By Ray Birch
OVERLAND PARK, Kans.—With credit unions closely focused on balance sheet risk, many are overlooking another risk that is equally important to their future, one analyst asserts.
Jeff Owen, chief operations offer at Rochdale+Paragon, told CUToday.info that “employee risk” is an area that has become a critical concern for the movement.
“The ability to recruit and retain top talent should be one of credit unions’ highest priorities today,” said Owen.
What’s causing many CUs to overlook the issue, contended Owen, is the emphasis by national and state regulators on risk within the balance sheet.
“Regulators are focused on safety and soundness and protection of the insurance fund,” said Owen. “Whereas credit unions are focused on increasing member value and their relevancy to ensure they thrive in the future. I think with our focus on things like financial risk, credit risk and compliance risk, we often lose sight of the whole risk around strategy and execution. All of those balance sheet risks don’t matter if we don’t have a relevant business model going forward.”
To do that, stressed Owen, credit unions must have the right people on board, and they are facing a tough job market in which the highly skilled—especially in the IT field—are in demand.
“Our industry is ripe for growth. But we need to get the right people on the ship who can push, drive and believe—not only with their fingers and their brains, but with their hearts, as well,” said Owen.
Owen believes credit unions are at a critical juncture as the result of a wave of retirements among CU CEOs that is expected to last another five years. To fill those vacancies, Owen believes credit unions need to hire leaders who think “out of the box,” are technically savvy, are willing to take risks and have a strong vision for the credit union of the future.
Who Typically Gets Hired
But Owen is concerned that credit unions often opt not to hire those types of personalities and resumes, and instead favor candidates who have stronger backgrounds in finance, noting many who advance to the CEO role were previously CFOs.
“People have been promoted based upon their level of expertise in the organization, not necessarily on what their vision and ability is to drive change for tomorrow. I think sometimes we have promoted based upon the skills, even if they have not been the right person,” said Owen, who said the key issue here is finding those with “soft skills” around innovation and ideas for the future. “I am not saying that we are messing up, but I think that more than ever it’s important to hire or promote people who can cultivate the right culture in the credit union—one that is forward thinking and one in which employees want to work to provide great member value.”
Owen said he does not believe that all credit unions need to look outside the industry for new CEOs, saying that would be a mistake, as leaders who have a strong credit union heritage are critical for the movement.
“I think we lose something that is really special about credit unions if we just hire from outside the industry,” he said.
Beyond the CEO’s office, Owen emphasized that credit unions must do well in hiring and retaining skilled IT professionals.
“With information security, so much here rests on the ability to have good employees who know what to do and what not to do,” he said. “But general technical know-how among employees is very important as well today. More and more of our operations lean on technology in some fashion.
“Also, I think as regulations and legal risks continue to increase, so does the level of employee we need to understand the rights and wrongs here,” Owen added.
Common Denominator Needed
But whether it’s a CEO or CIO, or any position in between, Owen said credit unions need to be nimble and open to change.
“I think one of the biggest things in our way is the ‘we have always done it this way’ mentality. We have to have the right people in place who are open to looking at new things and exploring new ways of doing things,” said Owen, who noted that CUs are often too cautious and don’t employ a culture that permits people to take chances and sometimes fail.
“I think sometimes we have such a conservative appetite across the risk spectrum that we have no latitude to make mistakes. And it’s hard to be innovative and entrepreneurial if you don’t have any room to make mistakes,” Owen said.
Becoming ‘Average’
Owen posited that if credit unions don’t get their hiring, promoting, and employee training efforts right in the coming years, they risk becoming simply average.
“We will just continue to be what we are, and we won’t advance within this fast-changing digital retail environment to become spectacular,” Owen said. “I think we have to be willing to make the necessary changes in staffing. If we don’t have the right people on board we have to get them. And the changes begin at the senior management level. I think we have lots of opportunity in the next five years to truly effect the culture and people side of the organization, and I think we can’t let our focus on other areas of risk distract us from what we need to do.”