Definition of an Entrepreneur (Webster’s)
- Noun
- A person who organizes, manages, and assumes the risk of a business or enterprise.
- Someone who takes ownership while accepting the risk.
The entrepreneurial spirit represents a mindset—a proactive approach that actively seeks change rather than passively adapting to it. This mindset fosters critical thinking, innovation, service, and continuous improvement.
These characteristics should also apply to Branch Managers, who can be viewed as the CEOs of their branches. Consider this: if a credit union has $200 million in assets, and one branch generates 25% of that, then that branch is responsible for $50 million in assets. Effectively, the Branch Manager is running a $50 million business within a business. The same logic applies to individual loan officers. For example, a loan officer managing a $10 million portfolio in a branch that oversees $50 million is responsible for 20% of the branch’s portfolio. They, too, are running a business within a business, assuming the responsibility and risk of their decisions. They are entrepreneurs.
However, after speaking with branch managers and loan officers, it is concerning to find that many cannot answer basic questions about their portfolios, such as what they consist of, the income they generate, or how they impact the branch’s bottom line. This is bad business!
Training programs for loan officers tend to be comprehensive, covering policies, guidelines, compliance, loan applications, interview skills, and some decision-making. Yet, one crucial element is often missing: teaching loan officers to think like businesspeople. This gap often extends to branch managers as well. These individuals are managing a business within a larger business, and we must treat it that way. By equipping them with knowledge about how the credit union operates and how their work contributes to overall performance, we can cultivate career-driven staff and ensure long-term financial growth and stability for both the credit union and its members.
Every loan officer should be able to answer three essential questions about their portfolio:
- What is the size of their loan portfolio?
- How is their portfolio broken down by credit quality (paper grade)?
- How much income does their portfolio generate for the branch and the credit union?
Branch managers should provide this information at least monthly, and loan officers often request it more frequently and in greater detail.
Below are essential metrics we should share with loan officers so they can better understand and manage their business:
- Portfolio size and percentage of the credit union's total portfolio
- Portfolio breakdown by paper grade
- Portfolio breakdown by loan type (e.g., auto loans, unsecured loans, credit cards, mortgages)
- Product breakdown by product by paper grade
- Gross and net yield of the portfolio
- Individual gross and net yield by product
- Delinquency and charge-off rates
- Net income generated by the portfolio
This information is crucial for loan officers to understand their business and how they contribute to the credit union’s overall performance. For branch managers, this data enables more targeted training and motivation, focusing on each loan officer’s strengths and areas for improvement. Performance goals and reviews can then be based not just on loan volume or marketing efforts but on overall contributions to the bottom line. This approach fosters an entrepreneurial culture, allowing management to more accurately forecast branch profitability and tailor training and development accordingly.
The responsibility for providing this level of insight lies with senior management. One phrase that is all too common in credit unions is, “We’ve always done it this way.” In today’s world, that mindset is unsustainable. Clinging to the past leads to higher staff turnover, stagnant growth, dissatisfied members, and reduced net income. Businesses must be proactive rather than reactive. An entrepreneurial culture empowers your team to achieve and sustain the credit union’s mission: “To serve the underserved.”
