Our Best Today, Even Better Tomorrow

Ongoing investments in processes, people, and technology ensure Heritage’s trip to the top is a one-way ticket.


With roughly 45,000 members and 152 employees, there is no shortage of opinions and ideas at Heritage Federal Credit Union ($451M, Newburgh, IN). But thanks in part to the progressive and transparent organizational structure put in place by President and CEO, Ruth Jenkins, the credit union still manages to single out the issues that really matter in a world full of noise.

"Sometimes strategies can compete against one another," says Steve Bugg, chief marketing and member service officer. "You have to have a process to take all of that feedback from members, employees, executives, and the board and rank those to see what makes sense for the organization."

Here, executives and employees from across the institution talk about the crucial projects they've been working on over the past few years and explain how these initiatives are helping build a stronger Heritage for the decades ahead.


Micro-Level Reporting Lets Employees Analyze, Then Actualize

Good benchmarking and reporting is at the heart of all winning institutions, and Heritage goes to great lengths to not just measure performance at all levels, but also make that information relevant and actionable to every employee.

On the front line, production staff can pull their own individualized weekly performance reports, and branch supervisors pull monthly reports to discuss performance with employees one-on-one. Branch scorecards also help mid-level managers better understand the strengths and weaknesses of their locations, compare branch performance against one another, and adapt accordingly. Once managers identify issues and troubled areas, they can work with the marketing team to customize new tools and resources for that branch's specific demographics.

Measuring the service side of credit union can prove more difficult, so instead of relying on one set metric, Heritage collects data from multiple sources — such as monthly transactional surveys, quarterly mystery shoppers, and annual member surveys.

"The main goal of reporting at this level of the organization is to help employees be accountable and customize a plan of action according to what it is that members say they need," Bugg says.

One Scorecard To Rule Them All

Too much analysis can have its downsides — as employees and leadership alike might find it difficult to decide how to weigh different sources of information. That's why Heritage created its in-house financial scorecard — a top-level benchmark that all other scorecards and reports feed up to. The metric also determines the annual bonus for every employee of the institution.

Today, the scorecard consists of four main categories: member satisfaction, employee satisfaction, operational efficiency, and financial ratios. But its true power lies in the fact it is a living document that the credit union can adapt over time. For example, early iterations used employee satisfaction as part of the calculation for bonus payouts, yet employees expressed a general discomfort with the idea that they could inflate those numbers just to receive a financial reward.

"We wanted staff to participate and be honest with us, so while we still have employee satisfaction as a part of the scorecard, that specific quadrant no longer impacts the payouts employees receive," Bugg says.

Prior to 2013, the credit union awarded 4% of each employee's annual salary based on the scorecard and another 4% based on the achievement of individual goals assigned on a per department basis. Unfortunately, this approach left some employees feeling like they had to work harder for their individual bonus than others.

"This year, we've created two sets of goals for everyone, both based on the same balance scorecard quadrants," Jenkins says.

"Hitting our first tier goals rewards employees 4% of their salary. Then we have a second tier, and if those goals are exceeded, then that rewards them 8%. Right now, we're exceeding those in almost every area."


A Culture Of Development

Heritage isn't afraid to invest in its people, says Barbara Winstead, vice president of human resources and employee development. But the way it does so has changed.

"In the past, we focused more on functional training and what you needed to know for the job you had," Winstead says. "Now, we have a lot more focus on soft skills and career-path type resources."

When it comes to attracting top talent, the cooperative has even paid above market value for key individuals and it continues to invest in training and support for all employees once they are on board.

Despite having a training budget that is heftier than most, the credit union still makes an effort to maximize free educational resources like industry publications and webinars in addition to its carefully chosen paid training resources. One much-used tool, CUNA's CPD Online program, contains unlimited access to roughly 200 online courses.

"This only costs us about $3,000, but so far this year we've used nearly $40,000 in training," Winstead says. "For 2014, we had each executive commit to four or five of these courses for each and every one of their employees. For example, our lending group is going to be studying up on Regulation Z and B."

Employees can complete courses individually at their leisure, and the system does not penalize employees for failing a course. In fact, there are no limits on how many times an employee can take, and retake, a course. The system automatically provides the required reading materials but the credit union also offers one-on-one coaching at the employee's request.

Within limits, whatever the employee needs to succeed, Heritage wants to provide. And a penchant for knowledge and self-improvement has become a deciding factor in many internal promotions, from the executive team all the way down to the front line.

"We had one employee who was a teller and wanted to be a Financial Service Consultant 2, which is a combination of both teller supervisor and assistant branch manager," says Mandy Koester, area manager of member service. "So she took it upon herself to take advantage of our online classes and talked to and learned from other employees in the branch. She was eventually promoted and is now one of the highest producing FSCs we have."

Compliance On Deck

Compliance tasks at Heritage were historically lumped in with internal audit functions, and one employee handled both tasks. But as the complexity of each of these fields has progressed, so too has the credit union's staffing strategy.

In 2008, it split these functions into two distinct departments and dedicated one employee to each. In compliance, Debbie Thomas took the helm as the new department director and the credit union added a compliance assistant to the mix in 2013.

It is rare for an institution of our size to have two full-time compliance staff members [but] we spend a lot less time and money by having it done right in the first place rather than having to correct issues with regulators down the line. 

Today, the compliance department's main responsibilities involve researching and responding to inquiries from across the organization as well as reviewing all marketing materials and any new policy additions and updates. This year, the compliance team also spent face time with every department and created a master list of all rules, regulations, and acts that affect that area of the business. The team then put together recommended training plans on a departmental or, in some cases, individual level. So far, the extra training has had a dramatic effect on the number and severity of compliance concerns the credit union encounters.

"We used to get pages of responses back from this department on different things," Jenkins says. "Now it's just smaller errors, nothing that conflicts with or violates a policy."

In 2014, the compliance department will also replicate its compliance training process in a much broader scope at the executive level.

"It is rare for an institution our size to have two full-time compliance staff members, but you don't make changes in a vacuum — every new initiative touches everything else at the credit union," Jenkins says. "So we spend a lot less time and money by having it done right in the first place, rather than having to correct issues with regulators down the line."


Remote Channels To Write Home About

Heritage has always invested in technology for the back-office and member-facing channels. But when David Milligan joined the credit union in 2011 as vice president of electronic services and deposit support operations, he immediately noted the need for overdue upgrades and new investments. Right off the bat, Milligan separated remote delivery services from card services, secured a significant budget, and began filling up employees' plates with important projects.

"One of the first things we started on was upgrading the card processing and ATM terminal driving, basically consolidating all of our fragmented systems into one processor so we can track and analyze member behavior and ramp up our reporting," Milligan says. "The other big project we're working on is an online banking conversion."

The new online banking system will feature items such as account aggregation, faster access to bill pay and transfer options, online loan applications, secondary account opening, and — most importantly — mobile banking.

"Greater technology was the No. 1 thing our members were asking for in our surveys, most specifically in regard to mobile," Milligan says. "But we'd been limited by our previous online banking relationship. It took a while to find a new provider who could meet that need."

The credit union learned some hard lessons about vendor management, and Milligan stresses the importance of challenging vendors and learning how to say "no."

"You shouldn't be afraid to ask for discounts if they miss certain milestones or ask for concessions and support on some of the soft dollars like training and product promotions," he says.

If you do reach a point where the give-and-take ceases, that might be a sign it's time to cut the cord, Milligan notes.

Mobile is certainly a priority from a member service standpoint, but Milligan also expects it to open a wealth of new analytical and marketing tools for the credit union.

"If members want to let us use locations services to market to them, we'd eventually be able to start sending them promo codes at certain retailers or information about our auto loans when we know they're at the dealership," he says.

Approximately 30% of the credit union's members already use online banking and that figure is growing at a rate of nearly four times the credit union's general member growth of 3.95%.

"Once we're able to deliver all of the things we want, that number is really going to skyrocket," Milligan says.

Back In Branch

Today, Heritage's brick-and-mortar footprint includes seven branches, a training center, and its headquarters building, which also houses its centralized loan decisioning staff. Many of these locations are former bank buildings, as the credit union prefers buying existing locations to support the local economy and remove some of the glut of excess property on the market. Over the past several years, the institution has upgraded its technological and operational capabilities to keep these locations functioning at prime efficiency.

"We now use monitors and teller headsets in the drive-thru so members can see who's helping them," Koester says. "It makes the experience more personable."

Heritage is also about to break ground on a new branch in Newburgh, IN, that will house its new administration building and has its eye on a county in Kentucky that will allow it to better reach its Evansville commuters. Identifying hot spots in desirable areas is an important part of Heritage's growth strategy, but a perhaps underrated portion of this process involves picking out the second-round picks or hidden gems the competition misses.

"We already have to give our members a reason to drive past other financial institutions, so we don't want to make that choice any more difficult," Jenkins says. "We want to be in a high-profile area but avoid those places where there are just too many choices already."

Heritage has already upgraded its ATMs to be EMV compliant, and it uses a mix of owned units — including two on the local university campus and one portable ATM that it moves to events like fairs or baseball games — and non-owned units that it pays another provider to brand as Heritage FCU.

"In bordering counties where we are not chartered, we'll use that relationship so members there can still have access to a fee-free ATM," Bugg says. At the same time, the branded units provide a convenient outpost for the credit union to test out a market prior to making a significant investment in a charter or branch expansion.