Secrets of High Performing Credit Unions

As CPA that specialize in serving credit unions, we are big fans of institutionalized processes that ultimately drive credit union members’ value. We have come to understand that process matters in decision making because it is easy to let hubris end up supporting a hypothesis that you want to see supported. While there are lots of ways to limit biases, one way is to create a multi-person decision-making process where the CFO is responsible to make sure critical decisions are made in a systematic way. In our years of working with many high performing credit unions, we have come to learn a few secrets about strategic decision making that we’d like to share:

1. One way to ensure consistent decision making is to ensure a counterpoint is always heard. Assigning someone or a group to look into an opposite viewpoint is helpful to bring up facts that may run counter to the decision. This is not always a popular or easy task, but we have seen it proven time and again that the “devil’s advocate” role often eliminates many poor decisions.

2. In a similar vein, making sure all assumptions in the decision are highlighted is another excellent exercise. Here, members of the decision-making group go around and highlight as many key assumptions as they can. Is the growth plan dependent on economic conditions improving? What are the interest rate assumptions? What are the cost-saving assumptions? Highlighting assumptions for biases helps bring to light the critical underpinnings of a model or decision which few see. It’s important to know that all strategy is based on future expectations – no one has a crystal ball. Accordingly, everyone in the decision-making group should understand full-well what those assumptions are.

3. Another important technique that the CFO should ensure gets into the decision-making process is the “pre-mortem.” Here, decision makers play a game that assumes that the project in question just failed. Each member is asked to anonymously write down three reasons why it has just failed. This may highlight some counterpoints that committee members may be reluctant to bring up for fear of looking uncommitted or pessimistic. (Before attempting, it’s important that the culture of your credit union supports an open and honest assessment during this procedure).

4. A fourth technique is all the assumptions, risks, counterarguments and reasons of failure should be documented in order to make sure a concise list of negatives or counter points are reviewed during the final decision. Often, all the negative input is forgotten about when the final decision time occurs so that institutional knowledge is often lost at the most critical time. Writing these items down helps not only bring thoughts forward, but also provides a record in which to reflect back on in the future to evaluate your decision-making process. This documentation process also provides a ready reference book for when the regulators ultimately come knocking on your door with questions about your decisions and actions.

5. Finally, a checklist should be developed that helps codify the process that the CFO must ensure in order to try to limit both overly negative and overly positive views in the decision. By creating a checklist, a record of the process will be maintained that can be improved upon.

Bad decisions will always occur, but the trick is to limit the ugliest ones. If the risks, assumptions and biases were properly highlighted in the decision and the project turned bad, then so be it. This is going to happen. However, by institutionalizing the decision-making process, hopefully bad decisions, like the ones made by the corporate credit unions in recent years, can easily be avoided. If you look around at the highest performing credit unions within your peer group, you will see many that must have adopted all or some element of these five strategic decision-making secrets.

– By Roger Jones, CPA

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