By Ray Birch
LOMBARD, Ill.—What makes the top-performing credit unions successful? There are two “common threads,” according to Raddon, which came to its conclusion after closely examining the latest group of its Crystal Performance Award winners.
Crystal Performance Awards are presented annually to credit unions by Raddon, which makes its judgements based on a balanced scorecard measurement of growth, income, efficiency and margin management. Twenty-one credit unions, segmented by those under or over $1 billion in assets, received the award this year.The keys to those who are at the top, and well as those that continually show up in the annual honors, are strong leadership—the CEO—and a specific set of metrics.
The Common Threads
“There are some common threads, and number one is really more of a management issue, and maybe the better word is leadership,” said Bill Handel SVP of research at Raddon. “If you look over time for the consistency in terms of patterns and behaviors, or things that really drove these organizations, it’s how they're lead.”
Handel said that consistently, the top-performing credit unions have leaders who give a great deal of attention to technology and innovation.
“And when I say innovation, I mean innovation in a much broader sense,” explained Handel. “I don't want to say they are reinventing themselves, but they're always looking to see how they need to continue to evolve. There's that willingness to be able to pivot as needed, but pivot appropriately. It's not as if you're changing just because somebody else is changing. You're actually saying, ‘My business model and what my membership needs, needs adjusting’.”
Benchmarks & Boards
These top-tier CUs, too, make their decisions based on a significant amount of data, emphasized Handel.
“They have their benchmarks of performance that they pay attention to,” he said. “They identify those key metrics that represent success for them and they continue to track to them.”
According to Handel, another trait found among credit unions that win Crystal Performance Awards is their boards are informed monthly on how the CU is performing toward its top five to seven metrics.
“Then, all that just trickles its way down throughout the organization,” Handel said. “These credit unions are managing with innovation in the broader sense of the word, and they also are managing to key metrics.”
Bill Handel
Handel stressed there is not a key metric, one that many of these credit unions all focus on, that leads to success. Instead, the credit union simply adheres to goals that pave the way for a well-run organization.
“It's not necessarily that the credit union did this one particular thing well as an institution, such as focusing on non-interest income,” explained Handel. “It's really an all-around approach—'I'm continuing to measure my performance and continuing to think about how to do things in a better fashion’.”
Relationships Matter
Not surprisingly, Handel explained that the top-performing CUs understand the need to focus on the relationships with their members.
“I know that sounds like something everybody says. But these organizations really do this,” he said. “We find that share of the members’ wallet is consistently higher among the high performers.”
There is another common trait to be found among the winners, with Handel noting scale helps many of the credit unions repeat as a Crystal Award winner, noting it is getting more difficult each year for small credit unions to excel.
“Don’t get me wrong, there still are many smaller organizations that are high performing. But it's just a little bit more difficult for them over time, and it takes a little more time for them to get there,” he said. “It's just difficult because they don't have that same scale as the larger credit unions.”
New Workplace Realities
Handel said the fact that leadership plays such a key role in the success of consistent high-performing shops is a bigger concern today as the industry is experiencing has been seeing a fair amount of turnover at the top, some of it accelerated by the pandemic.
“Leadership has always been important to credit unions, but it’s even more important now because of the significant transition that we're in,” said Handel about all of the CEO turnover. “We're in a significant transition period as an industry and we’re facing economic factors we haven't seen for some time.”
Handel, added that leaders must be even stronger, and able to adapt in the current landscape due to issues with the labor force—not always having enough staff and the war for talent—and the new remote working environment.
“We have a different workplace today than we had even three years ago,” said Handel. “It's a dramatically different workplace and I think it's going to continue to be that way. Leadership will continue to be extraordinarily important as we navigate our way through a lot of different pressures.”