21st Century Leader, The

When Jim McDaniel's son called from college recently to ask what he should major in to become a credit union CEO, McDaniel replied, "Son, nobody goes to college with the intention of becoming a credit union CEO. You just kind of end up here."

McDaniel, CEO of $107 million asset Carolina Trust Federal Credit Union, Myrtle Beach, S.C., hit on a credit union truism. Today, there are countless examples of accidental CEOs. But what does the future hold for the next generation of credit union leaders?

While their backgrounds may differ, most good credit union leaders share a set of skills that make them effective: collaborative leadership, team building, listening, the ability to convey vision, and an entrepreneurial spirit.

Jeff Farver, CEO of $1.8 billion asset San Antonio Federal Credit Union, says his background formed his assumptions about what makes an effective leader. Farver has been in the credit union movement for more than 30 years, starting on the financial side of the business. Early in his career, he developed work-out plans for two credit unions, and he says those experiences built character. "It taught me to deal with anxiety and uncertainty. It forced me to look for options that could overcome the problems the institution had."

Farver says the most important skill for a CEO is a collaborative leadership style. He points to the Japanese model of leadership advancement, explaining, "First you have to get peer support before management can pull you up. The leader still has the accountability and responsibility, but the value of dialogue with key players, managing the joint vision, and getting input makes for better decisions."

McDaniel agrees, adding, "My job is to hire the best qualified, most talented people I can afford and then give them the freedom to do their jobs."

In 1988, McDaniel joined Heritage Trust Credit Union in Charleston, S.C., as vice president of information systems to salvage a data conversion that had gone wrong. He was promoted to vice president for administration in 1991 and was named interim CEO in 1994. In 1996, he assumed Carolina Trust Federal's top spot. Later this summer, McDaniel will return to $340 million asset Heritage Trust as CEO.

Mary Cunningham, CEO of $680 million asset USA Federal Credit Union in San Diego, says creating a vision for the organization and conveying that vision to employees is an important skill for CEOs. "CEOs need to be future-oriented and open. They need to be risk-takers and have an entrepreneurial spirit."

Cunningham took a less traditional path to the credit union industry, graduating from college with a degree in broadcast journalism. This experience has helped her as a leader, she says. "The broadcast journalism background has served me exceedingly well in the credit union industry. You sway others' opinions, you rally the troops, you speak the vision and try to get folks onboard with where you want to go."

Cunningham took a job right out of college as a credit union receptionist while looking for a broadcasting job. Eleven years later, she was the credit union's executive vice president and left to become CEO of another institution. She has led USA Federal for four years and has 21 years of CEO experience.

Bobbi Kahler, president of Kahler Consulting in Portland, Ore., says a good leader helps everyone see the importance of their contributions. "It comes down to helping a team understand its role, the value it contributes, and how it makes a difference for someone else."

She remembers working with a loan officer who never realized the value of what she contributed to the organization. Kahler recalls her saying, "I've been a loan officer for 18 years, and every day I've driven to work thinking, Oh great, I'm going to go push some paper around.' But you've made me see what I do is so much bigger than that. I'm helping people achieve a dream, whether that's home ownership or taking their kids to Disneyland."

The leadership 'aha'

Jim Cardwell, CEO of Cardwell Group, Westlake, Ohio, has advised CEOs and their leadership teams on business strategy, performance, and culture for more than 30 years.

"Here's the big 'aha' about leadership," he says. "Leadership isn't about the leader. It's about the relationship between the leader and all the people around him or her. Effective leaders build a shared focus, an aligned infrastructure, and a supportive underlying culture."

To go from good to great, Cardwell says, CEOs need to provide:

* Role clarity. CEOs must ensure that people at all levels of the credit union have a shared perception of the business. "You need a shared sense of purpose, clearly understood targets, and standards of excellence at all levels," he says. "Those things create a sense of winning. Staff can see the contribution they must make, and they see how they're helping the credit union be successful. They take a lot of pride in that."

* Support. Good leaders provide consistent support. They make sure people have the tools and resources needed to get the job done. They build confidence in their staff and give them the latitude to grow. They encourage everyone in the organization to promote crossfunctional support between departments. One symptom of a leadership problem, Cardwell warns, is when functional teams praise their own areas and blame others in the organization.

* Accountability. Effective leaders delegate authority and allow staff to make decisions.

* Recognition and reward. "People need to be rewarded on their performance against clear expectations," he maintains. "Recognition for achievement drives employee engagement and motivation."

* More communication and dialogue. People at all levels of the organization need to collaborate. "Through dialogue, people get a much better idea of the credit union's direction and how it competes in the marketplace," says Cardwell.

Talking about what's not working is critical, too. "There needs to be an environment where people can bring out what's not working and what is," he notes. "A good leader creates the kind of environment where everyone's OK with that. No one takes it personally. Bosses and employees need to listen so they can build win-win, cross-functional solutions. Listening combined with dialogue produces problem solving, innovation, businessmodel optimization, and stronger relationships."

"The most effective leaders engage their team in the bigger picture by showing employees that what they're doing is important, not by telling them," says Kahler. She cites one credit union that has a "wall of fame" describing how the credit union has improved individual members' lives. "It's powerful and motivating for the entire staff," she says. "It engages their hearts, not just their minds. That's where true commitment comes from."

Challenges leaders face

Credit unions today face substantial challenges, including the difficulty of maintaining the movement's unique identity as the financial services industry changes.

"Credit unions are in a fight for their very existence," says Harriet May, CEO of $1.7 billion asset Government Employees Credit Union of El Paso (Texas) and a Credit Union National Association Board member. "Not only are we being attacked from outside [by bankers], we're almost unable to re-create ourselves with small credit unions... with the mergers and consolidations that are going on."

To face this challenge, May says it's critical for credit unions to maintain their identity. 'Tm making sure we're a financial cooperative, that we're stewards of our members' money. I emphasize the need to bring a level of value that's unique to our industry. We have to maintain our uniqueness in everything we do."

Dale Dalbey, CEO of $140 million asset Mutual Savings Credit Union, Birmingham, Ala., and Alabama Credit Union League chairman, agrees with May's assessment. "One of our biggest challenges is keeping true to our credit union values." With increasing regulatory pressure, Dalbey fears credit unions will try to become more like banks. "The biggest pressure is to generate a [healthy] bottom line. We have to guard against letting that pressure change our philosophical underpinnings."

The answer, he says, is to "focus on creating longterm value for our membership and creating long-term stability, not just [worrying about] what our return on assets [ROA] will be this year."

Leaders also need to adjust to competitors' changing tactics. One Cleveland bank, Cardwell says, is taking a page out of the credit union playbook by shifting its focus to consumers, serving small businesses, and building a sales culture. "Does all that sound familiar? Some of the large banks are stealing credit unions' business model, and they have a lot more money than credit unions to make it work. The environment isn't status quo. A lot of people want members' business."

Then there are bankers' efforts to tax credit unions and legislate them out of business. Their latest strategy: an effort by the American Bankers Association to require credit unions to convert to banks once they reach a certain asset threshold.

Therefore, add political activism to credit union leaders' repertoire of skills, McDaniel says. "We were legislated into existence, and we came real close to being legislated out of business [following the U.S. Supreme Court's 1998 ruling restricting multiple-group charters]. If we don't stay an ever-present force in the political movement, someone's going to eat our lunch."

He credits a strong grassroots movement led by the South Carolina Credit Union League for giving state credit unions clout with their legislators. They know credit union members vote, says McDaniel, and they ask for the credit unions' input when forming positions on issues affecting the industry.

May concurs. "In the past, while we were taking care of our members' assets, we just stayed in the background. We no longer can do that because it's not in the best interest of our members."

The new road to the top

Cunningham advises staff who want to become leaders to get involved in industry trade associations. "Get your name and face out there, and prove yourself to be a leader, a thinker, and someone who's willing to learn." She also recommends finding a mentor, a good CEO to emulate and learn from. Leadership education also is important, she says.

McDaniel agrees. Getting to know other industry leaders, building a network of contacts, and becoming known are important parts of management today. This builds name recognition and provides access to a rich source of support. "There's a wealth of information out there from credit union folks, and they're all willing to share it."

Dalbey says credit unions are less likely to promote from within than in the past. "Credit unions are being pushed by the marketplace to hire bright, creative people. Sometimes that means going outside of our credit union or outside of the industry more often than we did in the past."

Up-and-coming credit union leaders will need more extensive education, says May. "In the past, when things were simpler, you didn't have to have a master's degree in management or finance. It's much more complex today."

What background should future CEOs have?

Caldwell believes the best CEOs come from finance or branch operations. Branch managers, he says, have "three-quarters of the people in the credit union reporting to them. Every functional area goes through the branches. It's a skill set that's like running a little credit union."

Likewise, chief financial officers deal with all functions in the credit union and have a deep understanding of the numbers. "CEOs need to understand not just the mechanics of the ratios but also the interplay between ratios. A good leader has to understand what's going on."

Does leadership make a difference?

Several years ago, Cardwell relates, researchers set out to show that satisfied employees were productive employees. Although intuitive, it turns out there's no correlation using traditional measures. Some companies weren't great places to work but were very productive. Others were fun but unprofitable.

The research, however, uncovered something more profound: Good leadership drives 40% of ROA.

"How do leaders drive both satisfaction and productivity? They create a sense of purpose," Cardwell explains. "They prioritize goals [instead of trying to do everything], provide consistent recognition and support, and provide continuing coaching and feedback. And they create a sense of team, both within their units and across units. Leaders build their culture around relationships and performance," he adds.

What's your leadership philosophy? Sound off at CREDITUNION magazine.com

Copyright Credit Union National Association, Inc. Jul 2005
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