ORLANDO–It is increasingly important that credit union CFOs go from thinking purely in operational terms to also thinking in strategic terms—and while it won’t be easy, there are distinct steps for getting there, according to two people.
Speaking to the CUNA CFO Council’s annual meeting here, Sally Myers, CEO/principal with c.myers corp, and Rob Johnson, EVP/principal with the same company, offered these ideas on how CFOs can become competent strategic thinkers:
Master Both the Numbers and the Data
Johnson said this thinking is all about breaking down silos of information so that there is a better view of how it can be used to really benefit the organization. “With (Current Expected Credit Losses—CECL), everyone in the organization is looking at you. But from the perspective of what you need to know, it’s about more than just the data and the methodology: it’s about how does this impact the rest of the organization and your strategy. This is not an accounting issue, but rather an item that’s going to impact the entire organization.”
As an example, Myers cited one CU that showed an overall robust Net Promoter Score number. But when the NPS was broken down by age demographics, the CU did not score well at all among its three youngest groups. Instead, high ratings among the oldest members was skewing the number.
Align the Desired Business Model with Measures of Success
Myers said CFOs must become proficient at aligning the CU’s desired business model with short- and long-term qualitative and quantitative measures of success and aggregate risk tolerances.
As an example, Myers cited a CU that had broken down its interchange income by merchant. It found that 12% of interchange came from one grocery store, and as a result the CU began looking to see what additional opportunities there might be to get other members to use their card at that same grocery store. This was a credit union that had chosen to lead with payments, yet in reviewing its top 10 interchange sources by merchant it discovered one very important one was missing: Amazon. Amazon was not top-of-mind among members when shopping online, so it also began developing ways of raising that awareness.
Become Multidimensional
This, said Myers, is about the CFO who can move fluidly between creative problem-solving, critical thinking, and strategic thinking.
“Each of those is different and requires different skill sets,” said Myer. “But you can absolutely train your brain to do this; it just takes practice and focus and determination.”
Myers said that looking at the data, thinking differently and connecting dots is what this is all about. She used as an example one credit union’s data for loan applications by credit tier. It found it was getting as many apps from A credit as it was from E credit, and spending an equal amount of time on each, even though it was denying the E credit that did not fall within its appetite for risk. The CFO also looked to see what percentage of A, B and C applicants were being approved, finding the rate was 63% among A paper, 75% for C paper.
Johnson said that CU discovered that with a few minor changes that didn’t involve much more work it was able to significantly affect new loans.
Myers added another metric to review is time-to-decision by delivery channel. That same CU found delays in the mobile channel, which likely affected NPS among younger demographics.
“Every CFO needs to be curious and needs to ask why to the power of five,” said Myers.
Navigates Quickly in the Gray
This is about the ability to regularly demonstrate sound decision-making in the face of ambiguity, according to Myers.
“The world is getting grayer and grayer. Kicking the can down the road is still a decision,” said Myers. “Being able to be quick about it requires practice to train your brain.”
She said her company often puts executives through a “180-second exercise,” in which a provocative question or scenario is put forward and respondents have three minutes to formulate an answer(s). “It works because it’s fast; you’re not allowed to analyze. It helps the creative process,” she said. “You should start the ALCO this way. It helps the team to start thinking fast and it sets the stage for the ALCO to be forward-thinking.”
Johnson said this process is also about knowing how to say “no” correctly to leave room for some yesses. “You should look at projects throughout the year and asking are these still the best support for our strategic direction. Maybe you don’t need some distractions. It’s about being more coordinated on the right things to be doing,” he said.
Chooses and Develops the Right Talent
This step is about making the CFO adept at choosing, developing, and engaging supporting talent so there is appropriate time to think.
“Do you have the right bench strength? Do you have the time to think strategically?” asked Myers. “If you say, yeah, I’ve got the right bench strength and we’re focused on the right things, but I still don’t think strategically, then you need to ask, ‘Is it you?’ Going from an operational view to a strategic view is very uncomfortable for a lot of people. One reason is people are accustomed to getting things done. When you are thinking strategically you are not necessarily getting anything done in that moment. You have to have the right talent and bench strength to allow you to come up for air and think.”
Be a Skilled Communicator
“A skilled communicator is someone who can deliver reliable and relevant communication at various levels, ensuring that stakeholders with diverse backgrounds want to listen with an open mind to the good, the bad and the ugly,” said Myers.
This step is about being able to paint a picture for the rest of the team.
“Don’t underestimate the power of simple tools,” said Myers. “If you make it to have productive conflict and accepting push-back with purpose, that can help your organization to be stronger. Sometimes we go into organizations and no one wants to say anything contrary. You need to hear from people who think differently than you in order to move the organization forward. You need to make a habit of reviewing what’s working and what’s not working. If it’s part of the culture it’s not stressful when it needs to occur. “