is equal - you spend the same amount on development, advertising, etc., and have the same rates and fees, some potential members will join your credit union because of convenience - and other will join your competitor, because of service. The service-oriented member will prefer your competitor, while the convenience-oriented member will prefer you. This is a much better situation, because you will not be forced to out-spend your competitor in any area - other than convenience. Strangely, consumers tend to prefer this scenario, because it offers them clear, believable choices.

Obviously, this is an oversimplified situation, and naturally, all members want both service and convenience (and great rates, promotions, relationships and a ton of other things!). But there is a very important lesson in this example: you will have lower costs and better performance if you use your strategic planning to be where your competition isn't. The corollary is also true: the more your strategy looks like a competitor's, the less money you will make.

-Robert

Wednesday, September 5, 2007

Action Plans: The Work of Successful Plans

The strategic planning document has been written, the vision established and the mission statement agreed upon; now its time for the work to happen. It's easy to understand a vision, objectives and goals, but the real meaning of a strategic plan, the part that determines whether the plan is a success or not, is how it is implemented. And, this is where most plans fall apart.

Research shows that American businesses typically meet one third of their objectives in a strategic plan. Adding in action plans to the strategic planning process increases that accomplishment rate to about 60%; however, if you closely follow the strategic planning process being outlined here and utilize the implementation process being layout out, you should achieve 80% to 90% of your quality, service, financial and strategic objectives.

The action plan should be no longer than two pages in length with fewer than 30 action steps. The heading of the plan should have the full description of the objective, date of last revision and list all parties involved in the action plan. This is mapping out the road to success for this objective. If you have 6 objectives you will have 6 action plans. The worksheet of the action plan should be divided into columns like a spread sheet. Each column should be clearly labeled. Such as, Action number, Priority, Action step description, Who is involved, Estimated time to complete this step, Money, Starting date, and Completion date.

Be sure action steps don't turn into on-going activities. A step has a beginning and an end and moves the objective forward. Be concise. Instead of saying "monitoring drive thru wait time" write "establish drive thru wait time monitoring system."

Everyone has a full plate of work and adding a full set of action plans and a list of action steps can appear to be daunting and they frequently get shuffled down the priority list. By using an action plan system, it is the best way to incorporate this body of work seamlessly into daily activities. Thus, making it more likely items will stay on course and actually get done properly and on time.

-- Russell

Thursday, August 30, 2007

Be Sure Your Strategies are Supported by Commitments

A credit union wants to take on an aggressive approach on targeting marketing toward the teachers in their membership (a large market segment.) The marketing people work up a campaign, begin verbally designing ads for print and other media, and then they find the board has trimmed their marketing budget to unusable levels for any type of meaningful campaign.

The year hasn't even started and spirits are dampened and an opportunity is lost. Sound familiar? Strategies are not just good ideas and wishful thinking. They are components of a well-planning and established vision that needs the proper financial support and commitment.

Another commitment needed by all portions of a strategic plan is the commitment to make it happen. I've worked with credit unions that have a great planning document and it rarely gets looked at again until the next planning retreat approaches. This is a bad idea and a waste of time. The plan must have the commitment of those responsible for getting things done and executives actually taking on the action plans as a meaningful part of their daily work program.

College football teams like to start with a first game patsy, to get off on the right foot with a convincing win, build some confidence and gather momentum in necessary commitments for when the tough opponents come to play.

The same approach can be used when building commitments to your planning process. Start with the easy victories first. Demonstrate progress by accomplishing action plans and showing quick results. This gathers momentum for the staff to support and make commitments to the plan, the board seeing success and progress becomes easier on the financials as long as they know good progress (winning) is happening.

What are the easy victories? Small projects and visible projects are the best early wins. One credit union client wanted a new marquis that was programmable and had lots of active motion as an attention getter. The board approved it and it was quickly purchased and installed. As a "test" of the programming the first couple of days ran a scroll of a thank you to the board for their foresight to approve the project. The marquis was a piece of a larger marketing initiative to be more visible. Did thanking the board the first day help? It didn't hurt at all!

Commitments from the board and executive team for the proper funding and the proper work output is critical to giving your strategic plan a fighting chance for victory.

-- Russell

Sunday, August 26, 2007

Why should your strategic plan be written by a team?

There are just two key concepts that make the team the best way to create a strategic plan: input and commitment. The people who create the plan should be the people whose functions in the credit union give them the best perspective to give quality input to the strategic planning process - and they should be the people whose commitment to the resulting plan will be most critical to its success.

What this means, in simple terms, is that you want to involve people who have day-to-day management responsibilities in three areas of your credit union: sales/marketing, operations, and finance. Specifically, I'd suggest considering the following people for your strategic planning team:

-CEO (always)
-Business Development
-CFO/controller
-IT
-Human resources
-Member relations

While this is not an exhaustive list, it's a pretty good starting point. For reasons of creating good group dynamics, we've found that the ideal strategic planning team is made up of 5-10 people, so you will probably choose to have one or two more or less than the suggested titles above.

You probably have also noted that we did NOT list the board members. The board should have a strategic planning meeting - but its purpose should be to digest the plan created by the management staff and make suggestions to the CEO on how best to implement the strategic. In my experience, board-generated strategic plans inevitably flounder because they lack the two key elements - input and commitment - that should be required of every participant in your planning team.

-Robert

Friday, August 24, 2007

What is Your Strategic Focus?

The key word here is focus. Ever work with an organization that seemed scattered and each day felt like you were heading a new direction? This is not uncommon in the knee-jerk reaction times we see today in business and in credit unions. Sometimes we forget, it is possible to very good at one thing if you stay focused on it.

A friend of mine was a phys. Ed. teaching in an elementary school and he put the entire class on one side of a tug of war rope, and he stood on the other side. He thought he’d have fun and play with the kids pulling against him before finally winning with a good pull. Much to his surprise the kids were very focused on winning and with each of them pulling with focus he couldn’t beat them! The same goes for credit unions, when we focus and have a team that is focused we can beat a much bigger opponent.

In credit unions we win by gathering talent, focus and intensity to an issue critical to members, and do it better than anyone else in the market. This is how to become a specialist in certain areas and escape from the commodity mentality. Just matching the competition leaves members to select their financial institution based on rates alone and this takes away net income and dilutes any loyalty we want to build in our members.

Two important questions to be answered when establishing your focus will guide your management team on where the credit union needs to be heading and focusing.

What do you sell? Who are your targeted members or prospective members?

By taking the time to delve deeply into these questions you will find the focus you need to be taking as you plan out your strategies.

-- Russell

Wednesday, August 22, 2007

Who are the Competition and How Do They Impact Us?

You are not alone. You have competition all around you. Some you readily recognize and some you may have forgotten about, or not even known about. A common mistake among credit unions over the last ten years has been to try and copy the competition and offer the same products and services they do. You want members and prospective members to find a reason other than low fees and better rates for choosing you as their primary financial institutions.

You want to understand competitive strengths and weaknesses, and a solid knowledge of other factors affecting the business environment at a national, state and local level. Figuring out the competition is knowing where to avoid stepping toe to toe in their strengths and exploiting their weaknesses. It’s all in how you want to position your credit union. In some cases you will attract members because they prefer you and where you’ve positioned yourself; on the other hand, you may also drive some members away. Both results are ultimately good for everyone involved.

Right now the market is becoming even more volatile than ever before. Mortgage companies are going out of business, and the credit market is shifting causing all kinds of ripples for credit union executives to be in tuned to. As this situation continues to shake out and foreclosures and bankruptcies level off, everyone is going to be looking for the opportunities that have opened up in this shifting landscape. In some cases this will level the playing field and provide a short-term window of opportunity. Be ready! The more you understand your competition and the climate of the financial world, the less energy you will have to expend and the greater the opportunity to grow market share will be.

Information is power and that has never been more true than in the strategic planning process. You need good reliable information in order to win the battle for market share and membership growth.

-- Russell

Friday, August 17, 2007

Assumptions Are a Necessary Part of the Planning Process

Assumptions are temporary estimates about some probable future event or development over which you have no particular control. When you make an investment in a stock you assume it is going to give you a positive return. Maybe you based that assumption on the historical track record of that stock. Maybe you based that assumption on a reliable tipster. Either way you are making an assumption about the future.

Some assumptions are as easy as assuming the sun will rise in the morning and others are as complex as predicting the economic outlook for the next ten years. If it is so difficult to make accurate assumptions, why even bother? Because assumptions are necessary for a good plan, and better assumptions make a better plan.

In credit unions you have to make assumptions of future trends in order to prepare for those trends now. Because the credit union industry is changing so rapidly some credit unions are choosing not to make any assumptions and maintain the status quo, each year refreshing the same game plan over and over without making any significant changes. This doesn’t solve their problems and leaves them exposed for a number of negative possibilities.

Assumptions built on experience, awareness and research are the guide for actions and strategic initiatives. For example, if the mortgage lending environment is becoming quite restrictive, how will that impact your loan growth and delinquency rates over the next 18 months? How should you shift your actions today to prepare for those assumptions becoming a reality?

Wishful thinking is different from assumptions. A CEO can be so excited about the new branch he is building that he is convinced everyone in the area will leave their current bank to come to his beautiful new branch. When confronted with the response by the competition who are vigorously working harder to retain their customers, only then does he realize he was thinking more along the lines of wishful thinking that a proper assumption of the situation.

Drill down into the details when making assumptions. Proper assumptions are based on solid facts. The deeper you get into the details your instinct and historical information will form a clearer assumption of future activities.

-- Russell

Monday, August 13, 2007

Define Your Strategic Competency

A strategic competency is rarely if ever a single thing. It is usually a mix of three elements:

Skills: A skill is any manual or mental activities that result from talent, training or practice.

Process: A process is any manual or mental systematic series of actions that are directed toward some end. Include any significant "know-how" resident in your credit union.

Knowledge: Knowledge includes any information, data, or understanding of facts, or principles resident in your credit union.

A strategic competency must be strategic in nature. For example, if you are the best at how to hold an employee birthday celebration, it doesn’t have much strategic value, because such celebrations are not going to directly improve your relationship to your members, or your competition.

A strategic competency is something that can be used over a long period of time, and it usually knowledge based. It is something that should elevate you above the industry norms and provide an advantage in the marketplace.

A strategic competency must pass four specific tests:

Is it a combination of skills, process and knowledge?
Does it differentiate the credit union from the competition?
Does it create strong value for the member?
Is it difficult to copy?

If you don’t get a resounding "yes" to each of these questions, you should be skeptical that you have a strategic competency.

-- Russell

Thursday, August 9, 2007

Why Do You Sell What You Sell?

When I ask this of my clients and their boards of directors, I see a few blank stares, I get a moment of two of silence and then I hear generic justifications. I don’t want justifications, I am asking for you to look at your product and service line and one by one explain why this is being offered to your membership.

This exercise should cause other questions to be raised. Such as:

When did we start offering this and why?

How does this fit with our future direction?

Is this a profitable product or actually a drain of resources?

How well do we sell this?

How well can our front line staff explain the features and benefits?

What percentage of our membership actually uses this product or service?

Do we want more members using this product?

If yes, how do we make that happen, if no, why are we still offering it?

Sometimes in the evolution of a credit union products should be dropped and new ones added. I see many credit unions holding on to products because back in 1982 it was a hit and some of the board members remember those days. That product may no longer apply to the markets you are currently going after.

There is no advantage to offering everything. Strategically, it is much better to offer fewer products and services you do extremely well, than to divide your efforts too thin across areas with minimal return.

One client doing this exercise realized, of the 80 products and services they were offering; only about 35 really were of benefit to enough members that made it justifiable to keep in the credit union. Streamlining your products and services not only help your focus, but makes it easier for your front line employees to be better acquainted with what you are offering so they can more comfortably sell it to help the members with this financial needs.

-- Russell


Friday, August 3, 2007

The Next 15 Years are Only 5 Years Away

It’s 1992. The internet is barely in the public eye, cell phones are still for the rich and famous, the youngest president since Kennedy is taking office, and the recession is about to give way to a booming era of commerce. Looking back 15 years, how much has your business changed?

What shifts have you seen in your marketplace, technological leaps, your member expectations, your employees’ need for information? I think most of us would agree the last fifteen years have brought about a huge amount of change in how we do business. Many credit unions made the correct decisions and projections to still be able to be in business and some didn’t. Some credit unions are barely hanging on to their position they held against the competition fifteen years ago and some credit unionsw have risen to the top of their fields, commanding respect and getting increased market share and profits. How did those credit unions do it?

Three basic factors determined their success and those same factors will impact the success of credit unions over the next 15 years, which will happen in the next 5 years..

1. Accurate projections

The ability to project future trends of the marketplace, members and employees is to have an upper hand on most competition. Typically, when working with credit unions on their strategic plans I ask executives to project fifteen years out what the industry will look like. What changes are required to be successful. And, those projections usually come true…in five years.

The key to effective market projections is to be tuned in. Some CEO’s focus their energies on the day to day, getting caught up in the problem-solving of the organization and lose the bigger view, thus projections are short-sighted and inaccurate because they are not focusing in the correct area of their role as lead executive.

What cutting-edge knowledge are you listening to, accessing, and learning through seminars that keep you in tuned with future trends? Executives need to be retooling their knowledge every bit as much as the front line supervisor does to work with the new generations of workers. Proper projections give you advanced notice (although not nearly as much as you think) to prepare and make the proper developments for the new trends once they arrive.

Making accurate projections, even if they happen in one third the time you think they will, give you the opportunity to be proactive and make advances on your competition.

2. Taking the risk

Once a CEO has confidence in his or her team’s ability to make good projections, action has to be taken in order to make those accurate projections to pay off. This is the gut check. I’ve heard many executives talk about their abilities to make things happen, yet when it comes to putting up the money to make it happen, their confidence heads south and they are filled with excuses for not taking action. Executives need to decide if they are playing to win or playing not to lose.

Assume your projections of an industry shift in fifteen years will dramatically affect your business. Knowing that it most likely will take only five years for this shift to happen, are you ready to take the risk today to be proactive and prepare for that shift? Is your board of directors supportive of this action? If not, do you care if you job is on the line if you are wrong?

The “corner office” is no place for the weak at heart. Confidence is required to take risks. Risks are required to be proactive. Being proactive is required to be at the top of your industry. Take the risk based on confidence your projections are accurate and reap the rewards while the excuse makers continue to play safe and fight fires of their own making just to survive.

3. The luck that comes with preparation

Every successful business has been blessed with a lightening strike of luck at some point along the way. There is no doubting the lucky seem to keep getting luckier. Without going in to the whole law of attraction tangent (which I do believe in by the way) the reason luck comes to those who are lucky is because they expect it and they are ready for it. Preparation for the big windfall is critical in making the windfall a success. Some companies can actually grow too fast when hit with the lucky break to the point of bankruptcy because they weren’t ready for their good fortune. Some companies don’t get the luck because they never saw it coming and never say it pass them by.

The TV show Friends made superstars out of its six main cast members. Were they simply lucky? What about the actors who turned down the opportunity when those roles were offered to them? Simply unlucky or were they unwilling to take a risk for a new type of programming? Those that accepted the roles were prepared to grab at the opportunity. They projected it would be good, were willing to take the risk and were prepared when the opportunity was presented.

Success as an individual or as a credit union requires these three elements to work in harmony to achieve the best you can become. They used to say it takes fifteen years to become an overnight success, at the pace of today’s world; it’s only five years away – if you are ready to make it happen.

-- Russell


Tuesday, July 31, 2007

It's All About the Research

Think about your strategic planning brainstorming sessions you have with management team maybe even including the board. The facilitator poses the question: "Where do you want to be in 5 years?" For the next hour everyone offers their gut feelings, the ideas get written on the flipcharts and after a break the team comes back and as a group decides what the future should look like.

This is all by gut feel with no empirical data to support these conclusions which is why most credit unions are fearful of taking bold steps. They don't trust the process, and frankly, they shouldn't.

Let's say for example you wanted to invest $100,000 of your retirement funds and you decided to make this decision without any research or expert input. You just decided one day watching television you liked the ads for Burger King and you felt in your gut that with the new ads, their stock will rise and you would be making a good investment. How sound of a decision is that? How comfortable are you with that decision making process when $100,000 of your own money is on the line?

Strategic planning maps out the process of how a credit union can go from Point A to Point B. With the tenuousness of the credit union industry, with government regulations and competition changing daily, and with merger sharks in the waters, simply a gut feel on a Saturday morning at a retreat center just isn’t enough information to be planning that navigation to the next point.

When using the Simplified Strategic Planning process everyone involved in the planning must do their share of research on the specifics they have been assigned before the actual planning steps happen. Good information gathering makes for better choices, and better choices make for a smoother ride through difficult transitions. Credit Unions failing to properly research the necessary information are gambling with the future of the credit union and the members. Today is a completely different era than even only 7 years ago. Now is the time to focus like never before.

-- Russell

Thursday, July 26, 2007

Competitive Strategies Part 2

As I mentioned in the previous blog entry, competitive strategies define the direction the credit union is moving. Some credit unions has strategic plans that are so toothless they just drift along the tide and are at the complete mercy of the financial strength of the SEGs they serve.

Previously I talked about the Niche Strategy approach and ideas, so let's move on to two other strategies to move your credit union in a particular direction.

The Commodity Strategy

Some credit unions accept the fact they are not well positioned to serve a niche market and prefer to hold the course they have been on for decades by being another commodity in the market place. Although I don’t agree with using this as a long term approach for credit unions to be competitive, it can be a stop gap approach. Let's say you want to make some shifts over the new couple of years to better position yourself but you don’t want to just sit without any strategies until you get a better definition of who you want to become, so you want to at least maximize your current situation.

A commodity strategy accepts you are one of the pack of financial institutions and you want to attract high volumes with lower margins. This is a strategy that can be a profitable approach provided you have an economy of scale. The large banks in this country have hundreds if not thousands of branches across the country to serve their large numbers of customers. They have an aggressive approach to grow by acquisition as well as with service. Their profitability is based on their size! Their size allows them to offer slim margins because of the volume they can create. How does a credit union compare? Most credit unions have an advantage to offer slightly better rates and lower fees but the commodity shopper is mostly looking for convenience followed by best rates. Wal-Mart has become expert in their ability to use their economy of scale to drive out smaller competitors and the credit unions could face the same fate when trying to compete as a commodity.

Differentiation

By differentiating your credit union from the rest of the pack of financial institutions you are able to have the best of both worlds with high volume and high margins. How is this possible? When current and prospective members must be part of your organization you have the ability to operate from a greater position of strength. Differentiation is all about uniqueness and brand recognition. Apple has been able to create this with the iPod and now the iPhone. Apple is creating must have products where price is of much less concern to the buyer than the uniqueness of product and the brand of Apple. Obviously, Apple had to work hard to establish the brand with effective advertising and build the uniqueness in the mind of the potential customer where price was an after thought.

Differentiation for credit unions can come in your community involvement, in your stated culture in your marketing or in your unique efforts to grab attention and establish that you are a bit different. Try something like Vancity, Canada's largest credit union. On June 27th they kicked off their bike sharing program by "releasing" 45 brand new red bikes to the community. Recipients are being asked to hold the bike for no longer than three weeks and then give it to another member of the community to ride. If at any time the bikes are in need of a repair they can be taken to any branch of the credit union for a tune up. On September 7th all in possession of the bikes are asked to return them to the Vancity Centre, their main branch, and hopefully all bikes will be accounted for. The bikes will then be donated to PEDAL (Pedal Energy Development Alternatives), a local non-profit that will pass them on to individuals in low-income communities.

The publicity for the credit union is fantastic. This is great PR coverage for an idea to benefit the community. Each bike being seen in use will be a reminder of the credit union's community outreach, their stance on alternative transportation and it supports their campaign of Change Everything. This idea speaks volumes to their members and prospective members about what the credit union cares for and who they are as a different and unique credit union.

-- Russell

Tuesday, July 24, 2007

Competitve Strategies Define Direction

Take a look at last year's strategic planning document. What was the direction of your competitive strategies? Were you aiming for a niche market that although had low volume delivered high margins? Or were you trying to compete as a commodity to get high volumes even though the margins were low? Or did you take the time to research and develop ideas that created differentiation to your credit union where you can have high volumes along with high margins? You achieve this by delivering premium products at premium prices.

All three of these strategies can make your credit union sound and with a solid financial picture, but your actions must align with your competitive strategies and your competitive strategies must align with your approach to leading the credit union.

Niche Market

To reach a niche market you have to segment your membership and offer special features for that specific type of member. In some cases customization is required along with a good bit of research to understand the needs and proper approaches for this market. Obviously, if you want to attract young white collar members to use a particular product, then you must find ways to rise above the competition and reach that member or prospect in the correct manner based on their buying habits.

If a blue collar member is the niche you want to serve more, research the products that best fit their needs and still fit the proper margins for the credit union. Learn their buying habits and develop strategies to directly reach them. Needless to say, the different market segments used in this example are going to have different buying habits and have different product needs. The credit union needs to strategize which niche they want to be the expert in and work to deliver for that niche.

There are many different approaches to competitive strategies and in the next blog entry; I will address Commodity strategy and Differentiation strategies.

-- Russell

Wednesday, July 18, 2007

Be Honest With Yourself

Looking in the mirror and being honest is always a difficult thing. It's hard to admit weaknesses and I find people embellish their strengths especially when board members are involved. Management doesn't want to admit to problems and the board members are so proud of their credit union they often see things better than they really are.

This can be an obstacle to strategic planning. Effective planning requires honesty so you know where your strengths are and how strong they really are so you can set objectives to make them even stronger. In evaluating weaknesses it helps to have an outside perspective who can ask the tough questions. As one of my clients said, "Sometimes you have to ask someone outside of the family whether your baby is ugly or not." Weaknesses are naturally difficult to face, and in some cases even recognize depending on the management team dynamic.

It's easy to put the best spin on the credit union and believe you are the best in member service and product offerings. However, in the final analysis you are what you are, and if you are having a net loss in member accounts, and your loan value is decreasing then something is obviously amiss.

Declare an amnesty day where your team can "confess" openly to their concerns and views on the strengths and weaknesses. It's always better to be solution-focused rather than blame-focused, and honesty in this process will get you to better solutions quicker.

It's better to be honest when preparing for your planning process, than to work hard on spin control when the regulators are knocking on your door.

-- Russell

Tuesday, July 17, 2007

The Strategies of Success in Credit Unions

Success comes in a lot of different flavors. We tend to look upon the Low/Cost Price strategy as one of the best, because credit unions following that strategy tend to be the biggest - at least in volume. But there are other strategies which work better for most credit unions (and their members), and here's why: in any market, there can only be ONE biggest. Everyone else is second place. In the low cost/price world, second place is a very bad place to be, because, ultimately, the biggest player will set their fees and rates so low as to barely make money. The second place player, lacking the extreme volume advantage of the number one credit union, is forced into a losing position.

Now compare this scenario with the other players - the branding player, the technology player, the service player, the location player and the niche player. All of these can be "winners" - that is, profitable - in a market dominated by a commodity credit union. True, they won't be as big, but they can co-exist because they are targeting very different member behavior patterns. For example, the niche player may strictly target SEGs and members in a specific industry or even ethnic group. By catering to the desires of the niche, this type of credit union is the first choice of many potential members almost regardless of rates and fees. This is not a license to charge ridiculous fees, but, in a niche, you may be given more leeway by your members because you serve their needs far better than the larger credit union with a low cost/price strategy.

Which strategy is yours? Do you know the behaviors your credit union is best at catering to? If you don't, see if you can get a better handle on it during your strategic planning this year.

-Robert

Wednesday, July 11, 2007

Sustainability

One credit union client wanted to do some brainstorming during a rebranding process. The process was designed to give them a fresh look, a fresh image and an opportunity to reemerge in the community with their new charter.


The process lasted pretty much the entire day and fresh ideas were popping all over. Toward the end of the day names were getting whittled down to fewer options and it suddenly dawned on a couple of participants that a new name and image was going to be arrived at. Immediately, feet got shoved into the dirt and the resistance happened and the big shift in image and name became stalled, in fact the board finally voted on simply using the initials of the previous name for the “rebranding.”


To get significantly different results you have to do something significantly different.”


When you find your credit union is losing members, market share and the competition is becoming a more preferred provider, some significant shifting has to occur. You can’t just dust off what is already in place and hope it produces different results. You have to make some shifts.


Sustainability is key. I find when credit unions are in difficult times, people run around in a panic trying anything they can to change results. As soon as those desired results become more visible the natural tendency is to slide back to the comfort of old habits. In other words, no sustainability to the changes, no real shifting has taken place, so any change in results are temporary.


Well thought out management strategies are not reactionary, temporary or easy to slide back off of. They have measurements, accountability and sustainability. Strategies that have been designed to create proper changes will be better accepted by the staff, have better implementation and be treated as less of a fad where employees expect to slide away from after a few weeks.


In your planning process look for ways to create sustainable changes, not just knee-jerk reactions that only panic staff and have no lasting result.


-- Russell

Friday, July 6, 2007

How Immediate a Concern Are We?

I just read an excellent post in Seth Godin's blog about the power of immediacy. It poses an interesting question for credit unions: if immediacy is the most powerful motivator for members and potential members, where can we most easily motivate these important people? A few things come to mind:

1. Waiting in line at the credit union
2. Online, trying to get something done
3. Big life transitions - buying a house, getting married, having children
4. Standing at an ATM

Where else do our members (and people we want to become members) have immediate and pressing thoughts about our credit unions? And - just as important - what would we like them to think when they are in these moments?

If you advertise - are you intruding on your audience's thinking at a point when their credit union (or other financial institution) isn't all that immediate? If so, we either need tricks to increase the immediacy or we risk wasting out ad dollars.

-Robert Bradford

Thursday, July 5, 2007

Strategic Planning - Beware of Strategies You "Have To" Use

In the hundreds of strategic planning meetings I've done, I've heard a disturbing comment more times than I like: "Of course, you HAVE TO (insert strategy here) to be successful in this industry."

What's wrong with this statement? First, it implies that every successful company in an industry must follow the same strategy. Nothing could be farther from the truth. In fact, the more your strategy is different from those of you competitors, the easier you will find it to gain customers and make money - as long as the difference enhances value for at least some of your customers. Wal-Mart, IBM, Apple, Southwest Airlines - all of these companies rose to greatness by being truly different in ways their customers loved.

The second problem with this common statement is that there are unwritten "rules" that every company in an industry has to follow. Phil Kotler said it best in the title of one of his best marketing books: "First, Break All The Rules". Real entrepreneurs - the ones who make great money - are almost always rule breakers rather than rule followers. So the next time you hear someone spouting a rule for how you succeed in your business, ask yourself, "Why should I follow this rule? And can I win by breaking it?"

Monday, July 2, 2007

Find the Rarified Air for Best Returns

Credit unions have had a wonderful run of being a one-size-fits-all for members, but those times are disappearing just like the credit unions who are still trying to be one-size- fits- all. As the financial services market becomes extremely commoditized, credit unions are typically going after the easiest opportunities. Volume sales with shrinking returns only lead to a point of no return.

The best returns on your credit union strategic initiatives will be from carving a specialization niche in your market place. The harder to reach, the more work required, the less the competition and the greater the rewards. Are you ready to go after the opportunities where you can eliminate the competition?

How are you defining the markets you want to serve, not necessarily the markets you have been serving?

If you've typically had a manufacturing base of membership and your board is populated with those type employees, how flexible are you able to look at changing directions? Sometimes we are afraid of the answers we might find therefore we don't even ask the questions. But if you have the opportunity to ask the hard questions, here are questions that will improve your growth opportunities.

Some hard questions to ask yourself:

Is the foundation of my membership growing or shrinking?
Is the average age of my membership increasing or decreasing?
Is my loan portfolio growing or shrinking?
What is the profile of my perfect member?
How can we serve that perfect member in the best ways?
What changes would we have to make in order to attract and serve the perfect members?
Would the perfect member be willing to pay more for a perfect fit with a credit union? I'll give you the answer to this one -- YES!
Are we able to make the shift to smaller market share, yet a more profitable market share? If so, what would be required?

The credit unions willing to take this hard line approach to the future will in fact have a future that is more about thriving than surviving.

-- Russell

Friday, June 29, 2007

Strategic Planning for Credit Unions - Internal Strategic Opportunities

When considering opportunities in strategic planning, many managers in credit unions will focus on market based opportunities. These are opportunities where the benefit is derived based upon the reaction of the marketplace to whatever you do. New SEGs, new membership, new geography, and new products all fall into this category.

Internal strategic opportunities can be just as rewarding, for they help us to think about how we excel as an organization. Here are a few of the most commonly beneficial internal ooportunities:

-Improve hiring, training and retention of employees
-Improve our IT to increase information availability, reduce cost, or improve service
-Renovate a branch
-Change compensation to motivate employees
-Improve out website or other marketing capability
-Merge with another credit union
-Process improvements to increase speed, reduce cost, or improve member satisfaction

There are countless others, but all of these opportunities have, at their core, one of three strategic benefits:

1. Reduce cost
2. Improve member satisfaction
3. Increase membership

The interesting thing about the internal opportunities is that they tackle these three worthy benefits indirectly - that is, by making your credit union better able to reduce costs, satisfy members or increase membership. While internal opportunities often seem to take longer to generate benefits, they almost always provide longer lasting, more stable benefit to your credit union.

One of the pitfalls of internal opportunities like these is that many credit unions will do the first part of the opportunity - change processes, for example - without taking steps to assure the benefit. This is dangerous, because it's often just as much work as doing it properly - after all, you are changing your processes - and employees will feel they have done their jobs well, even though they didn't really realize the benefit. This is a really important point for later on, when you are setting objectives. When you set out on a strategic project, always make sure your employees know (A) what you are doing and (B) what benefit you want from it. In my experience, if you only tell employees what you are doing, you have no business expecting any benefit, outside of completing the action.

As an example of this, I've seen countless organizations spend lots of time and money changing their computer system. Many of them treated installation of the new system as the objective. The successful ones inevitably reminded themselves over and over that the real objective was better information, reduced cost, or improved member satisfaction. This helped them avoid just "going through the motions" and really focus on getting the benefit out of their strategy implementation. Make sure your internal opportunities remain tied to their real benefits, and you can greatly improve your own strategy implementation.

Thursday, June 28, 2007

Boutique Branding

Fact: Credit unions are struggling to grow.
Fact: 2006 was a pitiful year for share and loan growth in credit unions
Fact: You can’t expect dramatically different results unless you do something dramatically different.

So what is one possible answer to shifting this outcome? Boutique Branding.

Boutique branding is appealing to the members who are going to give you the best returns on services offered. The big question is how do you attract those members? Create the club within the club because they love to be part of the status by being an insider.

Airlines have designations such as Platinum member, or Diamond status for their most frequent users. Specialty retailers have private shows for their best customers. Rental car services have preferred services for their insiders. Nothing creates status for the elite members like when you belong to the club within the club. This creates loyalty and attracts more people like them.

Brand your credit union for the type membership you want to attract. If you want to attract members with credit ratings over 680 and active loan portfolios then you have to appear to their interests. For example, a Pontiac is a piece of transportation. A Porsche is an experience of transportation. Both will get you from Point A to Point B. Which is a more profitable car to sell? How do the dealerships differ? How does the show room floor staff differ? Which vehicle owner feels more part of a special club? One sells to the masses and one sells to a boutique niche. One has status and one surely does not. What do your elite members drive? Are they getting the same level of attention at your credit union?

Setting a strategy to attract a special type member requires a focus, a niche approach and an atmosphere that has a "Wow" factor to it.

What "Wow" factors is your credit union currently branded for? What services do you offer that would attract the elite member who wants to be treated special? Strategically, credit unions need to embrace the proper branding to attract the members they desire.

Measuring credit unions by number of members and asset size is commodity thinking. No longer is a new member something to rejoice over; in fact, some members can actually be costly to the credit union. It's more important to have better quality members than to simple have a member number.

Measuring a credit union by loan growth, high-profit product sales, and percent of members using the credit union as their primary financial institution is boutique thinking and a strategic approach to getting significantly different results from doing something significantly different.

Membership loyalty is disappearing as is evidence by the significant reduction in credit union membership across the country. Define the niche of member you want to serve, give them the feeling of being part of a special club, and hold onto them for generations.

-- Russell

Tuesday, June 26, 2007

Lean into Your Strengths

What is your credit union really good at? I mean the one thing you really can slay the competition at?

I find that credit unions often look toward their weaknesses first in the planning process in order to make improvements and shore up areas they may not be doing effectively and this is a mistaken approach. I’m not saying ignore weaknesses, but be careful if you find yourself making them your main focus for your planning process.

We should be spending our time focusing on what we do well, and work on making it even better. For example, I’ll talk with executives about member service training and I hear the response, “Our member service is great, we don’t need to worry about doing that type training anymore.” The Ritz Carlton also has great guest service; in fact, it is one of their defining strengths in the hospitality industry, which is why they spend an inordinate amount of training dollars to maintain that strength and look for ways to make it even better. They are leaning into their strength, not taking it for granted until it disappears and needs refreshing. That’s waiting for your strength to turn into a weakness, and that’s too late.

Let’s assume your greatest strength as defined by you and your board is member service.

  • What standards of excellence do you hold every employee to when delivering member service?
  • What are the measurements you use month to month to monitor your strength in this area?
  • Do you have employee turn over? If so, what is the training process every new employee receives to achieve those standards of excellence before being exposed to the member?
  • When asking members what they like best about doing business with you is the first response always your member service?
  • What ways can it become even better in order to stay in front of competition trying to match your service level?
  • Are you the buzz of the industry as the standard for member service?
  • Are you the buzz in your market?
  • If people within your market both members and non-members were asked who offers the best customer service in the finance industry in your area, would you be the name on everyone’s lips?

Southwest Airlines is routinely the standard in airline customer service, Ritz Carlton is the standard for guest service. These are names known throughout the industry for their strengths and they are constantly looking for ways to improve on their strength as you want to do with your strengths.

This is leaning into your strength. Taking what you do well and making it even better. Making your strength your defining factor in the minds of competitors and the members and prospects you can serve. The planning process is the best time to make the steps and objectives to keep the main thing the main thing.

-- Russell

Thursday, June 21, 2007

Strategic Planning for Credit Unions - a short video

Here is a short video of a speech I did recently. There were quite a few credit union people in the audience, so I talked a bit about how credit unions can differentiate themselves. I hope you enjoy it.

http://www.acidplanet.com/artist.asp?pid=991858&T=9704

If you'd like to have Russell White or myself speak to your credit union group, please drop us a line!

-Robert

Wednesday, June 20, 2007

How Do I Sell and Serve Remote Members?

A question I’ve heard frequently from credit union executives with declining membership: Most of our members are remote and don’t visit us at the branch, how do we service and sell to those members?

The simple answer is with the same approach you’ve always used in serving members; just using different technology and tools. If members are not getting the face to face time with tellers as they once did, then they must be connecting with the credit union through drive through traffic, on the phone or online.

What are the demographics of your membership by connection method? Do you find the more senior members still walk in, the middle aged members drive through and use the call centers, and the younger members are all about online banking? Once you find the breakdown of these demographics, you can then approach them in the ways they are connecting with you.

Do the research. List the reasons why each group chooses their point of contact with the credit union. Once you understand their reasons for that method, then you know why it is appealing to them and how to use that to your advantage.

Blogging and YouTube will not be the best approach for some members, yet others may find that their preferred method of getting information. Get to know your members by the products they use and the way they access your credit union.

Bottom line, providing good credit union information to the member, maintaining common courtesies, and speaking to the member about the specifics they are interested in hasn’t changed. It’s only the method and where the information is best placed has changed.

To maximize your marketing efforts, strategically know the proper channels to reach a target audience with a specific initiative. This will guide you in the direction of better returns for your efforts.

-- Russell

Saturday, June 16, 2007

What is the "Happy Member Process"?

When working with credit unions in the past, I've often referred to what I call the "Happy Member Process". It's a simple concept, but thinking about it can lead to some great innovations.

Picture a member - or prospective member - who is unhappy about something that we can affect. That member has money, and unhappiness. Put the member through the Happy Member Process, and out pops the same member - perhaps a new member, now - but with more happiness and less money.

Here's the critical question: generally, members are less happy when they have less money. So why would this process make anyone happier to have less money? There are plenty of examples. A rapid turnaround fee for a loan application is an excellent one - we charge a fee, which means the member has less money, but we process the loan faster, and so the member is happier. One of the interesting challenges of the Happy Member Process is to see how much happiness you can cram into that member, and what the member would be happy to pay for that service.

-Robert

Friday, June 15, 2007

Don't Just Define Your Market: Dominate It

One of the areas most credit unions misunderstand is market segmentation. Having exclusive SEGs or a community charter-type boundary isn’t enough of a market segmentation approach. You don’t just want to be a player in the market you want to dominate a segment of the market.

Important point: You don’t want to satisfy every member and you don't want everyone to be a member.

I'll bet you read that at least twice because you couldn't believe your eyes. You can't be all things to all members successfully. As I mentioned in a blog entry last week I've seen credit unions offer up to 80 different products and services, no doubt in an effort to try and satisfy every need of their members. This is a wonderful idea in giving great member service but it begs the question: How can you be great at all of those products? The real answer is you can't. It's best to decide which products and services you can excel at and hit the market hard in those areas.

Which is better, to be an adequate option on a wide range of products thus making you a commodity, or to be the best at a select number of options where everyone sees you as the best at those things?

If your members shop your credit union as a commodity then they have little or no loyalty and will shop everyone else as well, which means your members only see you as an option.

When you dominate a market segment through proper positioning as the best in those products, your members and prospects will seek you out as the best in this area. Loyalty is high when members seek you out for specific services. This is how you get to be the PFI for those members.

Good market segments are usually made up of members who think about and buy your products and services the same way.

Ask yourself the following questions:

What are they buying?
Who is Buying
Why are they buying?
How do they buy?
How will they use what they buy?

How you answer these questions will point you in the direction of market segments you may want to hone in on so you can be the dominant player in the market.

-- Russell

Thursday, June 14, 2007

Strategic Planning for Credit Unions - Thinking About Opportunities

In my opinion, opportunities are the key to great strategic planning. You've never hear of, for example, a company that became great by fixing all of their weaknesses, or avoiding all of their threats - and you never will. That's because great success comes from taking appropriate risks to make great opportunities pay off. Every great business success story is based on this - and yours should be based on opportunities, too!

When you consider opportunities for a credit union, it's helpful to remember that there are many different types of opportunities. Not all opportunities are, for example, going to come from the business development folks. Let's take a look at the main types we have seen in the past.

First, all opportunities can be broadly classified as either "market-based" or "internal". Market-based opportunities are specifically opportunities that will succeed or fail based on the reaction of the marketplace. Classic examples of market-based opportunities are new products (such as a seniors club) and entry into new markets (such as a new employer group or geography).

With market-based opportunities, we can further break down our options into four categories:

1. Current business (current products sold to current members)
2. New product augmentation (new products sold to current members)
3. New market augmentation (current products sold to new markets)
4. Diversification (new products sold to new markets)

Although it looks like a good way to ameliorate risk, diversification often turns out to be the most risky of these four options, because you are giving up your strategic competency in doing what you do for your current member base.

In my next post, I'll discuss the different types of internal opportunities.

-Robert

Friday, June 8, 2007

You Get What You Measure in a Credit Union

You may have heard this before - that you get what you measure. In business, this is definitely, true. However, in certain types of business - and credit unions are certainly in this group - there is SO MUCH being measured that it's sometimes difficult for employees to decide which measurements are really important. One rule of thumb that guides all of my thinking about using data in strategic planning is that most reasonably intelligent people can keep 6-8 things straight in their heads at any give time. Not 10, not 20, and certainly not 40.

So why do we ask people to keep track of so many numbers?

Well, first, we don't want to miss anything. Of course, this is a complete fallacy, since the easiest way to get people to miss a number is to hide it among 39 other numbers.

Second, we want to preserve the complexities of managing a credit union - oversimplifying might lead us to ignore some critical detail. This is true, but we shouldn't rely on a mass of numbers to convey the richness of our business. Rather, we should give human beings the ability to pick this richness out for themselves - which they surely won't do if they are overwhelmed with too many numbers.

Finally, numbers are often seen as the lifeblood of credit union management. Now, I have a slightly different theory about this - I think members and employees are the real lifeblood. But numbers, in many ways, are really the product or service that we provide our members, so it's easy to see where this idea comes from.

I'm not at all suggesting you shouldn't look at numbers in managing your credit union. They are vital, and you will have trouble succeeding without them. But you should aim to get a "feel" for a few critical numbers that relate to your effectiveness as a manage before venturing off into oceans of data.

As an example, consider your member retention numbers. Pretty important stuff. So, how many do you need? One. The only time you should be looking deeper than that is when there are customer retention issues and you need to explain WHY customer retention is changing. At that point, "retention of members with less than 1 year of membership" might help you understand exactly what is going on. But putting both member retention AND new member retention on a report simply makes it longer with data that is redundant a significant part of the time. And - this is the key point - a longer report will get less focused attention from the people who really need to use it to understand what is going on.

Tuesday, June 5, 2007

3 Important Questions to Answer in Preplanning

In many of my credit union training classes I ask, "How many products and services do you offer to your members?" Typically even the executives don't even know exactly. A few months later when I come back for another training installment they are quick to tell me how many they offer. I've heard from 30 to roughly 80 products and services. My next question is this: "If you offer 50 products and services how will you ever have a good sales culture expecting your employees to know how to talk about all that you offer?"

Trying to be all things to all people usually ends up making you nothing for nobody. A strategic plan needs to be focused not arbitrary. Ask three specific questions to guide your planning process.

1. What are you going to sell?

Just because you can offer a product doesn’t mean you should sell the product to your members. It's better to effectively sell fewer products than to offer many products and services your staff is not equipped to properly inform members about their benefits and features.

Knowing what you can sell effectively, that meets the needs of your market, is the key to knowing how to structure your approach to maximizing those offerings. Your preplanning homework should involve product analysis to determine what are your most frequently used products, what are your best margin or moneymaking products, and what are the products you want to be known for as the best in the market for your membership field.

2. Who are your target members?

As credit unions grow in their membership bases or even go more community charter it's easy to fall into the trap of trying to serve everyone. The first determination you must make is whether you want to be a commodity credit union or a credit union best known for a specific couple of products that are the best in the marketplace.

No one has an unlimited budget for marketing and even if you did would people believe you are good at doing everything? McDonald's has a huge marketing budget and have been in food service for decades but that doesn’t mean I'm ready to order a NY Strip Steak at their drive thru if they offer it. Why? Because great steaks isn’t what they are known for in the marketplace; no matter how much they market it.

Target marketing provides you with a narrow niche to maximize your investment of your marketing dollars and products you offer. It also makes research easier to determine what their buying habits are and what the best way to reach them is.

3. How can you beat the competition?

This is the big question isn't it? Avoiding the competition was the historical way that credit unions kept from bumping into each other. You had your SEG's and they had theirs. Those boundaries are dropping so not only are we still bumping against the banks, but now other credit unions as well.

So now it's time to explore ways to out-serve the competition in specific products and services, with locations or with marketing savvy and uniqueness.

To learn how to beat the competition you have to study the competition and the marketplace. Research into leverages, market gaps, under-performing products and find the weakness that presents the best opportunity to beat your competition.

These three basic questions will provide your board and executive team with clarity of the vision you have for the credit union and the strategic plan you expect to implement with resounding success. The upfront work on these questions will make the entire following process simpler and more focused.

-- Russell

Monday, June 4, 2007

Three Critical Components of a Strategic Plan

For a while strategic planning sessions spent an inordinate amount of time on mission statements, vision statements and core values descriptions. It became an exercise in semantics and took the focus off the three most important areas of a strategic plan: operations, finance, and the market.

1. Operations -- how you take care of the credit union, your employees, and your member experience -- is an area that must get total attention. Without solid operations you can lose good employees, inefficiently operate internal processes, and lose members because your technology is old, your fees are too high or you just aren’t fun to do business with anymore. What are the cutting edge ideas in this area you need to be incorporating? How are you planning on retaining your best talent? Who is trying to "steal" your members? Those are just some of the questions to be researched and addressed under operations.

2. Finance is also a critical area for in-depth planning to ensure safe and sound business practices, to comply with federal or state regulations, and although credit unions are non-profit organizations, sounds financial ledgers provide better services to members and better benefits to employees; not to mention, better positioning for future growth opportunities. What would it take to have every member consider your credit union their PFI? Could you handle it if it happened?

3. The market is also a critical area for strategic planning for the simplest of reasons: credit unions do not operate in a vacuum. A shift in local employers, a shift within current SEGs, and a new competitor in town can all have an impact on shaping your future strategic vision. The market is where you touch your members through advertising, with a sales culture, and with the products and services you offer. The right mix can have you flush with membership growth; the wrong mix can have you in a dire situation.

The planning and decisions in these three areas should be the foundation to making any credit union visions a reality.

-- Russell

Sunday, June 3, 2007

Customer Behaviors in the Credit Union Market

Customer behavior is both a fascinating topic and a frustrating one - because, in reality, there are an infinite number of actual behaviors. For our purposes, we want to find a way to simplify how we think about those behaviors, so we can come up with a limited number of market segments.

Here are a few of the most common classes of members:

1. Rate Shoppers
2. Convenience Buyers
3. Social Members
4. Linked Members
5. Service Shoppers
6. Multi-buyers

The simplest behavior to identify and segment is the pure commodity member. This person is joining your credit union to get the best rates and fees, period. The positive thing about the Rate Shopper is the he or she is easy to get - just make sure you have the lowest rates. The bad thing about that, of course, is that it's easy to end up losing money on these members, and they are likely to switch to another financial service provider the minute they see a better deal.

Convenience buyers are a bit more tricky, since different things create convenience for different people. The most obvious convenience factor is location - a CU that is on the way to or from work is likely to attract a lot of convenience members. These folks don't switch as readily because changing credit unions is, of course, somewhat inconvenient. The downside is that it's hard to get them to switch from wherever they belong now.

Social members join a credit union for the social activity of the branch they frequent. This can be as simple as the people behind the counter, the other members who frequent the branch at the same times they do, or more organized activities around the credit union. While it's a little more difficult to attract these members, they are also very loyal, because they view the credit union as part of their network of friends.

Linked members are very similar to Social Members, in that they join because of some outside relationship - a friend who works for the credit union, for example. They do not, however, view social life at the branch as a value. Linked Members tends to be a small group, but a very loyal group - as long as you keep employing their friend.

Service shoppers are like rate shoppers, except that they value service over other factors. If you provide excellent service, this group will be loyal and profitable, but they tend to be demanding and may switch if they become dissatisfied.

Multi-buyers are members who have multiple accounts at your credit union, and may choose to join because of their experience with the other accounts. The most common example of this is someone who has separate accounts for their personal and business finances. These members tend to be affluent, and quite profitable, since the multiple accounts increases your convenience value for them.

Friday, June 1, 2007

Are You Proactive or Reactive?

One credit union executive I tried to work with had pretty much given up on his credit union. How did I know he gave up? When something negative would happen such as an increase in loan delinquency, or a new competitor came to town, he would always have the same response: "Whatcha gonna do?"

He went on to say he only needed to make a few more years to retirement, and besides, the world is just a different place than it once was. Then he would shake his head, tell me he had no need for my services because he wasn't sure he could afford them, and even if he could, it wouldn’t make any difference.

He was right about one thing: the world is a different place than it once was, and he had been CEO of that credit union for over 40 years. Times have sure changed.

Because of so much going on it's easy to fall into reactive mode or heaven forbid, "victim" mode as this gentleman had allowed himself to do. Waiting to see how things shake out and then reacting to that is waiting too late. Opportunity can be lost. Also, since you waited for everyone else to start going the same way, you are now just an option in a commodity market. The credit union environment has changed and those getting ahead are those taking a proactive stance on planning for the future with a specific vision in mind. When you are proactive in your vision and plan, it rallies people behind your direction, it gets people excited to buy-in and you become more in control of your vision.

Not to mention, employees respond better to an executive who takes a proactive stance instead of waiting for the opportunity, then makes a reaction. Would you rather be in control and design your results or wait and hope for the best? You are in charge -- you call the play.

-- Russell

Tuesday, May 29, 2007

The Credit Union Strategic Plan: A Few General tips on making a better tool

1. Keep it simple - people use tools that are easy to handle and use. A single page is always better than 100 pages, if it conveys the same information - so try to be succinct rather than hefty with your strategic plan.

2. Communicate with yourself - you will pick up this strategic plan in the future and USE it, so don't be cryptic or vague. You are talking with yourself in the future, so write your plan as specifically as you can.

3. Drive to salient information - use bullet points rather than prose, and ALWAYS answer the specific questions in your planning worksheets. If you are asked for a prediction on growth in a specific market segment, write down a number rather than an explanation.

4. Remember you can change your plan - while we don't want to be whimsical about changing our plans, we do want to go back and tidy up bits of it over time, as reality overtakes our assumptions about the future. Go back and fix it up (as a team) when fixing the plan makes sense.

5. Use the plan to drive results, not politics - this should be obvious, but your team is planning to make the credit union succeed. Don't let people use it to drive an agenda that will not get make your credit union more successful.

6. Use a structure that makes the plan easy to refer to - the Simplified Strategic Planning process is ideal for this! And be sure to watch for Simplified Strategic Planning for Credit Unions, which is currently being written!


-Robert