Mazuma Credit Union ($524.32M, Overland Park, KS) has taken an aggressive new approach to vendor management that has helped it cut costs and improve processes while knocking down silo walls.
As part of a sweeping reorganization the Kansas City credit union has undertaken in the past three years, Mazuma has expanded its use of its longtime vendor management consultant from a depository for due diligence documents to its contract negotiator and performance monitor.
Mazuma works with 120 different vendors that range from lawn care to card processing. The credit union has single contracts with some companies and multiple contracts with others. For example, Jack Henry & Associates provides the credit union’s core processing platform as well as some ancillary products. Those all fall under “JHA” in the vendor management system the credit union is using from Florida-based Maple Street Inc.
Christian Marcussen, Chief Information Officer, Mazuma Credit Union
“Looking back at the way things were, vendor management had always been a sticking point for us,” says Christian Marcussen, Mazuma’s chief information officer. “A lot of our executives operated in vacuums with their own contracts and their own relationships.”
Not anymore. Now, senior management works from a calendar that tracks contract expiration dates and other need-to-knows for its quarterly review of all the credit union’s provider relationships. That transparency helps both increase strategic alignment and reduce duplication of services.
According to Marcussen, the ROI on the contracts the consultant has negotiated in the past year exceeds 200%. Internal relationships have prospered, too.
CU QUICK FACTS
MAZUMA CREDIT UNION
Data as of 06.30.15
HQ: Overland Park, KS
12-MO SHARE GROWTH: 5.63%
12-MO LOAN GROWTH: 9.38%
“As we grow in size and complexity, we can’t have the right hand not knowing what the left hand is doing,” Marcussen says. “That has put us in a precarious spot before, but now we know what we’re doing as a business across all units.”
A Variety Of Vendors
The ante for cross-departmental cooperation and transparency has been markedly raised since Mazuma launched a physical, digital, and cultural makeover that included a headquarters move from downtown Kansas City, MO, to a showcase, leading-edge facility in Overland Park, KS.
A strategic vendor plan is part of that reorganization.
The NCUA has been scratching around talking about doing examinations and audits of third-party vendors. If that happens, we’ll be seeing two worlds collide: the NCUA and vendor management.
“My charge when I took over as CIO (in mid 2013) was to bring better vendor performance and cost reduction to our key contracts,” says Marcussen, a 12-year employee at Mazuma. “When I approached that holistically, I realized we should look at all our vendors and what they mean to us.”
But that doesn’t mean beating them up over pricing. Although the credit union has many long-term relationships with vendors, it has run into providers that don’t want to negotiate with a third party either in general or specifically with Maple Street.
“In situations where they refuse to play, we have to decide if this is a vendor we want to work with,” the Mazuma CIO says. If so, the credit union’s executives might simply handle the negotiations themselves. “It doesn’t change the equation, but it makes the vendor feel better,” Marcussen adds.
Looking back at the way things were, vendor management had always been a sticking point for us, because a lot of our executives operated in vacuums with their own contracts and their own relationships.
Will Worlds Collide?
When an executive handles the negotiation, it means the credit union is responsible for making calls, coordinating details, and putting the pact in place. And that’s OK, when it’s an area in-house staff has in their wheelhouse. When they don’t, Mazuma calls in Maple Street to consult on contract terms and, sometimes, performance issues.
“The consultant’s overarching responsibility is to look out for Mazuma’ best interests,” Marcussen says.
One of those major areas of interest is compliance.
No longer simply the keeper of documents and checklists, the vendor management provider helped Mazuma build out new policies and procedures. It also takes an active part in keeping the credit union up-to-date with the changes.
“The writing is on the wall,” Marcussen says. “Banks are already being held to higher standards, and we expect that to happen to us, too.”
For example, the NCUA is working to expand greatly its ability to examine vendor relations. Marcussen says it’s just a matter of time before the regulator will insist on contract language that it deems necessary to protect members from risk.
“The NCUA has been scratching around talking about doing examinations and audits of third-party vendors,” the Mazuma CIO says. “If that happens, we’ll be seeing two worlds collide: the NCUA and vendor management.”