A year ago, many in the industry had all but written off GTE Federal Credit Union in Tampa, Fla. It lost $27 million in 2008 and $44 million in 2009 due to the slumping Florida real estate market and economy, shrinking to $1.6 billion in assets (from a peak of $2.2 billion) and shedding some 20,000 members.
The credit union hired former BECU executive vice president and COO Joe Brancucci, who helped build his former institution into one of the largest and most successful credit unions in the country. If anyone could put GTE back on track, it would probably be Brancucci, who has also participated in other successful credit union turnarounds.
At NAFCU’s recent Annual Conference in San Francisco, Brancucci and GTE Chairman Brad Hines described what they have done over the last 12 months to change the culture and performance of GTE. Below are excerpts from their presentation — answers to 10 key questions that they believe all credit unions need to address in order to thrive in today’s complex business environment.
1) What’s most important to credit unions?
HINES: The correct answer for GTE FCU — and for all credit unions — is the member.
BRANCUCCI: If we’re not focused on members, we’re not credit unions. We exist because we put people before profit. When we forget our roots, we lose our reason for being.
HINES: We have to have a single-minded focus on members. If we do that, the credit union can’t help but do right. If you lose sight of that, you can find yourself derailed in a hurry.
BRANCUCCI: While I’ve been a credit union guy since the early 1990s, I must confess I started as a banker. My first credit union was an eye-opening experience — everything we did was member-focused and done to better the member experience. At my next credit union, BECU, focus on the member was even more intense. We looked at everything we did from the perspective of how members would benefit and how we could make the credit union more attractive to members and potential members.
Rebuilding GTE is based on refocusing on our members. It’s what we think about first and foremost. It’s how we market.
2) What’s most critical at the top?
HINES: Two elements define the relationship between the board and the CEO. The first is mutual respect. The board must respect the CEO. We hired him to manage the credit union according to the policies we establish. The CEO must have the board’s respect and, by extension, trust, if we’re going to run a successful credit union and serve our members.
BRANCUCCI: The CEO also has to respect the board. Boards today are professionals, often tops in their field. We benefit from their different perspectives and their broader experiences. As CEOs, we have to respect that.
HINES: The second crucial element, especially in difficult times, is solidarity. We have to stick together. This isn’t to say we agree 100 percent of the time. We disagree plenty; yet, when we decide on a direction, there’s 100 percent commitment to it, and the board and management move together as a whole.
BRANCUCCI: When a board and management are 100 percent together, your credit union can accomplish remarkable things.
HINES: It’s important to note that boards have only one employee — the CEO. We manage the CEO. The CEO manages the credit union. Our only means of influencing the way policy is enacted is through our one employee. This is why it is so critical to establish a firm foundation of respect and solidarity.
How often do CEOs ask their boards how the relationship is working? Why not ask your board this question every month or quarter? The point is the relationship — the partnership — has to work for the credit union to run well and serve its members. How can that happen if the status of the board/ CEO relationship is unclear?
3) What must your credit union team know?
There’s a lot for your credit union team to know, yet one thing rises to the top, before all others: Everyone has a job to do. Roles and responsibilities must be clearly defined, and everyone on the team must understand and follow them.
HINES: Our job as a board is to establish policy and govern by policy, measures and metrics. And remember my point about having one employee. If we don’t sense credit union policies are being properly acted on, we have one employee to discuss it with. We act with and through the CEO.
BRANCUCCI: Your team must understand their individual roles and how their role interacts with the entire credit union. In addition to understanding what to do, they must understand how to act. At GTE, we talk about seven guiding principles. They are:
4) What must be clearly defined?
HINES: The board, the CEO and the team must understand the credit union’s direction — where we are going and why are we headed in a certain direction.
BRANCUCCI: In other words, what’s our strategy? This definition from S. Hunter is simple and direct: “Know your weaknesses, know your strengths and maneuver accordingly.”
HINES: In the short-term, our strategy was clear — GTE was going to survive. We knew our weaknesses, and we knew our strengths. The trick was maneuvering through them. That’s where the board/CEO partnership comes in. A clearly defined strategy that’s understood by all is critical for success.
BRANCUCCI: You can’t know where you are if you don’t know where you are going. GTE didn’t, at least that was the view from the outside as I was considering the CEO position a year ago.
We’ve remedied the strategy question. Throughout the credit union, our strategy is clearly defined for everyone to see. We encourage our team and members to ask questions, and we respond to them quickly.
Don’t wait for a BIG EVENT to force you to define strategy. Do it at this year’s planning session. Credit unions have a remarkable opportunity, post-recession, to gain significant ground. But only if we know where we’re headed.
GTE FCU’s seven guiding principles
- Respect — We show respect to each other, the members and our communities. Respect is nonnegotiable and is given to the member in good standing as well as the member who has caused us a loss. It is given to all employees, even if they are elevated to the position of member (terminated). It defines who we are and how we treat each other.
- Integrity — In order for this overused word to have meaning, we need to be authentic and genuine, otherwise integrity is just a nice word to use. At GTE FCU, we are genuine and authentic, and that makes our integrity indisputable.
- Innovation — Everyone at GTE FCU is encouraged to innovate. This includes looking at improving how we are doing things, taking the time to ask “why,” and finding new ways of doing the business of the member.
- Accountability — We are committed to not “ping-ponging” the member. That means each of us takes accountability for an issue, as well as accountability for the role we play — but we are all accountable for the member experience.
- Engagement — We are all present, prepared and passionate about what we offer our members and our communities.
- Advocacy — We look for creative ways to say ‘yes” to our members and to provide the best information and advice for them.
- Leadership — Everyone is expected to exhibit some level of leadership. Whether the teller or the CEO, leadership takes many forms, but we recognize it, nurture it and celebrate it.
5) How will you be judged?
HINES: When your credit union isn’t 100 percent healthy, only one judgment matters.
BRANCUCCI: Brad’s right. The one judgment criteria is purely financial. Is your credit union safe and sound?
The financial answer, of course, is capital. Above 7 percent, you’re considered to be in pretty good shape. Below 7 percent, not so much. We were below 7 percent one year ago. Happy to report, we’re in much better shape now.
HINES: The board’s job is to establish short- and longer-term capital requirements. In the short term, we knew we needed to be above 7 percent. In the longer term, we now understand why a higher capital ratio than we previously targeted is necessary.
BRANCUCCI: In the short term, getting above 7 percent had to be the goal, so we said GTE would achieve a capital ratio of 7.10 percent by December 31, 2010. The goal was credit union-wide, everyone played a role, and achieving the goal came with a reward. The credit union would retroactively restore the 5 percent pay cut it enacted earlier in the year if we met the goal.
Needless to say, that focused the team. And, I am happy to report, we surpassed the goal by 15 basis points at year-end. This said to our board, our management, our staff and our members that GTE was back and here to stay. It was a major accomplishment, perhaps our most significant to date.
6) How must we see?
HINES: The answer is plain enough, we must see clearly.
BRANCUCCI: Sometimes things are clearer from the outside than from within. Our industry knew GTE was having some difficulties, and we knew it for some time. We were a little confused as to why some changes were taking place and why others weren’t.
HINES: Joe made a point earlier that bears repeating: Board members bring a different, broader perspective to the credit union. Recognizing reality takes effort and a willingness to probe deeper into what you are seeing. Doing so keeps both the board and the CEO on their toes, clearly focused on how to make things better for the members.
BRANCUCCI: There’s only one way to ensure the board, management and staff continually see things clearly: complete transparency. Just before I started work at GTE, I started an internal blog that I post to almost every day. The purpose is open and honest communication with the entire credit union team. The blog deals with important issues of the day, upcoming events, the credit union’s culture, our goals, our objectives, and anything else I feel is important for the team to know. It’s something I’d recommend to every credit union CEO. Making sure everyone sees clearly starts with regular communication.
7) What’s our greatest asset?
BRANCUCCI: Talent. Today’s credit unions require rock stars and strong backup bands. Let’s face it, it’s a complex world. Without the right talent, running a credit union is purely impossible.
HINES: At the risk of sounding like a broken record, the board only has one employee — the CEO — and he or she has to display lots of passion and plenty of energy. The CEO’s job is to coach, mentor and inspire. GTE needed someone who believed and could make others believe.
BRANCUCCI: Assessing your credit union’s talent is something you must do on an ongoing basis. The world changes rapidly, new skills are required, quick adaptation is a must. Your credit union needs employees who morph and change with your business.
If your employees can’t adapt quickly enough, you’ll have to change employees. Since July of 2010 we’ve had 80 percent turnover in our executive and VP ranks. The credit union, for the most part, has completely new management, and plenty of new employees. The credit union needs a team that can think ahead of the changing environment and adapt to it.
8) What would you do?
HINES: Do the unexpected. We’d done most of the typical, expected things a credit union in our situation would do — reduce costs, increase fees, close branches, hunker down. Yet the expected doesn’t always work.
Our tendency, initially, was to focus on the here and now. Crisis mode, if you will. But you have to know where you are going in order to address the day-to-day issues of where you are. You have define your future so you make the decisions that move you towards it.
BRANCUCCI: Taking counter-intuitive steps is another way of describing “do the unexpected.” Here’s a tip: The only way out of a situation like this is to grow your way out. The only way to grow your way out is to let your members and the public know you’re open for business and ready to lend. Our ads run on TV, radio, in the papers, on billboards. They are starting to work. Our mortgage volume grows monthly in one of the tougher real estate markets in the country.
Another “spend” for us was eliminating debit card fees, one of the ways GTE was trying to increase revenue during the downturn. The minute we eliminated the fee, usage, membership and deposits started to grow. So did income.
I mentioned earlier we restored a 5 percent pay cut when we achieved a capital ratio of 7.10 percent. We could just as easily have left the cut in place. But remember our most important asset is talent, and we want the talent to be happy and motivated.
9) What are we responsible for making?
BRANCUCCI: The hard choices. How I wish some days that the hard choices were no harder than which pastry to choose. In this case, however, we are talking about the hardest of hard choices.
HINES: This is where recognizing reality comes into play. At GTE before Joe came, we closed several branches. There were options on the table to close more, but we thought the lower number would do the job. We didn’t recognize reality. Once we did, we had to go back and close those branches we should have closed the first time around.
Boards of directors are charged with preserving and enhancing the credit union entrusted to them. As America struggles to recover from this Great Recession, understand that the level of effort and intensity which will be required by directors in the future just got ratcheted up several notches. If you’re not prepared to make very hard decisions, don’t remain on your board. It’s not good for the credit union or for your members.
BRANCUCCI: Making hard choices begins with a commitment to delivering constant change to the credit union and to the members. As Brad said, we made many hard decisions. We closed more branches, we reduced staff. We also committed to spending money when it did not appear wise to do so. We, in essence, changed most everything the credit union had been doing for years. The results show it worked.
10) What does it take to govern and manage a credit union today?
BRANCUCCI: Courage. Once you’ve made the commitment to your strategy, you have to stick with it. As Brad said, we’re entrusted with preserving and enhancing our credit union’s charter.
HINES: Deciding to be courageous isn’t a moment-in-time event, it’s a long-term commitment because some of what you do will not make everyone happy. During our journey to rebuild the GTE charter, we’ve had regulators, members and employees mad at us. We got through it, though, because the board had the courage and stubbornness not to fail.
BRANCUCCI: It takes courage to stay focused. There’s no doubt you must deal with the big stuff. But you can’t forget the little stuff. Not a week has gone by in the past year when some new “little” thing pops up. Many of these little things turn into big things. Over time, we’re finding fewer and fewer of them, yet we go looking for them. We want to know what issues may surface, so we deal with them head on.
Deal with the big stuff, certainly. Deal with the little stuff, too, before it becomes big stuff.