Editor's Note: This is the first of three stories detailing how three credit unions that had been losing money and even operating under conservatorship turned themselves around. Their stories were shared during NAFCU's annual meeting in Nashville. The first in this series, featuring Arlington Community FCU, can be found here. The second in the series, featuring Key West FCU, can be found here.
NASHVILLE–It wasn’t that long ago that Pioneer West Virginia FCU was a “joke.”
“We were the laughingstock of the Charleston, West Virginia credit union community,” said Dan McGowan, who is now president of Pioneer West Virginia.
Indeed, recalled McGowan, an examiner had actually referred to the CU as a “laughingstock.”
Unfortunately, no one was laughing, recalled McGowan, who was one of three CEOs who shared turnaround stories during NAFCU’s annual meeting here.
“In 2010, our board finally made a decision to make a change in leadership at the CEO position after 10 years of what might be described as Theory X Management,” said McGowan. “In 2010, I came on board as CFO, and we got a new CEO and COO at the same time.”
What that new management team inherited, he said, was a credit union where “every financial metric was going in the wrong direction.” The branches were rundown, which he said was an “accurate representation of where we were.”
Along with that came a poor relationship with the regulator.
“To make matters worse, the previous CEO had written a long, long letter to NCUA documenting why the NCUA examiner was an incompetent buffoon,” said McGowan. NCUA later assigned that particular examiner to be the credit union’s lead examiner.
Credit Union, AKA 'Defendant'
Besides laughingstock, there was another word for Pioneer West Virginia at the time: “defendant.” When the new management team arrived it found it was a defendant in five lawsuits, two from members, three from employees.
Not surprisingly, “we inherited a workforce of highly demoralized, unmotivated, and highly suspicious workers in our credit union. About half of the calls to the credit unions were not even answered. I started to think who in the world would work in that environment for year after year after year? Oddly enough, we did have a handful of people who did show some promise. Otherwise, it was people who didn’t mind being abused or had no marketable skills.”
It was that handful of people who did show some promise that the management team took and told them there would be better days ahead.
“We needed a rebranding in every sense of the organization,” said McGowan. “Good things can, in fact, happen when you treat employees well and they are engaged every single day. That means showing the employees the respect, beginning with the pleases and the thank you’s, and common courtesy to each other, as well.”
The TPS Report
The new management team put in place a daily dashboard, (which, for fans of the movie Office Space, is called the “TPS Report,” but in this case stands for “Today’s Pioneer Status”).
“That report shows us all the changes overnight in loans and shares, year to date, etc.,” he said. “The first thing the management team looks at every single day is the TPS Report. We don’t want to wait until the end of the month to make a decision.”
But the biggest internal change has been what McGowan said has been the implementation of a “service AND sales culture.”
“We don’t understand this argument: is it service or sales? We want to grow the business by removing obstacles that are in front of our members. We should be ashamed of ourselves if a member walks out the door and we have failed to find a way to make their lives better. But let me be clear: we are not product pushers. We want our people to find a valid, legitimate place for our products and services.”
Pioneer West Virginia has worked to remove any “obstacles” between itself and its members, McGowan said. That has included putting in place what he said is the “single best credit card deal in the country.” Its risk-priced cards range in APRs from 5.2% to around 17%.
'Having A Ball'
“We have a ball moving all our people out of the 20%, 25%, 27% tiers from the bank cards and department store cards,” McGowan said. “We don’t charge balance transfer fees. Why in the world would we want that barrier? We want the relationship more than anything else.”
It also wants happy and motivated employees. “Life is good,” said McGowan, when “employees love their work and their coworkers. You have to the right people and let go of the wrong people. We want a culture where we have people in the right seats and they enjoy the fundamental aspects of their work.”
McGowan urged credit unions to hire people who have the skills a CU wants for today AND tomorrow. McGowan said he has heard from others who have called the CU a “demanding organization,” but he disagrees. “We want to be an inviting organization. We seek and reward intrinsically motivated people who enjoy achievement.”
When it finds those intrinsically motivated people, Pioneer West Virginia pays them well.
“Market intelligence indicates we have the richest compensation and benefit package among local credit unions by about 10%,” said McGowan. “We are proud of that. Our board has a stakeholder mentality; our employees have a stake in this.”
Offering Tangible Rewards
McGowan said credit unions should provide “tangible rewards” in terms of compensation and benefits whenever possible to recognize employee contributions to an organization’s success.”
But that also means “no entitlements. We emphasize to employees that rewards can only continue as long as we continue to support and justify it.”
McGowan said credit unions should also:
- Consistently articulate a vision of excellence for both the credit union and the employees.
- Express confidence that employees can achieve great things through hard work, smart work and persistence every day.
All of that has helped turn around the $192-million Pioneer West Virginia. In 2010 it had a 54% loan-to-share ratio. Now it’s right around 100%, with loans up $100 million since 2010.
At NAFCU, from left, Karen Rosales, Scott Duszynski and Dan McGowan.
“And we didn’t put junk on the books to do that. Two thirds of our paper is A to A+,” said McGowan, adding the CU has repaired its relationships with NCUA and even taken in three other CUs via mergers at NCUA’s invitation.
“We do not do any indirect,” said McGowan. “We steal it back from the dealerships. We are very aggressive in going after these loans. And when we do that we get their other car loan, and a credit card balance transfer. Most members have multiple relationships, and we try to get all of them.”
After two years of losses, in 2011 Pioneer West Virginia added $1 million in new earnings. In 2015, we beat the 2011 record by 20% and this year it’s seeking to improve upon that by another 20%.
“Recognize the small steps and resulting accomplishments in the move from mediocrity to greatness,” said McGowan.