GHOST ACCOUNTOWN, USA–It’s Halloween, and it isn’t just mysterious apparitions that haunt some credit unions—it’s unshakeable memories of poor management, bad loans and even a comedy club event gone bad.
In this, the second of a two-part series in CUToday.info, credit union leaders share decisions and events that have haunted them in the past, and how they have excised those ghosts today. Part one in the series can be found here.
Scott Wilson, CEO at the $549-million SeaComm FCU in Massena, N.Y., said he has had many restless nights filled with nightmares on occasions when his credit union has left employees in the dreaded dark when an important decision was made, having not asked for their input.
“It is extremely important that when decisions are being made that you understand the total impact,” said Wilson. “Unfortunately, sometimes we rely heavily on sales pitches and our own internal discussions with senior management and we don’t always bring in staff to tell us what they think. We have changed our philosophy because we learned the hard way.”
Wilson recalled implementing a tool on the CU’s core operating system.
“We believed, based upon what we knew at the time and with limited internal research the change would ultimately assist us to better track our member activities and enhance communication,” he said. “This new tool only added more burden to our staff by duplicating data entry. It never worked as we anticipated. It caused our staff to be more apprehensive, consumed their already valuable time and ultimately they questioned its overall implementation.”
The credit union then asked for direct feedback from staff on the project during one of its Member Experience Meetings—a committee made up of staff—to help SeaComm understand the obstacles that stand in the way of providing an exceptional member experience.
“We goofed. We knew it. And, the only thing to do was discontinue the tool’s use—bite the bullet and write off the cost,” said Wilson, about the harrowing decision. “We are thankful our staff was willing to share their insights even after the fact. You can learn much from making mistakes.”
The Great Pumpkin
One CEO has advice for others in this rising rate environment, cautioning leaders to not to get too comfortable with Great Pumpkin-sized capital cushions, lest concentration and interest rate risk eat them alive.
“As a CEO you make many decisions over the course of a day, week or month,” said Thomas O’Shea, CEO of the $154-million Aspire FCU in Clark, N.J. “While you make them with the best information available at the time, some of them, and hopefully not too many, will come back to haunt you.”
O’Shea pointed to concentration risk and interest rate risk as two areas in which CUs be extra vigilant to watch for any tricks.
“Just because you can put about 12% of your assets in commercial loans doesn’t mean it should be all in the same type of commercial loan,” he said. “Interest rate risk is a relatively new phenomenon, or at least one we haven’t seen in quite a while. In both of these cases you really need to do your homework, model out various risk scenarios and decide how much risk you can afford to take. If done poorly, this stuff can hurt you and haunt you for a long time.”
Haunted Memory
In Kettering, Ohio, Bill Burke says having fun is good for the credit union, but still recalls one time that led to some frightening results.
“In our continuing quest to be considered a desired place of employment, we have one or two associate social events every year,” said the CEO of the $400-million Day Air CU here. “Several years ago our Fun Committee decided to have an associate event at a comedy club. I assumed that the committee vetted the event and confirmed that it would be family friendly. That confirmation never happened and the show, while very funny, was decidedly not family friendly.”
Burke said he heard a lot of comments afterward that the event was a lot of fun, “but I bet we never do that again.”
“Thankfully there were no repercussions and I resolved to do a better job of asking questions before signing off on future events,” he said.
Still Shaking
CUToday.infohas saved the scariest lesson for last, one that harkens back to the coffin-cold days of the Great Recession.
Karen Church, CEO at $604-million Elga CU in Burton, Mich., shared a story that likely still strikes fear in the hearts of many brave CEOs.
“We haven’t had any haunting decisions in recent years,” Church said. “The last decision that really spooked us was lending 100% of appraised values in 2007. We learned how quickly home values can drop by 60% and how easily members can justify walking away when their homes are upside down.”