Credit unions and the aggregation of marginal gains

As a strategic planning consultant, I’m always proselytizing the pursuit and achievement of a big vision and goals. I am a believer that we are capable, individually, collectively and as organizations, of doing hard things and achieving big audacious goals. I see it happen all the time.

It’s essential to have a clear and robust vision of the future. But how to go about realizing this is another thing. This is where the ‘The Aggregation of Marginal Gains’ comes into play.

The Aggregation of Marginal Gains was a phrase credited to Sir Dave Brailsford, a very successful UK cycling coach. The marginal gain principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together.

Opportunities for marginal gains at credit unions

Sometimes we may feel that we are contributing at 100% and couldn’t possibly have additional capacity to gain or reach for a just a little more. Maybe this sentiment exists within our credit union teams. These mindsets are difficult to overcome, and they are a risk that could hold us back from something bigger (and better).

Credit union leaders operate in one of the most competitive business environments. Competition where winning and losing can be measured by a couple of basis points in growth/revenue, the quality of a one-minute member interaction or the number of electronic clicks to open an account. And while we are in this race together, focusing on finding that extra minute of capacity, or slight competitive advantage, we also face dynamic regulatory forces, generational shifts and changing consumer preferences. Truly it does seem we do not have a moment to spare. And yet, we can’t afford to blink and miss our moment and fall behind.

Credit union leaders must have the skill set for finding and aggregating marginal gains.  It’s here that extra capacity, higher performance, and a clearer strategic advantage will be found and leveraged. Taking a look at lending, the bread and butter of credit unions, let me suggest a few (of many) areas where one might find meaningful marginal gains that are vital for credit unions.

• Analysis: Pull the group together, every person or a representative from every department that in anyway “touches” a loan. Walk through every single process relating to lending. How many member touch points, how many staff touch points, you get the idea? A few years ago, I facilitated this with a group, and we found 34 redundant actions, across the entire credit union team, that could be dropped to improve efficiency. What if your team could identify 5 small actions that could be removed during the next year?
• Follow through: Still focused on lending, I frequently find missed opportunities in the final follow through of loan closing. Especially in smaller credit unions, but I have seen it in large credit unions too. The first place I look for a marginal gain is by reviewing the pending loan report. The pending loan report should be a short list. It’s short because loans that have been approved have been closed as quickly as possible. Why? Because the risk of losing the loan opportunity soars the minute, we lose the members attention. Instead, I frequently see long pending lists and notes such as, “waiting for member to find a car”, or “waiting for member to bring us paycheck stubs”. Loan approvals mean nothing, in fact they’re a lost investment, unless we timely close the loan. What if through attentive underwriting, closing and measured pending loan review, your team could book an extra 2-5 loans a month? Loans that might have otherwise been lost to a competitor.
• Perseverance: Some of our lenders need to acquire the same level of grit and determination as our investment officers (I’d argue they are the same as investment officers). During a long period of low market rates, many of our CFO’s had to become hawks when it came to pursuing and closing the best investment opportunity they could find – often with a very short window in which to act. They fought and clawed for an extra 10 basis points on an investment. What if more of our lenders were as intentional or assertive as that? Lenders that are hawks for finding and closing each potential loan application. How many extra loans could we win?

There are many opportunities for credit union leaders to find areas of marginal gain. I’ve just shared three.

Why it matters

Credit union leaders are likely to face many competitive, economic and resource related headwinds during the next couple of years. Those leaders with a strong desire to excel, despite the headwinds, are each looking for a competitive advantage. Many will find these competitive advantages as they aggregate a multiple of marginal gains that give them enough of an edge to win.

Winning matters. I’m a firm believer that the balance of social mission and financial margin are the key to a successful credit union and credit union movement. Looking ahead three years, opportunities abound for credit unions to maximize social impact and greater community awareness. However, their ability to do so will be determined on how well they can compete for margin and growth in changing times.