June 23, 2010

When he was a kid, Patrick Adams’ father wasn’t a handy man about the house. He had two solutions to every problem: If it moves and it shouldn’t, duct tape it. If it doesn’t move but it should, use WD 40.

“We’re a credit union movement with way too much duct tape on it. We need some more WD 40,” Adams, president/CEO of $188 million/38,000-member St. Louis Community Credit Union (www.stlouiscommunity.com), St. Louis, told attendees at CUES Annual Convention in Lake Buena Vista, Fla., yesterday.

Patrick Adams, president/CEO, $188 million/38,000-member St. Louis Community Credit Union, St. Louis, asks the audience a question at CUES Annual Convention in Lake Buena Vista, Fla.

“Too many members stand in our lobbies and refer to us as their bank,” he said. But there is lots of distrust in banks right now and credit unions need to seize the moment.

“We’ve got a lot of good opportunities as a credit union; we just have to take advantage of it. The market is there for the taking,” especially for the younger generations who don’t want much to do with big business.

Credit unions need to “get the duct tape off.”

He shared several ideas that should be on every credit union’s radar:

1. The Cs of Our Movement’s Success

• Cooperative Structure

• Collaboration … Compete: Stop worrying about the other CU in your town. Worry about the banks. Work together to take down the banks.

• Capital Leverage: Spend money. Measure ROE instead of ROA. “Now is not the time to draw in,” he said. “Let’s get it going. Do what we can to be successful.”

• Commoditization Avoidance

• Compliance/Regulation Lobby: “I’m not nearly as worried about competition as I am about this last item,” Adams said. “Our natural predator resides in Washington, D.C. We’ve got to get our lobby strengthened as much as we possibly can.”

 2. A “Six Pack of Mistakes” to Avoid

• 900 lb. Gorillas Eat 800 lb. Gorillas: Somebody wants to eliminate you. Don’t be complacent if you are doing all right.

• Relationships Matter: Put people before profit.

• Stop Believing Your Own Press Releases: “Is anybody telling you what’s wrong with your credit union? I want to know what is wrong with our credit union. I want the board to know what is wrong.”

• Expense Management on Steroids: Manage expenses, but don’t cut just to cut. Slashing and burning expenses will destroy your corporate culture.

• Board Independence is Essential: The credit union needs a plan to respond to a reputation crisis. An independent and transparent board will be crucial in the event of crisis.

• Grow Market Share … Never Be Satisfied.

3. Moving Strategy to Execution

Why do business plans fail? Adams asked. They fail when companies rarely track performance against long-term plans.

“If you are measuring something on a semi-annual basis, make it quarterly,” he suggested. If quarterly, make it monthly. Shorten the window so if you find yourself out of whack with the plan, you can make a quick adjustment.

Another problem is that strategy often gets lost in translation:

o Approved strategy is poorly communicated.

o Translation halts good action plan.

o Confusion over what resources are required.

o No one is held accountable and underperformance is repeated over time.

Never put anything in a business plan if you don’t have the human capital, time and financial capital to get it done. If you don’t have those three things, it will just lead to frustration, Adams said.

4. Spell Opportunity With 3 Ls

• Identify Life Stage Opportunities: Offer products that meet every life stage of your membership.

• Lifestyles Are Changing: But respect the changing lifestyles of your membership. “Folks don’t do it the way we did it,” Adams said. “Are we plugged into the lifestyle?”

• Embrace Lifetime Value: “People ought to be knocking our doors down,” Adams said. “They are coming in our front door, we’re losing them out the back door.” As credit unions, you need to “keep your members for a lifetime.”

5. Embrace a Culture of Innovation

At your next planning session, ask and discuss these three questions:

• If the credit union was reinvented today, what would it look and feel like?

• Does your current business model have legs? Is it sustainable?

• Do you have a strategic differentiator … or are you lost in the clutter?

“Lots of credit unions in this room think the differentiator is service,” Adams said. But they are wrong. “If service is our differentiator, we’d better have service on steroids.”

Instead he suggested the differentiator is the not-for-profit business model.

“What has Starbucks done with coffee that we can do with financial services?” he asked. “It’s built into our business model. We’re not for profit. There is huge value in that and we don’t use it.”

Theresa Witham is a CUES editor.