FOCUSREPORT/Leadership in 2021
If 2020 taught us anything, it was that no business model is shock proof. Many trends that were already in progressaccelerated rapidly during thepandemic and some weaknessesbecame starkly obvious. For thecredit union industry, it becameexceedingly clear that our interestrate shock tests and ALM projections did nothing to prepare us forthe onslaught of change we experienced in a few short weeks.
When COVID began late in thefirst quarter of 2020, most creditunions were unprepared for themass exodus of staff, widespreadbranch lobby closures and theovernight utilization of digitalchannels for member interactions. The pandemic would proveto put the credit union model under stress unlike anything we hadever seen.
As the pandemic stretchedinto months, it became clear thatthere were two main leadershipapproaches to address the challenges we faced: Hold our breathsor create a new business model.
Suddenly our well-thought-out
strategic plan action items were
thrown out the window. No
amount of modeling could predict
what we would be facing in the
coming months or years. As lead-
ers, we had to make decisions in
rapid succession with
little information and
very few facts. For
those credit unions
that had invested in a
that included paper-
less processes, on-
line access for basic
member service func-
tions and an easy-to-
implement work from
home strategy, the
ability to adapt was
simple. However, for
those credit unions
that had yet to complete that digi-
tal journey, the challenges were
much more difficult. Unfortu-
nately, most small credit unions,
which make up the majority of
all credit unions, fell into the lat-
ter category. When small credit
unions struggle, the whole indus-
So, how did we get here? How
did we allow ourselves to be so
complacent? It is not a surprise
to anyone that while the future of
our business is digital, so many
credit unions still do business
like the industry did in 1985. We
pride ourselves on our service,
but by service we mean personal,
face-to-face service – not a digital
experience. We have been making
decisions based on this service
model and COVID
showed us that this
thinking is flawed.
Credit unions area highly regulatedindustry. We mustcheck a lot of boxes,We maintain high capital levelsbecause it makes our regulatorshappy when we really should beinvesting that money into ourmember experience. All the capital in the world will not save usfrom the rapid paradigm shift weare currently experiencing. Smallcredit unions are already beingmerged out of existence due to thechallenges of keeping up. Will thataccelerate in the years to come orcan we adjust now to adapt to thenew reality of a post-COVID creditunion world?
If you are a credit union execu-
tive, you are grappling with how
to lead your credit union into a
future not one of us expected to
be upon us so quickly. As the re-
ality of the situation settles in, we
are all realizing things will not
go back to how they were before.
Consumer and employee behav-
ior have been fundamentally and
unalterably changed. How can we
be sure we survive the next centu-
ry? How do we lead this industry
into 2021 and beyond? I fervently
believe that the initial leadership
approaches to this pandemic in
2020 should be narrowed down to
one: Create a new business model.
This crisis has made it abundantly
clear that our priorities were not
in the right place and the time to
change is now.
All credit unions have limitedresources, but those resources aredisproportionately limited at asmall credit union versus a largerone due to economies of scale.A credit union can grow muchlarger without adding additionalexpenses once it reaches a certainequilibrium. Larger credit unionscan allocate more resources to adigital infrastructure and manyof them have. However, smallcredit unions have the advantageof speed. A small credit union’sinvestment in a digital infrastructure may be smaller dollar wisethan a larger credit union, butthe timeframe to implement thatinfrastructure is greatly reduced.Smaller credit unions should leverage that advantage to get moving on their new digital businessmodel now. The time to act is in2021.
Creating a new model soundsdaunting, and it is. It starts with achange in mindset certainly, butreally it is about getting back toour roots. Credit unions were theoriginal crowd-funders! Creditunions disrupted the banking industry! Challenging the status quois in our DNA.
Change has been forced uponus, so how will your credit unionrespond? And where do you start?
Moving to a digital businessmodel is a marathon, not a sprint.Depending on where you are inyour digital journey determineswhere you need to start, but startyou must. It might take five yearsto get where you want to go but itall begins with the first step. Hereare some things to think about asyou plan for 2021 and beyond:
• What lessons has your creditunion learned in 2020 abouthow your members prefer todo business and how your employees work? Are there thingsyou want to continue post-pandemic? Many employees willexpect the flexibility to workfrom home from now on. Is thatsomething you are prepared tomake happen long term?
• Can your technology backbonesupport a robust digital offering? If you have not had yourtechnology infrastructure assessed in a while, you should dothat now. There have been major advancements in networking, virtualization and cloudplatforms in recent years thatmost credit unions do not utilize. It makes no sense to spendlots of money on a cool piece ofsoftware if your network infrastructure cannot handle it.
• Does your current core platform support full digital serviceto your members including digital signature capabilities, fullyintegrated digital banking, real-time payments, data analytics,and online account openingand lending? If not, look for anew one.
• Do your internal processescreate hurdles for a 100% digital service experience for yourmembers? If so, they may needan overhaul.
The next three to five years willbe pivotal for the credit union industry. The decisions we makeas leaders will determine our ultimate success or failure. 2021is the year to bring back the culture of creativity and innovation on which this industry wasfounded. n
Leading Your Credit Union in a Post-COVID World
Becky ReedCEOLone Star CreditUnionDallas
‘This crisis has madeit abundantly clear thatour priorities were notin the right place andthe time to change isnow.’