Today’s leaders must facilitate and empower innovation and change.
They don’t show up wearing capes. They aren’t miracle-workers. And they can’t do it alone. Leaders are oft en hard to spot, and they need the support of strong teams. They oft en receive too much credit when things go right, and too much blame when things go wrong.
They are, however, powerful change agents who can transform credit unions and help them identify and embrace opportunities in the face of rapid technological changes, rising member expectations, and persistent economic and competitive challenges. Credit unions need multiple leaders—all on the same strategic page—at key positions.
“There’s a huge leadership deficit today in credit unions,” says management consultant Mike Neill. “Too many credit unions are run by managers, not leaders. They might operate well from day-to-day, but the world is changing at whiplash pace, and that requires leadership.”
Evidence of this lack of leadership is the dwindling number of credit unions, Neill argues.
“You’re seeing it right now,” he says. “Credit unions without strong leadership tend to be over-managed. They won’t be able to change as their environment changes, and they’re going to become irrelevant.”
Matt Davis, innovation director at Filene Research Institute, says there isn’t enough emphasis on leadership development within the industry. “Certain indicators suggest that some senior executives appear to be more interested in maintaining the status quo than in leading,” he says.
About 77% of recent CEO hires in credit unions with more than $100 million in assets came from the chief financial officer (CFO) position—promoted either externally or internally, according to David Hilton, president of D. Hilton Associates Inc., at a recent CUNA CFO Council Conference.
That’s not surprising, as the role of the CFO is expanding in many industries—including credit unions. CFOs are making the transition from financial experts to trusted advisers and strategic partners, driving growth and profitability.
Davis, however, suggests a broader view of leadership. “What startles me is that leadership should come from a much more diverse set of backgrounds,” he says. “Credit unions’ Achilles’ heel isn’t accounting or finance. It’s about telling the marketplace that credit unions are unique, that we’re here to help members solve financial problems and reach financial goals, and that we’re not only up to speed with technology, but we’re leading the way.”
The propensity to turn CFOs into CEOs, Davis says, shows a reluctance to innovate or try new things. “The safe way to go is to make sure we have a CEO who can deal with NCUA and who can make the books look great,” he says. “While that’s important, and many financial professionals are good leaders, it’s also a sign that we’re not thinking about leadership as much as we should.”
Consider marketing executives, Davis says, because of their understanding of members’ wants and needs. He also suggests information technology (IT) leaders—an uncommon CEO pathway— because much of personal finance is shifting to Web and mobile platforms. Plus, IT leaders have a handle on members’ financial behaviors and the delivery channels they prefer. That insight, Davis believes, could produce excellent CEO candidates. But few credit unions consider their IT leaders for this position.
Ultimately, Davis believes this conservative strategy of focusing first—and almost exclusively—on finance professionals will do the industry more harm than good.
“I think it goes back to the difference between leading an organization and maintaining a business,” he says. “Maintaining a business is obviously essential, but if we’re not innovative and coming up with new solutions for our members’ problems or new ways to make our business model sustainable, credit unions’ future is grim. If we don’t do these things, we’ll become irrelevant to consumers.”
NEXT: Beyond the CEO
2. CUNA Leadership Institute, Nov. 3-8, San Diego
An important distinction
The distinction between managing and leading is important. Not all managers, despite their job titles, are leaders. And not all leaders are managers. Management skills and leadership skills oft en exhibit themselves in different ways.
“Managing is making sure projects get done well and on time—it’s not so much about finding new solutions or new ways of thinking,” says David Birky, vice president of member development for $644 million asset Interra Credit Union in Goshen, Ind. “Leadership is more about vision and direction—it’s about looking at things from a different perspective, trying new solutions, and learning from mistakes.”
Neill offers this example to illustrate the difference between managing and leading. Consider a loan officer who finished September three loans shy of her goal. Someone who is overmanaging and underleading would conclude that she must close three more loans in October. That shows no understanding of September’s shortfall and no strategy for making more loans in October.
A leader would talk to the loan officer to determine what she plans to do differently, what she could change to be more successful at closing loans in October. This results in a change in behavior that leads to a change in outcomes.
“Management focuses on outcomes,” Neill says. “Leadership focuses on behavior because that leads to changes in outcomes.”
At Interra, leadership involves helping staff adopt new behaviors so they can achieve new results, says Birky. In that sense, he says leaders are change agents within organizations.
One of the biggest changes Birky brought about was introducing and creating a sales culture at the credit union. A sales culture was his mantra for a while before he convinced the credit union leadership team to take the plunge.
“Sales has traditionally been a dirty word in the credit union movement, so we talk about delivering service excellence,” he says. “If you provide excellent service, sales will follow naturally.”
Birky acknowledges the transition took longer than he expected. He cautions others who are considering bold cultural changes to have realistic expectations.
“It was about two and a half years before service excellence became an integral part of our entire operation,” he says. “And some employees never did embrace the sales culture, so we had to work through that as well.”
Introducing major initiatives or changing “corporate culture” is oft en difficult for some employees, says Cy Wakeman, a leadership consultant who uses her background in psychology to help managers, executives, and boards reframe their perspectives to embrace change, growth, and progress. Wakeman says credit unions don’t need to abandon loyalty to their employees to bring about change.
“You’re always going to lose about 10% of your workforce,” she says. “You should choose which 10% you lose. You’re going to lose either the best or the worst, and the best won’t stay if you hold on to the worst.”
Wakeman says forward-thinking employers give employees two choices when those employees are confronted with major, systemic change: Stay and adapt—or leave. Too oft en, though, employees push for—and employers grant—a third option: Stay while resisting change.
Employers tolerate these employees out of a misguided sense of loyalty or out of a fear of conflict. Either way, it’s not without cost. Other employees notice when the rules are different for some workers. It makes operations confusing and inefficient. Talented, ambitious employees who welcome new challenges will find those new challenges elsewhere. All this inefficiency and loss of talent eventually hits the bottom line.
Credit unions tend to focus only on the cost of letting some employees go, Wakeman says, but they overlook the cost of letting those employees stay. “They’re doing bad math,” Wakeman says. “They’re being loyal to the wrong employees.”
Assuming that some turnover will accompany change isn’t as harsh as it might sound. “You first give people the opportunity and the tools to change and succeed,” Neill says. “Give people the training they need and most people will adapt. Those who don’t will leave, but not before you did everything you could to create success.”
Turnover isn’t the only concern credit unions have when embracing new leadership and change.
“A frequent impediment to bringing about change is overanalysis,” Birky says. “We need to analyze data and make the best decision we can, but we can’t wait for perfect data.”
Birky isn’t suggesting that credit unions shoot from the hip, but he does warn about “analysis paralysis.” He encourages credit unions to be bold and to not let fear of change or failure prevent them from innovating. Credit unions simply need to identify risks, assess them, and guard against them as best they can before taking action, he says. Aft er all, leaders don’t just consider opportunities; they create and act on them.
“You can’t be afraid to fail, and you have to assure the people working under you that it’s OK to make mistakes and fail so long as they learn from it and move forward,” Birky says. “The best advice I would have is to do something—make a decision today.”