I was listening to the radio this week, and the local disc jockey was talking about clichés he couldn’t stand anymore. One of the clichés was “thinking outside the box,” which I probably hear on a weekly basis, and it is probably me saying it half the time. Thinking outside the box is practically part of my job description, because our company is an intermediary for credit unions that often need to create new and unique solutions to solve problems. But, innovative thinking isn’t the solution to all problems. Sometimes having a strong command of the fundamentals of lending and operations is all that is really needed to solve some of your institution’s problems.
I suppose we can call it “thinking inside the box” when we use common sense and implement basic solutions that were simply missing to begin with. I can elaborate on how institutions are failing to incorporate the basics after having worked as a bank examiner who critiqued bank managers, and also working at the CUSO where I speak with many CU management teams. With both industries there are definitely recurring problems where people are failing to think inside the box.
The most common way I see people failing to think inside the box is when they blame the competition for their woes. When people blame others for their failures, they are failing to do their job. All organizations need to hold people accountable for their actions, and hire people who are not afraid to take responsibility. And yet, when people fail at business development or departments fail to be profitable, they point the finger at people outside the institution for the reason behind their incompetency.
The next issue I often see is the lack of profitability. This is either a revenue problem or an expense problem. With revenue, it may come from holding too much cash, and failing to deploy that cash into interest earning loans or investments. Or with expenses, it may be they complain about the high cost of compliance and overhead, but fail to recognize that their efficiency ratios fall far shorter than their peers. Every institution must generate enough interest income to pay for operating expenses, which is a basic function of all depository institutions, and a failure to do this indicates a problem with management, not the industry or local competition.
And with business lending, we see too many credit unions approach business loans the same way they approach consumer lending. Lenders want to help members out because they have great character, mistakenly lending large sums of money to fund business operations that have significantly more risk than a normal car loan or home loan. Also like consumer loans, some credit unions will not follow up with borrowers after they book the loan, failing to realize it is standard industry practice to continually update information in the file. These institutions fail to monitor risk by following widely known best practices.
As with any task with life, success is 10% innovation and 90% perspiration. In other words, thinking outside the box is important, but working hard to master your core business operations is truly the most important function your credit union should undertake. If your credit union is not operating effectively to begin with, then thinking outside the box may do little to improve the current situation.