Following the Leader will Lead us...Where?

Eugene, OR; July 9, 2009: I have to admit I find Jeffrey Pfeffer both intriguing and insightful. For those of you not familiar with him, he is a world renowned professor of Organizational Behavior at Stanford University and author of a number of books. He contributes frequently to BNET.com, a social networking site I also highly recommend.

His most recent piece on “efficient marketing” really struck a chord with me, especially as it relates to financial institutions. The premise of “efficient” marketing is that if a particular premise or approach worked someone would already be doing it.
He points out the flaws in that thinking, but it is interesting to see how much strategy has really embraced the spirit if not the actual practice. Benchmarking is almost a sacred vow in most organizations. Consultants and MBAs speak reverently of KPIs or “key performance indicators” and we track them feverishly. I don’t reject benchmarking or the use of KPIs. I do think it is important to use the right ones for your organization and situation.

As you might suspect this is a recurring theme for me. I wrote a “white paper” some months ago discussing a “new paradigm” for community banks and credit unions encouraging them to see themselves as community support and development organizations and using engagement as a strategy. I also talked about Main Street versus Wall Street in terms of the current financial crisis and Detroit versus Tokyo.

In this continuing perspective I ask myself where are we seeing real creativity in community banking and credit unions?
I recognize that there are those who would point to the emergence of CUSO or “credit union service organizations” offering everything from insurance products to pre-paid funerals, but in many cases I see CUSO organizations that offer products and services largely copied from larger financial institutions. The ATM, investment services, etc. I don’t believe any of these were pioneered in the community banking or credit union space.

A great example was a few years ago when I was working for a large credit union and we had an opportunity to adopt a product that would incentivize members to utilize electronic services such as EFT, on line banking, e-statements, and related technology and reduce costs. The provider argued that the costs savings from using these more efficient means of delivery could yield margins that far exceeded the costs and still offer exceptional incentives to members to both join our organization and expand their “wallet share.” We took the leap of faith and enjoyed significant and profitable growth. My point was the agonizing our Executive Team and Board went through to take that leap.

Similarly we embraced our community involvement strategy as a way to increase engagement for our employees, our members, and our communities.

The reaction from many of our “colleagues” in financial services was doubt and in some cases criticism for being imprudent, until the results came in!

How many credit unions and community banks are in fiscal trouble today because they “followed the leader” in pursuing significant investments in business services, real estate development, and other areas where we had limited expertise and experience?

I am a self-professed radical. I can’t tell you how many meetings I attended with senior credit union executives where we strutted about talking about our capital ratio like members of Mensa discussing our IQs. I committed the heresy of inquiring whether or not high capital ratios represented money that was not in the community supporting members. I recognize that fiscal policy needs to be sound, but growing up in the for profit world we also evaluated the balance of calculated risks and opportunity costs. How much capital is too much capital?

I remain concerned for the CU industry about the demographic deficit. Credit union membership continues to age. In other venues I have talked about the talent shortage we will be experiencing in the next 10 to 15 years- the supply of employees in the 30 to 45 demographic. Not only do they represent a talent shortage, they represent a potential member shortage unless credit unions do a better job of recruiting them and retaining them now. How many credit unions and community banks have in place a talent development program to address this upcoming shortage in the ranks of their management and executive infrastructure? In my experience with either group I haven’t seen exactly a rush to adopt these practices. Management development is rarely a priority, and if it is we tend to be insular, we train them the “CU” way.

I believe that the “recession” we find ourselves in is going to have long term effects. Those of us in the community banking part of financial services can play a major role in mitigating the effects on our customer bases and communities if we are willing to take some risks and explore our own strengths and capabilities rather than just following the leader.

Mark F. Herbert is a speaker, author and consultant with over thirty years of experience helping organizations like Honeywell, Spectra Physics, Mobius, Oregon Community Credit Union and others take their organizations from Compliance to Commitment™. He is currently a principal at the consulting firm of New Paradigms LLC. He recently published his book Managing Whole, One Man’s Journey, which is available at amazon.com or his website at http://www.newparadigmsllc.com/. He can be reached at Mark@newparadigmsllc.com

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Posted by Mark F. Herbert at 7/9/2009 6:43 PM
Categories: Credit Unions,Management
Tags: Herbert
 

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