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In an Uncertain World, Look for the Silver Lining

When it comes to putting the finishing touches on strategic plans and budgets for 2017, thinking through solutions to the industry’s on-going challenges can have even the most seasoned credit union management team shaking their heads. In today’s environment, there are many circumstances beyond your control – unsettled economic conditions, interest rate pressure, regulatory and compliance expectations, competition from familiar and untraditional sources, the costs of technology and cyber security, as well as ever-changing member service expectations. But even in this uncertain atmosphere, there are plenty of areas you can control in order to maintain long-term viability.

Following are four steps that JMFA advises clients to take to overcome what they can’t control by improving their existing processes and procedures to achieve excellent member service levels and better overall results:

1. Take a thorough look at your current operations. Before you can begin making improvements, you need to identify where any efficiency gaps exist within the credit union. This will help you to determine if you are using your assets effectively, or whether unchecked expenses and ineffective systems are having a negative impact on overall performance and revenue.

A formal study of your operations, conducted by a professional consultant, will add objectivity for optimal outcomes. For best results, the study should involve your credit union’s leadership team, as well as key employees and line staff, and cover every facet of your institution. You’ll not only gain a thorough analysis of your strengths and weaknesses, but a comprehensive review of the following areas:

  • Organizational structure
    Does your organizational chart accurately reflect how every department works within the credit union’s operational framework? Is there a reporting structure at the department head level that will allow for necessary changes? Is your “Span of Control” such that there is too much concentration with one individual, potentially impeding progress or suppressing positive ideas?
     
  • Department workflow
    How is the workload distributed among staff? Is there too much or too little work for employees? Are there areas where you can eliminate work duplication and possibly find cost savings, while improving efficiencies?
     
  • Reporting procedures
    Do all current operational reports have a purpose? How are they prepared? Are they being transferred from one format to another simply for format? Who receives them and why? Are they being printed; only to be placed in a shred box after daily viewing? How are they stored and secured? Are some existing reports unnecessary or could they be replaced with more effective documents?
     
  • Branch profitability
    What is your return on investment of existing branch locations? Are they conveniently located within your service area? Are traffic numbers consistent? Are there technologies that could be applied to improve the efficiency and profitability of each branch?

    As you implement new technology, is it possible to downsize or close some facilities? Could certain locations be replaced by an Intelligent ATM machine without the potential loss of members? Do you have branch accounting capabilities that can help you determine how each branch is affecting the bottom line?
     

  • Products and services
    Are existing products and services meeting your members’ needs? Are you planning ahead to address changing service preferences? Do you have robust processes and technology resources in place to support both existing and potential new products and services?

With a formal operational study, you’ll be able to answer many of the above questions and obtain many other practical recommendations for your credit union. These include: staffing and salary administration reports and comparisons; incentive program reviews; income and expense analyses; operational enhancements for consolidations and mergers; best practices suggestions and revenue-planning programs.

2. Strengthen your financial position.
Another step in the overall improvement process is to identify opportunities for tracking your success and maintaining an advantage over your competitors. While your securities portfolio generates net interest income, overall it has very little impact on non-interest income and non-interest expense. 

Examining both sides of your balance sheet – total assets minus securities – will give you a more accurate tracking of your credit union’s rise and fall in net operating cost and efficiency. You will be able to more clearly see where changes may be needed – ranging from workflows for key operations and technology utilization to staffing and salary administration.

For instance, re-evaluating your overdraft program in most cases will provide a substantial boost to your credit union’s bottom line. Plus, a well-established program can offer greater value by providing assistance to members who find themselves in a short-term financial bind. What’s more, re-evaluating processes and procedures can ensure the program is up-to-date with all regulatory expectations and best practices. This is the best way to ensure that you are providing a compliant financial solution for members and recapturing lost revenue for your institution.

3. Sow the seeds for growth.
Once your basic foundation is solid, it’s time to customize your current systems and implement the services and technology needed to stay competitive in today’s financial services market.

For example, while more and more credit unions are implementing mobile apps to allow their members to conduct financial business online, there are instances where an account holder will visit a branch location for service. Have you considered streamlining basic in-branch depository functions with image-enabled ATMs and other self-service technology? Doing so can provide more convenience for account holders and free up time for staff to focus on addressing more personalized questions and advice. There are likely multiple ways to improve processes that will create stronger growth for the future.

4. Establish a sales and service culture.
An effective sales effort requires employees to have a thorough understanding of the products and services your credit union offers. To promote this type of environment, credit union leadership needs to focus on combining employee knowledge and experience with the perceived need of the member. 

Following are things you should consider to help support a healthy sales and service culture in your credit union:

  • Maintain a strong training protocol. A vibrant sales culture includes sufficient educational resources, qualified trainers, a satisfactory setting and adequate training time for all employees. And keep in mind that different training approaches and scheduling may be necessary for your specific employee group.
  • Provide the proper support. A successful sales culture requires the on-going support of basic day-to-day operations. If your sales representatives tell you they are too overwhelmed with non-member contact work to focus on increasing sales, it may be necessary to move the member operational tasks from the desks of sales and service representatives into the back office. The primary focus of your sales staff should be providing services to account holders who have taken the time to come into your branches.

The bottom line: Look for the silver lining

While uncertainties and uncontrollable conditions exist in today’s environment, it’s great to know that there are possible silver linings waiting in your credit union. Obtaining an objective view of how your institution runs can provide an in-depth understanding of where its performance can be optimized and set the process in motion for achieving ever-greater results.

If your institution does not have the internal infrastructure to handle these assessments or manage the restructuring and implementation process, consider contacting a third-party consulting firm that specializes in addressing the needs of credit unions. The process will help you find ways to improve the effectiveness of your core systems, strengthen member service and enhance your profitability for the long-term.

About John M. Floyd & Associates (JMFA)

For the past 36 years JMFA has been considered one of the most trusted names in the industry helping credit unions improve their performance and profitability. Whether it’s recovering lost revenue, uncovering savings opportunities, serving your members better, finding the perfect personnel fit or delivering a 100% compliant courtesy pay program, JMFA has the right solutions to help you not only meet, but exceed, your goals. We are proud to be a preferred provider among many industry groups, including CUNA Strategic Services. To learn more please visit www.JMFA.com or call (800) 809-2307.

If you have any questions about JMFA, consulting services, or an overdraft protection program, contact your HCUA field representative.