"Taking a good, hard look at yourself" is a common cliche, but as another cliche so accurately notes, "it's easier said than done."
Yet as was reported in this space Nov. 6, that's precisely what CUNA Mutual Group has been attempting to do as it reviews every aspect of its operation under (relatively) new CEO Jeff Post. The company is spending some $200 million as part of what it calls an "improvement agenda."
In this, the second part of a two-part series, Post answers questions about the company's operational review, and even offers some advice to credit unions in need of a little self-analysis themselves.
CUJ: When someone hears "operational review," the first thought is "expense review." Is that, fundamentally, what the process is, or is there more to it? Are there abstract issues identified that do not have a budget line but still are important, and, if so, are there any examples?
Post: There's much more to it. Do we have the right structures, technology, people, and processes? Can we partner with outside organizations to improve quality or reduce costs? These are just a few of the areas that need to be reviewed in addition to looking at expenses.
Does CUNA Mutual need to improve expense ratios? Absolutely. Our improvement plan, though, is much more than identifying expense reduction opportunities. For example, in Investments, David Marks (Chief Investment Officer) grew his investment team. He actually added expense. He and his investment team are changing our investment portfolio, adding new investments, and the result is $25 million additional NET investment income improvement from our general account-that means after the increase in expense. And this was achieved without increasing risk or the duration of our investments. This particular operational review indicated we needed to spend more on our investment team ... and the result would be a greater overall return for the company.
In our customer service areas, the operational review is about completely changing how we deliver service to our customers. We're investing in technology, a new operations center, and training for our staff. Again, spending more money at the outset. We're also working to reduce costs and eliminate redundancies. If we were simply reducing costs, we wouldn't have invested in technology or broken ground on a new center. Our review, though, has indicated these changes will drive improved service-AND make us more competitive in the long-run from a cost standpoint.
I could give you more examples. It goes back to understanding your current situation, identifying the kind of organization you must become, and having the courage to make those changes-even when those changes are significant.
CUJ: With any effective operational review come changes. How do you keep change from being perceived as a negative by both employees of the organization and customers of the organization?
Post: Change is difficult in any organization ... and CUNA Mutual is no different. Communication is essential. Internally, we spent several months in "Summer School" last year, helping employees understand our need for change. Employees themselves contributed to building our case for change. In our first year of change, we communicate the progress we're making ... while continuing to reinforce our case for change. We started this change effort one year ago. We're taking some time this month to recognize our progress, to take a bow, and to remind ourselves that we have more to do. At the same time, we are not na?ve-change is hard for people and some people will never be convinced we need to change.
We're also increasing our communication with customers. I've spent more of my time this year in the marketplace, talking about our change agenda and reminding credit unions that our commitment to them hasn't changed. I remind them about how we donated more than $35 million to credit union causes-something our competitors can't come close to matching-and the work we're doing behind the scenes to help reduce plastic card fraud.
We also benefit by being open and honest with our customers- acknowledging the feedback we've heard from them and committing to making improvements. I believe credit unions like what they're hearing from us. I know, too, that it's time for us to execute-to make sure our actions match our words.
CUJ: Do you have benchmarks in place for reviewing the review? How do you measure progress?
Post: Yes. We have a three-year, $200-million improvement agenda that has specific, objective goals for 2006, 2007, and 2008. We are measuring our progress in improving the company and expect to exceed our plan in the first year. It's essential to have clear benchmarks in a change effort.
We're also committed to meeting and exceeding our business goals while we improve the company - I call this fixing the airplane in flight. We have annual goals for revenue growth, profitability, and internal customer service measures. Year to date, we're doing pretty well with our annual business plan and we're working hard to finish the year strong so we exceed our business goals, too.
CUJ: What surprised you in the review of CUNA Mutual?
Post: Our credit union customers really want CUNA Mutual to be successful. Their openness, honesty, and patience while we are changing is very encouraging. It's hard for a CEO to ask for more from a customer group. Our customers see great value in having a partner dedicated to their success-and they have done a lot to help us improve.
CUJ: What advice would you pass along for credit union CEOs considering a similar review of their operations? Can they handle it internally, or would it be most effective to use an outside party?
Post: I think it's critical for the CEO, senior leaders, and the Board to be aligned around the operational review first, AND the subsequent plans for improvement. Everyone needs to own the plan, they can't pass it off to an outside party. I have found value in tapping into the expertise of outside consultants-particularly in developing a fact-based approach to change. But understanding the need for change and being committed to change must be owned internally. Outside experts can contribute ideas and expertise to a change agenda, but successful implementation can only happen when your people and your board are truly committed to change.
CUJ: Is this type of review to be an ongoing process, or an issue best revisited on a regular schedule, or never, ever, ever, to be tried again?
Post: I'm sure you're familiar with the saying, culture eats strategy for breakfast. As we drive change as part of our three-year plan, one of our goals is that we change the culture and develop a culture where continuous improvement is how we do business. Any organization must continually learn, change, and improve to be successful. That shouldn't require a comprehensive "organizational review" every three years. Instead, it should become how we do business.
Frank J. Diekmann is Publisher of The Credit Union Journal.