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NCUA has modified its CAMEL rating system by eliminating the CAMEL Matrix. According to the NCUA Letter to Credit Unions, dated December 2007, NCUA will be eliminating the use of the NCUA Matrix when evaluating a credit union. The “M” evaluation process in CAMEL [the credit union's Management] will now focus on assessing a credit union's strategic plans and plan implementation – specifically the credit union's goals: determining whether the strategic plans are realistic and tailored to the credit union's unique needs. In addition, are those goals reflective of the current economic environment, and ultimately, in the best interest of the membership? The plans should be unique to and reflective of the individual credit union. Examiners will also assess how the plan is put into effect.
With the shift in how credit unions are audited, there is an opportunity for credit unions to look at how to reduce the risk and raise the quality of the credit union's “M” in CA M EL.
Measuring “M” The Management component of CAMEL can be difficult to assess because of the qualitative nature of it. To choose a more “tangible” approach, the following introduces a formula outlined in a Harvard Business Review article by Robert Simons entitled, “How High Is Your Return On Management?” His discussion provides some great insights for managers to control the risks in M by achieving a better focus on strategic objectives – thereby actually getting strategy implemented.
The following is an interpretation of Simon's formula:
Quality and Speed of Decisions ___________________________
Management Time and Attention Invested
The goal is :
Increase Quality and Speed of Decisions _____________________________
Decrease Management Time and Attention Invested
Quality and Speed of Decisions Ram Charan, a well-known management expert and co-author with Larry Bossidy in the book Execution , has observed that many unsuccessful companies do not set clear priorities. They also lose their focus and become indecisive. As a consequence, the company has what he describes as a “culture of indecision.” Here are some tell-tale signs of a culture of indecision:
In addition, projects that “seemed important” are strangled to death by lack of resources, insufficient budget, etc. Since any credit union is equal to the “sum total of all decisions made” – having a culture of indecision is fraught with risk.
Charan says that no company can function without people working together and further suggests that “dialogs” are the glue as well as the key to changing a culture of indecision. It is no coincidence that the numerator in our equation, “ Increase Quality and Speed of Decisions,” is a direct result of the type of dialogs that an organization has.
The following are some tips he suggests for improving dialogs – resulting in higher quality and faster decisions:
Management Time and Attention Invested Simon (referenced at the beginning of this article) explains that the managers in successful companies know they have a set amount of time in the day to do their work – and they are disciplined on how they spend their time. They make decisions every day about how they will use the resources they control – and they are clear on where they will spend their time and where they won't.
The following are five tactics for making managers more efficient and effective (ROM):
Obviously, this article wasn't written to give managers another week of vacation. The point is that most people want to work on the “right” things. Both Simon and Charan have presented tangible tactics to improve the speed and quality of decisions and reduce wasted management time and attention. Using these tactics should improve any credit union's ROM – and exceed expectations for M in CAMEL.
Article references: 1) “How High Is Your Return On Management?”, Robert Simons, HBR, Jan. 1998, 2) “Conquering a Culture of Indecision” Ram Charan, HBR, April, 2001, 3) NCUA letter to CUs CAMEL rating system http://www.ncua.gov/letters/letters2007.html
For more information on these management tactics and more, please contact Jim Cardwell or Karla Norwood at Cardwell, 800-395-1410. Or visit our Connections Online website: www.connectionsonline.net.
March 24, 2008
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