Siloed by Fear: Breaking Barriers Seen as Key to IT Driving CU Growth
Credit unions that have a culture of cooperation between information technology and business managers generally outperform their peers that tend to work in silos and reach out only on a case-by-case basis.
That's a takeaway from a new report from Aite Group, the Boston-based research and advisory firm. In January, the firm interviewed managers at 54 credit unions ranging from under $100 million to $10 billion in assets, analyzed their attitudes and member service online deployments and compared that to their performance in three major bottom-line metrics.
According to senior analyst Ron Shevlin, the survey found that high performers share three attributes: tolerance of IT risk, strong commitment to IT from senior management and excellent coordination between IT and the business.
Shevlin said that the credit unions that scored high on those three dimensions of managing IT were the highest performers in a number of ways over the past two years.
"Comparing 2009 year-end performance to that of 2008, the high scorers averaged 3.74% growth in their net worth, a 12.51% increase in their market share, a 4.09% jump in loan growth and a 3.38% increase in membership growth...[while] the low scorers averaged lower growth," Shevlin said.
Similar results were recorded the year before, and it doesn't just come down to capabilities now in place, the Aite Group report said. For instance, it noted that similar numbers of high and low scorers can send targeted e-mail to members and that few of either group integrate offline CRM capabilities with the online channel, send SMS marketing messages or send trigger-driven marketing messages based on online actions.
Instead, the high scorers tended to have plans in place to use those new tactics. For instance, half of the high scorers that don't now use texted and trigger-driven marketing capabilities plan to in the near future, while about one in five of the low scorers have similar plans.
Differences also were noted in the use of social media. While Facebook use was similar between the two groups, Twitter use is much more prevalent among the high scorers, and they also are more likely to have blogs and member review comments pages.
Another area of differentiation is in personal financial management tools. The Aite Group survey found that about a fourth of the high scoring credit unions already had PFM tools on their Web site and nearly all the rest were considering implementing them this year. Only a third of the low scorers were considering deploying PFM in 2010.
Credit union managers in IT and other departments naturally tend to sell management on initiatives on a case-by-case basis, but Shevlin said building executive commitment first would be more advisable.
While that might "seem backward," Shevlin said, that's how it works at the more successful credit unions in the survey.
"It isn't that the leaders don't build business cases-they do-it's that they don't have to convince management of the need to invest in technology," he said. "Senior management [at the higher scoring credit unions in the Aite Group survey] is more concerned with finding the right technologies to invest in rather than whether or not to invest in the first place."?That rings true to Carl Thomas, a founding partner in BTE Consulting, a business technology enablement consulting and software firm in Buffalo Grove, Ill.
"A lot of this has to do with fear, fear of IT risk and fear of the unknown," he said. "A case-by-case approach won't overcome this. You need to communicate the overall picture to the senior management and, specifically, how this new technology tool will fit into that."
Thomas also agreed with the Aite Group assertion that "it's emotion more than logic a lot of the times." Breaking down the silo walls by opening lines of communication on a regular basis are a key to solving that issue, he said.
Those silo walls often take the form of unconnected computer systems as well as people disconnect, he said, offering as an example credit unions he's visited where the CEO gets differing reports from various departments that don't even agree on how many members the credit union has.
"It can be that basic," said Thomas, whose firm offers enterprise organizational software as well as consulting services to credit unions and banks. "Knowledge is power.
"You have to begin by understanding the organizational structure you have and synthesizing that, and then you have to communicate with each other, not just about that technology versus this technology but in ways that build trust and communicate how this fits into the overall picture of what the credit union wants to do.
"The risk is that, if I'm the guy in charge of a big credit union, and I don't have all the information I need to make good business decisions, am I going to want to go out into that mine field with such limited knowledge?
"I mean, I might find myself saying, I don't know if I want to spend that money on Twitter so maybe more people will take us up on our offer for car loans, Mr. CIO, when I don't know what else that can do to me or the credit union."
To pull these things off, therefore, takes coordinating knowledge of the organization both from the technology and business sides and using that new understanding to build communication and trust between the various players, Thomas said.
Shevlin, meanwhile, said that the Aite Group doesn't believe that "superior business results" will result simply because of tolerance to IT risk, commitment to IT from senior management and coordination between IT and business units.
"We do believe that a credit union demonstrating these IT management attributes will be better positioned to make the investments in both new and established technologies and in the marketing capabilities they need to produce superior business results," he said.