Prime the pump for productivity and profitability
For many, many years credit unions have been managing expenses to become more efficient. They’ve tightened and re-tightened belts. They’ve cut until they can’t cut any more. They’ve pinched every penny and squeezed every drop of water out of rocks. If you’re like most credit unions, Moses couldn’t get any more water out of those rocks!
The time has come for Boards, executives, and leaders to take a diametrically new and different look at how they become more efficient … and profitable. High levels of efficiency can be attained by decreasing expenses but, more significantly, by increasing production. Most credit unions have spent way too much time focused on the former and not nearly enough time and effort on the latter.
Stop squeezing water out of rocks and start priming your pump for a deep, torrential flood of productivity and profitability!!!
One definition of “efficiency” is how much does it cost to make a dollar. If your credit union’s Efficiency Ratio is 0.78, you’re spending 78 cents to produce one dollar. Therefore, the lower the efficiency ratio, the more profitable you are. There are three ways of improving your efficiency ratio: decrease the numerator (expenses) while maintaining the denominator (revenue); maintain the numerator while increasing the denominator; and increase both but increase the denominator more significantly.
Since most credit unions can’t realistically reduce their expenses (the numerator) any further, they’re only option is to increase their revenue (the denominator) as much as possible – that is, produce more revenue with the same or similar levels of cost. Following are three key strategies for growing and optimizing your revenue in 2017 and beyond:
- Optimize your marketing and sales efforts – turn your strategic focus and investment dollars toward those activities that should produce quick but lasting revenues. In today’s unbelievably competitive world, credit unions need to get the word out that they have the solutions their members, and future members, need. Promotional efforts shouldn’t just be about our rates or what we have to offer but how we can help members as much, if not more, than those new and aggressive financial services providers. Every employee who “touches” members must be able to thoroughly understand their needs and present appropriate solutions that will deepen the relationship and promote long-term loyalty. We have great products and services; it’s our responsibility to make members aware of it! So get the word out – all the time and to every member. We care about you as a member, not a sales target. We want you to be financially and emotionally successful, not dump a product on you. We want to provide as much help as possible. Please think of us first and often.
- Minimize friction and frustration for employees and members – the buzz phrase in the industry now is “ease of use” and it should be a primary focus of your delivery channel and service efforts. From the employees’ perspective: find ways to free-up as much time as possible so they can reallocate as much time as possible to serving your members. Way too many employees are spending way too much time processing repetitive and unnecessary transactions and activities that produce no service or revenue. Get them focused on the member and minimize their frustration. The more time you can free them from operations duties, the more time they can spend on service and experience duties. From the members’ perspective: look at every interaction (in-person, virtual, by phone, etc.) and fine-tune it to be as seamless and effortless as absolutely possible. Creating and maintaining this type of journey is a primary driver of satisfaction and necessary if you want to generate more revenue from your current and future member relationships. Your member’s positive feelings about your credit union are only as deep as their most recent positive experience with your credit union. So, make certain each and every experience is as inarguably positive as possible.
- Remove the restrictions on the organization’s creative energies – for the most part, you have well-intended and talented individuals working in your organization. However, far too often, their contribution to the organization’s success is muted because they’re restricted to a role that doesn’t allow them to grow and make a difference. Tap into the reservoir of creative ideas that each and every individual thinks they need to do to be more productive and enhance the member experience. Don’t focus them on how to cut expenses or do more with less; focus them instead on how to be more productive and do more with the same. Many credit unions have unintentionally instilled a culture of “less, less, less” by focusing so much on costs. Today, they need to instill a culture of “more, more, more” by focusing primarily on maximized production, growth, and experience. Tap into your top producers to see how they’d like to take their production to even higher levels; tap into new hires to see how their fresh perspective on the organization may be different than your long-held, highly biased perspective; tap into non-managers who have diverse backgrounds and can introduce concepts and practices that drove productivity growth at their previous job.
Transitioning from a stifling cost-driven culture to a burgeoning production-driven culture isn’t easy but the payoff can be life-altering. A recent study by Harvard Business Review suggests that the best companies are more than 40% more productive than their industry peers. And this productivity allows them to be 30%-50% more profitable and realize significantly faster growth. In today’s world of uber-competition, each and every credit union needs to strive to be 40% more productive and 50% more profitable. Your future as well as the industry’s future depends on it!
If you’d like to stop squeezing water from rocks and prime your pump for a flood of productivity and revenue at your credit union, my firm can help. Please contact us at Probert@fi-strategies.com or 636-578-3280.