Embrace the “Red”

“We need you to push our limits this year,” said a credit union CEO as we built an agenda for a few days of strategic thinking, dialogue, and planning with senior executives and the Board of Directors. “We’ve been successful, but our members deserve more from their credit union. What can we create and do to drive more value to their relationships with us?”

We built the framework for our meeting around a model exhibited by the US Navy. In general, several years ago, the US Navy embarked on a strategic initiative to increase the number of ready F/A-18 Hornet fighter jets from 260 to 341 within one year. One year. A 31% plus increase to move out of always being behind schedule (consistently unavailable assets) in fulfilling part of its mission. “Embracing the Red (negative indicators of progress on strategic measures of success) meant pushing leaders to undertake innovative approaches and a culture of rapid learning, testing, and execution. You can read more about this model in “Lessons from the US Navy on Building a Culture of Learning” in the Harvard Business Review (hbr.org).

“Our ‘Red’ to embrace was member relationships,” stated the CEO. “While our number was good (according to industry comparisons), it wasn’t great (according to our standards). We chose to increase our metric 50 percent over two years. That kind of success would result in the byproduct success of increased assets, revenue, and profits, but our focus was one number. Now.”

Three elements drove this credit union’s path to pushing its own limits.

• A “Get Real” goal. Setting an increased membership, loan production, or profitability set of goals was not enough. Those would not inspire a team to chase something that seemed out of reach. “When our members experience and realize our passion for their success,” replied the CEO, “the new and expanded business will develop. If we want members for a lifetime, we had better measure and earn an increase in the lifetime value of each member’s relationship.”
• Data-driven decisions. So many points of data, so little time. Through rigorous analysis (and some AI to help the review), two significant measures correlated most with loyalty: products and tenure, with tenure being the measure most connected with loyalty. Holding a product was a great start, but remaining with the credit union allowed for time to market and deepen relationships. Time + consistent marketing + service first = products and relationships. This formula, with “time” as the leading KPI would drive all efforts and plans.
• Solutions-only. It’s easy to get mired in details, especially specifics that indicate a project will take longer than anticipated or chart a different course. But, when leadership at the top (Board and CEO) has determined the top strategic priority, solutions must surpass resulting challenges. “As a leadership team, we shifted our focus to ‘How can this be done?’ Rather than assigning blame to people, time, or resources, we decided to collaborate and learn how we could continuously improve and encourage accountability for results,” said the CEO.

Understanding baseline performance is a key principle in strategic planning, as is leveraging data to comprehensively understand performance drivers and targeted interventions for improvement. However, leadership is a pivotal element in strategic planning, emphasizing motivation and team-focused actions over individual administration of responsibilities.

But, “embracing the red” may be the biggest differentiator toward reaching strategic success. “Like many credit unions, our strategic scorecard shows progress as red, yellow, and green,” shared the CEO. “We like green indicators of progress (who doesn’t?), but having a goal in red, one that is seriously important, but feels amazingly out of reach, improved our ability to focus, decide, and execute. ‘Red’ means we are stretching, striving, and – over time – succeeding.”

As your executive team builds out details to your strategic plan, consider pushing your own limits as business builders. What single measure of strategic success would put your credit union well beyond its mission to members? What “Red Zone” deliverable to members would drive your team to build an institution members choose first and foremost? Consider “embracing the red” as a part of your strategic plan and its execution. Odds are good it will lead to plenty of green.