Members 1st Federal Credit Union (Mechanicsburg, PA) is the third largest credit union in Pennsylvania with $2 billion in assets and 196,000 members. It began as a credit union for the Navy Supply Depot in Mechanicsburg. It has since added multiple SEGs and opened branches across the south-central portion of the state. In this interview, CEO Robert "Bob" Marquette discusses the relationship between Members 1st's Board and its management team.
Explain how you work out a strategy.
RM: We go on a retreat with our Board once a year. At this retreat we review our strategic plan, but we really don’t change it much. It’s a five-year plan, and we expect it to last that long. Our feeling is that if a plan is truly strategic, then it seldom needs overhaul. Only when dramatic circumstances come along does a strategic plan have to be dramatically changed.
I’d say our strategic plan is broadly based and gives management the tools it needs to operate effectively. It’s 23 pages long and really what it does is lay out very large issues. In general, the Board stays on the strategic level. At the monthly Board meetings Board members examine and discuss the metrics, but they stick to a strategic perspective. And at monthly Board meetings if they take up a single aspect of the strategic plan, they hold to the strategic level.
Does the plan include metrics?
RM: Yes, broad metrics. It does not articulate minutia to the management. We are generally satisfied with the metrics in the plan, but if we find they are not doing the right job, we change them. Over the life of a plan, though, they do not change much.
Is there an instance of a time when you changed them?
RM: One element of our strategy has been to lower the average age of our members, so a metric became our success at signing up younger members. Tactically we moved into social media types of activities. Personally, I am not attracted to the social media phenomenon, but if you are going to be viable to young people you had best be involved. It’s an example of a strategic purpose moving to a tactic and monitored with a metric.
How does the plan deal with the credit union’s budget?
RM: The plan gives guidance to a budget. Once the plan is approved, management works on a budget, which is so large and complex that a Board could not realistically grapple with it. The budget is meant to reflect goals in the plan. The Board approves the budget. Then management develops a business plan to implement the budget.
Where do new initiatives come from?
RM: They can come from the strategic plan, the budget, or the business plan.
How are the plan and budget translated into operations?
RM: The Board approves the plan and the budget. After that, it is really management that comes up with the products and services we will offer in the marketplace, the initiatives, and the marketing plans.
A few years ago we changed to a strategic governance model. We eliminated committees that considered issues before they went to the Board. Accordingly, the Board has delegated a lot of authority to me. This allows management to move quickly. I don’t have to wait for a Board meeting or educate the Board on an issue via email and get Board members to respond by email. I can report after the fact what management has done and why.
How do you make adjustments to changing conditions in the financial environment?
RM: Let’s say one of our strategic goals is to raise the level of loans. The economy and consumer behavior are going to affect loan demand. Right now loan demand is low, but so are interest rates. In keeping with our goal of increasing loans, we will try to stimulate loan growth without stimulating deposit growth, which in this environment is unfavorable to us.
Tactically, this is what we set out to do, and last year we were successful at it. We had a fantastic year and look to be having another one this year. We opened nine branches last year and are opening five this year.
We concentrate on convenience and service. We now have 48 branches, which we find are much appreciated by members. We also have done well with marketing, and we are widely recognized in the community.
We’ve had good growth in member business loans. I believe we have been successful recently because we have the ability to adjust constantly to new conditions and because we keep the Board informed and have good discussions with them. When loan demand gets back to normal we are likely to have exceptional growth. At that time we’ll need to attract deposits to meet the loan demand.