9 Tactics to Improve Your Credit Union’s Return On Management

Has your company developed a “culture of indecision?” If so, how can you turn that around to produce higher quality and faster decisions?




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:

  • They have one meeting after another;
  • There is no clear agenda nor are decisions made as a result of these meetings;
  • They “re-work” everything – vision, values, structure…but nothing seems to stick.

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:

  • Every meeting should have clear priorities – and most importantly closure (no one wants to waste their time in a meeting where “nothing gets done” – hence the denominator in our ROM equation – Decrease Management Time and Attention Invested).
  • The meeting atmosphere, established by the leader, must be conducive to productive dialogs: There must be a sincere search for answers; they must be able to hear the “truth,” even if it is unpleasant; they should be open to a full range of views; and they must point to a course of action. (Without this type of dialog atmosphere, and constructive human connection, there is a culture of “silent lies,” which leads to poor decisions.).
  • The “right” information available – and communicated – to everyone is essential for good dialogs. This method sends a message of trust (and with trust, anything is possible!).
  • A dialog focused on feedback and follow-through is an extremely powerful combination. These factors together help leaders and employees make timely decisions to adjust what and how employees do their work.

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):

  1. Clearly translate strategy into what is “in-bounds” what is “out-of-bounds.” This strategy will improve the speed and quality of decisions and dialogs as described above and decrease a lot of wasted time chasing after things that are not important or strategic
  2. Link strategy to performance measures so everyone is clear whether you are on track to meeting your “destination.” This provides everyone with the “right” information for faster, better decisions
  3. Have no more than seven measures that are the manager's primary focus. More than that is too cumbersome to be effective. Managers should be able to memorize these measures – which helps in making decisions about adjustments to the work their employees do to achieve these outcomes. In successful companies, senior executives use ONLY four-to-seven measures to communicate progress on strategy to the organization.
  4. Don't confuse a lot of time on analytics with reducing risk. There is more risk in “drowning” in analysis, which more often results in wasted management time and attention – often resulting in no decisions at all. Eliminate waste from your decision-making processes.
  5. Ensure everyone knows “what keeps the boss up at night.” This will help frame the “filters” that all employees should use to make decisions. Leaders need to educate everyone on what information they use to interpret the health of the business and progress of strategy execution. This will help build leadership decision-making throughout the organization – improving bench-strength for succession.

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.