How Credit Unions Can Create Strategic Alignment

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How Credit Unions Can Create Strategic Alignment

Amidst the challenges of the pandemic and an increasingly competitive talent market, credit unions are reevaluating their strategic game plans as they head into the future. However, what happens when executives and board members lack direction or aren’t on the same page? On “C.U. on the Show,” Doug welcomes guest Peter Myers, senior vice president at DDJ Myers, a firm specializing in senior leadership development, strategic alignment, and succession planning. Peter helps credit union executives and board members develop foundational strategic plans to help lead the organization more effectively.

Where is Your Credit Union Headed?

Peter emphasizes strategic alignment as a priority for credit unions that want to continue reaching their goals, innovating, and attracting and retaining top talent. He also describes the consequences credit unions can encounter when leadership isn’t moving in the same direction. As Peter explains, there are many reasons credit union executives may not be aligned; for example, they may value different performance metrics, make decisions in a purely reactionary way, or spend excessive time on tactical operations rather than strategic planning. For instance, while a common concern among board members may be asset growth, should that be the overall focus compared to the organization’s bigger goals and business model?

Conversations with Purpose

Firms like DDJ Myers help executives dive deep into conversations about the organization’s goals, what KPIs they value, and what’s important to each executive or board member. As Peter explains, this can be a painful yet illuminating process for executives who discover their lack of alignment. However, when these conversations occur and result in a consensus, discussion regarding larger organizational goals such as expanding executive benefits, prioritizing asset growth, or pursuing a merger become easier. Peter explains that while this process takes time, sometimes years, the upfront planning sets up the foundation for leading the organization on a united front around which the rest of the credit union can organize and enact. 

Peter likens this discovery process to stretching and flexing new muscles that, while uncomfortable at times, can ultimately create more sustainable organizations that are more adept at navigating daily operations and unexpected events. Stream the full episode to learn how Peter has helped credit unions apply strategic planning with real-life examples, plus:

  • When a credit union should identify or reevaluate its key performance indicators
  • Why he says leadership development for executives and board members is essential
  • Why it’s critical to understand where executives spend most of their time

If you feel your credit union leadership needs a strategic reset, listen to the episode to hear more about the conversations, questions, and steps to get started.

Peter Myers and DDJ Myers are not affiliated with or endorsed by ACT Advisors, LLC.


Audio Transcription (pulled from the podcast)

Doug  

Today’s podcast is part one of a two-part episode with DDJ Meyers. In this episode, my guest is Peter Myers, senior vice president of DDJ Myers. Peter facilitates professional development programs for executives, succession planning processes for boards and CEOs, and strategic planning engagements for credit unions nationwide. Today, we discuss the steps of a strategy development program and when to identify or reevaluate your KPIs.

Doug  

Welcome to the show, Peter. I’m glad to have you join us today. So tell me, how did you first get started working with the credit union movement?

Peter  

Yes, good question. Thanks for having me, Doug. I’m excited to be here. And just to give you a little shout out, I love listening to the show; you do a great job. So I’m excited to be here. To answer your question, do you want the professional bio version? Or do you want the story Deedee tells?  

Doug  

You know, we want the story Deedee tells and you can tell. Since you have the connection, you can tell the truth about the story.

Peter  

Yeah, the truth. So just for all the listeners out there, at DDJ Myers, Deedee is the CEO. And I’m Peter Myers. A lot of people when they meet us today, they’re like, “Oh, your sister.” Once in a while, they’ll say, “Oh, your wife.” I don’t know what that means, and I don’t know how to take that because she is in fact, my mother. I’m the only other family member who works at our company; we got like a dozen, 15 people or so. And so the way that Deedee talks about how I joined the company is in first grade I would be running the mail meter machine. She would send letters out to the financial executives out there because we started really inside treasury management, asset liability management, executive search for banks, regional banks, transnational banks—executives across the United States, and this is when we would have to mail stuff. So I would fold letters, put them in the envelope, and then go cha-ching for the little metering thing in there. So that’s what I would do. That’s how I got started. And she would pay me in quarters. And so she’d say, all right, if you do all this, you get 50 cents, that’s two quarters. And the significance of the quarter is because the restaurant we used to go to had a Pac Man machine. And I loved playing Pac Man. And so I got to play Pac Man a couple of times for doing hours and hours of labor, right? It’s the way Deedee really had it go. The story she continues to tell is at one point in time when the mailing list got longer, I negotiated. I went to her and I said, “Well, hey, you know what, there’s a lot more letters here. So I think I should get paid more, okay?” All right. Well, how much should it be? “Well, it’s twice as many, so I think I should have twice as many quarters.” So it’s a quantity thing, not a complete the job thing. And she, as her motherly self, said all right, yeah, you can have the extra quarters so you can play Pac Man. And that’s how I got started. She still pays me in quarters today. That’s kind of the line of it today.

Doug  

Thus, the DDJ Myers expertise and incentive comp is through and through all the way.

Peter  

All the way. Yeah. So we started, the brief history of our organization, we started in executive search and found our way into the credit union industry. In executive search, we work with C- level position CEOs, obviously with boards for the CEO positions. Then we also were invited to help executives bring out their best, their executive potential. And we started our leadership development offer in the early 2000s. Because in our executive search offer, they were saying, “hey, well, you helped me bring my best foot forward, and I didn’t even get the job. But now I understand what I need leadership-wise, to work on, get better and so forth.” Deedee had the insight to start our leadership development programs. We’ve been doing that for over 22 years now. And then we got invited to the strategic planning conversations, because we help teams, whether it’s the board or the executive team, get aligned on what is most important in a way they had never had before. And so we’ve been doing our strategic planning offer for about a dozen years now. And then, of course, this goes back into the executive comp conversation. The way we orient with any of our services is very data driven, very informed, very strategically oriented. That leads into this executive comp or CEO comp conversation where we help boards and also frankly, CEOs, be more diligent about what they’re doing with executive retention and benefits, and rewards programs. So that’s a long story to say that’s how we got into the credit industry because we love working in this industry. And we love the people. You know the drill, we drank the Kool-Aid. Right?

Doug  

Yes. It is a beautiful place to get to be a part of the servant leaders of this credit union movement. Well, let’s talk about the times we’re dealing with, Peter. You know we’ve got an incredibly inflationary environment, both in goods and services, and of course, a highly, highly competitive environment for talent. So how are credit unions and boards dealing with this environment in a data-driven strategic way?

Peter 

Has there ever been a time when credit unions weren’t really organizing around or anticipating or a little bit fearful around something, right? There’s some strategic opportunity or some external variable. What tends to happen is organizations will get hyper-focused on that topic of the day, but not work on the discipline as an organization, from a board perspective, from an executive team perspective, and frankly from a mid-management perspective about how do we address the strategic concern of the day. So not working on that pattern or that methodology. And so that’s where teams we work with, and I say teams broadly—this is boards and executives—they get so reactionary, and they’re like, how do we operate in the strategic stratosphere? We want to operate at 30,000 feet or 50,000 feet. How do we operate at that level? It’s like, well, how are you setting yourself up for getting up to that level? There’s years of planning for us to get to that kind of level. And that’s painful for organizations to implement because it’s change and change is hard, right? But also change is, I would say, inevitable. I’ll put it in a fitness kind of context. We’re runners and we do a run a couple times a week. And our fitness regimen around running is just running. And so we’re just going out and we just do the thing. And that’s the pattern. But we’re asking to get to faster paces. We’re asking to be more injury preventive and all these things, but yet, we’re still just doing running. And so the way I think about it is, well, you have to put a big stretching regimen in there. You have to stretch your body in a way that is actually kind of painful at first, right? You have to stretch and flex new muscles. And then if you get injured and you go to a physical therapist, I guarantee they’re going to say, “Well, how’s your squat? How’s your squat doing? How much resistance work do you do to get better at running?” And most people say, “Well, I’m a runner, I don’t do that stuff. I want to be lean, I don’t want to get bulky.” And so what we say is you have to work the foundational movements that make the execution, in this case, running better. And so that’s what we work with organizations on is those foundational deep stretches. Lifting those big movements or those loads so when they actually go to do the thing, they’re more adept, they’re more flexible, they can endure the different terrains, whether it’s running on the street, or running in the hills, or running when it’s cold outside, running when it’s hot outside. You never know what tomorrow is going to bring. 

Doug  

So let’s get tactical about the strategy. Let’s pretend our listeners have just engaged you to do exactly that. What are going to be the steps they’re going to go through to begin getting that strategic alignment together? Walk us through it.

Peter 

So we tease out, well, what does alignment mean? What are your concerns about this? What’s your vision for this? What’s the pace of execution you think we need to run at to achieve this objective? How are we measuring success? What are the most important KPIs we should be looking at? And I’ll tell you when we have executive teams stack rank most important to least important KPIs based on their current trajectory—it is daunting how much lack of alignment executives have on just some of the most basic principles. And so then when we put that content I’ll call discovery content in front of them, sometimes they can feel maybe a little sheepish, like, wow, we’re not on the same page about some of these fundamentals. But what we say is, hey, there’s power in that. If we understand the lack of alignment today, that gives us what we can orient toward in the future to get aligned. Now we know the destiny, we know the starting position, and we know the destination. So how do we get there? It’s not just a one weekend conversation.

Doug  

Are you stack ranking the KPIs within just the C-suite? Or is this the CEO to the board?

Peter 

Yeah, so it’s both, right? And so when we’re doing this, there’s a number of different angles of approaches to do a strategy development and deployment program. Lots of times, it includes just the executives. Lots of times it also I would say half the time includes just the executives and half the times it includes the executive and the board. But the board is involved at different intervals, right? So we’ll do a reveal conversation in the beginning, which includes both parties. And then the executive team works for a series of times, let’s call it six, seven months, and then we bring the board back in. And then we run that kind of pattern where about twice a year, the board and executive team are in a strategic conversation. But the executive team meets quarterly and maybe every two months to get us started. Sometimes it’s every month; it really depends on the scope, but they have to build the strategic muscles as an executive team to position the strategic conversation for the board. I’ll give you a simple example. Boards also want to operate in the stratosphere. They do. Now they espouse that but yet they also have what’s called more operationally, more tactically focused questions and so then it leads into the quote unquote proverbial weeds of the conversation. I blame executives lots of times for boards getting into that weeds conversation. And that’s maybe not fun for executives to hear. But I think it’s useful for them to hear. And I’ll quote one board member, he goes, “Hey, if you put an operational detail in front of me, I’m going to want to talk about it.” So the power in him saying that is, if I don’t put an operational detail, I’m not withholding. But if I position a strategic conversation, I have to position it, I have to provide information, I have to load the conversation, then that board member will then latch on to that conversation and operate and converse in that dialogue up there at the 30,000-foot level, not at the ground level. And so that’s really where I think executive teams have to learn. What is a strategic conversation? What does it sound like? And how do we position ourselves, frankly, as executives, to be in the right conversation? And then what are the questions we don’t know the answer to that we have to gain more insight on to help understand what the membership’s perspective is? So that’s a long-winded kind of answer to say what that looks like tactically.

Doug  

That’s a huge amount of work, in a small number of words, right? Agreeing on the KPIs alone—what are they? How do you define them? How do you measure them? How often do you measure them? That is a huge amount of work. And what I think I heard you say is the executive team and agreeing on what those, they’re meeting frequently and checking in on those. And then the more strategic conversation with the board on the same subject happens on a lower frequency basis, but it’s still informed by the KPIs smartly, discussing them from a strategic standpoint and not getting caught up into the day-to-day tactical that’s over on the executive side. Is that correct?

Peter 

Yes, all of that. And I’m going to say, when we set up the right kind of conversations, the right kind of pattern or frequency of the dialogue. But more importantly, we learn how to have a strategic conversation, we learn how to catch ourselves, when we get more unnecessarily operationally focused, because it can be very useful for a board to dive into an operational conversation, just to get the conversation over with so they can understand why the strategics, so sometimes boards and executives, they go, we don’t want to ever hear that. But then their questions sometimes go there. And so I think it’s easier and more beneficial. If we can dive in for a minute, like, hey, let’s have an operational conversation for five minutes. And everyone goes, oh, good, I can breathe a little bit, I have those concerns. But now I can operate up here. So once we get that all established, I would say actually, on a monthly basis, the conversation, the board meeting, can be more strategically oriented. It can be because we’re going to have a series of topics in a scheduled kind of fashion that we’re then going to address. We’re not going to address the whole strategic plan every single month. Yeah, probably the progress maybe on those KPIs we’re talking about. But hey, this is our topic for March, this is our topic for May. So we’ll schedule that out. And that gives the executive team and also the board advanced lead time to prepare for that dialogue, to get educated on that dialogue. That’s how it ends up going. It takes a couple of years for boards and executive teams to get there. It’s not going to happen in six months. 

The most referenced KPI for boards, I would say, is asset growth. They talk about asset growth. It’s probably the most easily referenced, and it is everywhere inside of the KPI formulas. Assets are loaded into so many different call report metrics. It’s on the NCUA’s CU data website; when you pull it up, you can find out some basic information and the KPI that’s on there is the asset size. And so board members, they talk about it a lot. And when boards go to conferences, or say they’ll say, well, how big is your organization, right? So what are the assets? So it’s easily understandable that it is an important KPI to a lot of board members. But it’s not always the most important to their business model and where they’re trying to go. And for boards to wrap their head around that it takes some fundamental understanding of really what the organization is good at, what it’s trying to do. And frankly, what it’s not trying to do. In this strategic circumstance, it actually is not what we’re after, we’re after this other KPI, these other series of KPIs. So it takes time. It’s painful changes, as you said earlier, it’s hard. But we’ve got to stretch, we’ve got to build up different muscles.

Doug  

What causes the credit union to realize it’s time to reevaluate or even, I guess, identify the KPIs and build a strategic process like this?

Peter 

It’s largely informed by some of those external variables like oh my gosh, this market is going this particular direction positively or negatively? Or that the organization leadership or board executive team will see the strategic opportunity. And what is that market opportunity? And how do we actually measure success for that? What are the relevant business model KPIs that will tell us we’re going in that particular direction, and frankly, it’s sustainable? Like over the last six, seven months or so, right? Peloton is kind of like everyone understands. Peloton took over the world, right? They went from like eight to 50 billion market capitalization. And now it’s back down to 8 billion or something. They were only organized around growth. I’m going to liken it to asset growth. What can we achieve? I would have loved to have been in their executive team meetings and board meetings just to hear one person saying are we overextending? Is this sustainable? What happens if people go back to gyms? No, no one’s ever going to go back to gyms, right? And so that’s where I think they’re not looking at the sustainability model. And I think that’s where credit unions in the Great Recession, we killed it, right? We killed it as an industry compared to banks because we were all built on sustainability, right? And I think that’s the opportunity for us.

Doug  

I expect you would have a couple of other answers in addition, which is succession planning. I’m sure this is driven a lot of times by that. And then M&A. I’m sure that necessitates these engagements. Talk to us a little bit about that.

Peter 

Yeah, so talent is everything. Talent is absolutely everything in the end. One of the flaws I see in strategic plans talent is not addressed in 99% of their strategic plans, or if it is, it’s all about the staff level. Yeah, our staff needs to get better at these kinds of things. Never are executive teams documenting our strategic capabilities, our skill sets, we don’t have this or we have this, we need to get better at these kinds of things. So we have these ambitions. But how good are we at these? And it’s very powerful and I’ll say, strategically informative, to say, we suck at this one thing, and we’re awesome at these things. We need to capitalize on this or you know what, the strategic opportunity mandates we get better at this thing we’re not so good at. So how are we going to do that? We’re going to hire outside talent, develop it internally, we’re going to do this thing; talent is everything. And it’s not just about the staff levels, being better at conversing with the members and all that kind of stuff. It really starts at the top if you want to have a learning organization. And if the CEO does not have their own leadership development plan, you are not living those values. It starts at the top unequivocally. And I always say the board too, board development plans if your board members do not have an actionable development plan that tells them they need to get better at one, two and three to be the best at their capabilities. How do you expect the organization, the sophistication of dialogue, to actually be elevated? It’s going to get worse. That’s just what happens. It gets stale, right? And so if we’re not learning, we’re dying if we’re not growing. 

So you asked about M&A too. I think in the last couple of years, boards and executive teams are now more open to the dialogue about M&A. Partly because people like you who are putting out podcasts and educational information, which I love. DDJ Myers did a series of white papers in 2021. They’re available on our website. They’re a great piece of work, they were really well received in the market, and they’re not DDJ just to be clear, taking a position, you should or you shouldn’t—it’s more educational, it’s informative, true white papers. We’re not selling anything in it, which is weird inside of white papers these days. So what is cool about M&A is that when boards want to be in that conversation, we approach it from an educational perspective. What’s the data saying? Where’s the industry going? Why do organizations merge? What would be in it for us? What wouldn’t be in it for us? Why would we not merge? What becomes really exciting is when boards and executive teams can say, hey, the best thing for the members, not for me personally, but the best thing for the members is to not merge and here’s why or to merge and here’s why. They can really have a higher purpose documented, reasoning, strategic reasoning as to why and I’ll give you a real story. In the beginning of the pandemic, the throes of the pandemic pre major economic stimulus, I was working with the board and executive team. I’ve been working with them for a number of years in a turnaround situation. So this CEO was in a turnaround situation, it’s a five-year plan; he’s in three years into it, then, boom, the pandemic happens. Everyone’s worried about loan losses, all that kind of stuff. This organization was like we need to be in this M&A dialogue, we need to see can we survive as an organization and a thrive ability standpoint, and what they strategically decided and I agreed with them is that in their market, really someone coming in because they are so far from everywhere else in their community so unique, that their local representation was most important, not economically thriving, not getting the 10% net worth, not getting the 1% ROA. It was really the local representation, even if we had depreciated earnings for a while. And so that was a very rough but very informative conversation. And they really evaluated everything and I applaud them for it. They could have easily said look, we can get the digital stuff, we can get better technology, we can get better, more branches, we can do all that stuff if we just get acquired, but they, as real local representatives of the community, decided that’s actually not their membership’s most important priority and prerogative.

Doug  

Sounds to me like a board doing exactly what they’re supposed to be doing.

Peter 

But they had a process, man, they went through a process, they didn’t just read an article, and then just haphazardly have uninformed conversation, right? They dove into the dialogue. We stack the conversation, meaning, read these things, come with these things, answer these questions, prioritize these things, have this dialogue, and then we’re going to sleep on it. We’re going to pose this dialogue, this other question, we’re going to have another conversation in three weeks. So being in strategic conversations is really about setting it up. You can’t just turn on the strategic gears, right, like in a board meeting, okay, now we’re going to be in the strategic. We have to prime the pump, right, we got to get the brain ready, we got to get the culture and rhythm of the dialogue ready and that takes time; it’s not a switch.

Doug  

Let’s say a listener has gone through this episode and wants to evaluate if they should take a next step on getting more strategic with their board and identifying the KPIs and making sure they’re acting in a strategic way. So two things I’d ask you, one, what should their next step be? And then two, can you set up the next episode with Deedee about data-driven executive comp conversations?

Peter 

So one begets the other. I’m going to answer your second question first. From our perspective, when boards want to be in a strategically informed comp conversation, our first question is, well, where are you trying to go as an organization? What are you trying to accomplish? Right? What’s your objectives? Right? And that gets maybe a little tedious with board members because their first answer is usually not the real answer, right? It’s the surface level answer, we want to get to the deep, more meaningful answer, and how well do they actually understand where they’re trying to go as an organization? Because if we have that answer, then the strategic comp conversation is that much easier, right? The conversation just flows. We know which data source, we know which metrics to load, we know how to set up the multi-year performance plan, leadership-wise, financial incentives, all that kind of stuff. So we have to have that conversation. And that’s what Deedee does a great job of, helping boards understand what they’re trying to accomplish with their executive comp plans. I would say the easiest thing for listeners to do is look at how they spend their time. How are you spending your time? The overwhelming majority of executives, even in very, just be clear, very, very successful organizations, those executives still spend an inordinate, and I would say an unhelpful amount of their time operationally, tactically focused on reactive problems— fire suppression, as one of our clients said. Really, how we need to organize is declaring that in the future, I’m going to be spending this amount of time in proactive, strategically thoughtful, focused deep work about how to make our business better. How to leapfrog our business, not doing the work, but actually looking at how we can enforce and declare standards for the future that the rest of the organization can then enact and organize around. That is probably the one thing on how you spend your time.

Doug 

Peter, thank you so much for joining me on the podcast today and more importantly for the work you and the entire team at DDJ Myers do for the credit union movement. It is great content we’ve created today. And I hope it makes a difference for our listeners.

Peter 

Thanks so much for having me, Doug. It’s been a pleasure.


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