When core values drive a credit union's competitive positioning,both the institution and its members profit. Rudy Pereira,president/CEO of Royal Credit Union in Eau Claire, Wis., may knowthat better than just about anyone.

Pereira, who has led the $1.6 billion community credit unionsince Jan. 1, 2012, arrived at a time when both operating expensesand market saturation for the credit union had peaked. Service feesalso had reached record levels, causing a growing number of itsonce-loyal northwestern Wisconsin members to close their accountsand move to other financial institutions.

Pereira knew conditions needed to improve to support continuedgrowth for the credit union, formed in 1964 to serve employees ofEau Claire's Uniroyal tire plant that eventually closed in 1991.What may have seemed at the time like a mountain of obstacles ledPereira and his team to a monumental idea.

“We came up with the Pike's Peak Peer Group as a replacement forwhat others have called 'big, hairy audacious goals,'” Pereira, theformer senior vice president of operations and technology at $8billion Alliant Credit Union in Chicago, Ill., said. “I am not afan of benchmarking, but in this case we needed something againstwhich to measure our progress.”

Launched Jan. 1, 2013, the PPPG compares Royal CU's financialand performance capabilities against 12 other similar credit unionsfrom Wisconsin, Illinois, Minnesota and Texas, all located in thesame NCUA region. The special group was necessary because, despitethe credit union's success to date, many of the criteria fromRoyal's NCUA peer group did not match the characteristics of thecredit union's members, Pereira said.

Royal CU had a 28-branch organizational structure, aloan-to-deposit ratio of more than 85% and a checking accountpenetration of 60%. Yet its largely rural membership base of160,000 maintained a deposit average of $8,415, compared to thecredit union's NCUA peer group deposit average of $11,705.

“Only 6% of our members qualify as affluent according to Raddon[Financial Group],” Pereira said. “We really do have a lot ofWalMart-level members.”

Many of those members were being hit with service fees, many ofwhich Pereira considered punitive. Despite the economic imbalance,the credit union was 100% loaned out and operating fees werethrough the roof, the executive said.

The goal of Royal CU's PPPG participation was to growmembership, increase deposit and lending activity and cut punitiveservice fees ultimately to 0%, Pereira said. And the credit unionwas going back to the basics in order to do it.

“We knew we had to start with Royal's core values and corepurpose,” Pereira said. “And I am a strong believer that membersshould not have to spend money just to use what already is theirmoney.”

The core purpose of the PPPG, the executive explained, was tocreate a positive impact on the lives touched by the credit union.To do that, the program outlined broad basic goals directing staffto provide exceptional service and do the right thing on behalf ofmembers.

From an operational standpoint, those guidelines required RoyalCU to become as competitive as possible with rates and reduce feesas quickly as possible with the ultimate goal of eliminating themaltogether. Now, just halfway through the five-year PPPG process,positive results already have begun to surface, Pereira said.

Read more: The program kept costs scalable and inline with expenses …

“We formerly had earned up to $4 million a year in fees, butwe've managed to cut $3 million from that amount over the past twoyears,” Pereira said. “Despite that three-quarters drop in fees,we've increased assets by $400 million, improved our net worth to11.5% from 8.5%, and significantly reduced our operating expenses.We're in much better shape today than we were before the programstarted.”

Operating more efficiently was critical, and the programuncovered ways to keep operating costs scalable and in line withexpenses.

“It puts the onus on us to drive much greater efficiencies,”Pereira said. “It also enables us to create an organizational DNAthat helps us more effectively approach projects, bring teamstogether and work cooperatively toward greater solutions.”

Pereira admits that when Royal started the PPPG program, itsoperating efficiency was in the first percentile – the very worstit could be compared to its peer group. Since the program began,the credit union has jumped to the 45th percentile, but theexecutive said there is still much work to be done.

Royal CU has targeted six new goals specifically aimed atcompeting effectively on the emerging nontraditional financialservices environment. Those goals are: More effective talentacquisition to address emerging strategies; a more strategicmarketing approach that does a better job of telling Royal CU'sstory; an integrated technology architecture that makes servicesolutions seamless for members; capabilities to provide memberswith an integrated experience when interacting with Royal CUthrough various technologies; better use of predictive analytics toidentify and serve member needs; and a more automated workflow,which Pereira said is “not sexy, but extremely necessary forimproving member service.”

At Royal's July planning session, Pereira plans to scrap thePPPG program, not because its failed but because after only two anda half years it has already exceeded the majority of its goals andthe credit union is ready to take the next step.

“From the efficiency side, we haven't yet hit our goal of the75th percentile, but we plan to increase that to either 80% or90%,” Pereira said. “We're just a few fees away from total punitivefee reduction, and now we're going to shoot for 100% feeelimination.”

Metaphorically speaking, Royal Credit Union is ready to climbits next mountain, Pereira said, even though he doesn't yet knowwhich peak he's going to name the new program after. The 90% buy-into the current program by staff will go a long way to maintainingand improving the credit union's continued scalability, both of itsoperational efficiencies and its goals.

“We want to be special, and that's something that will bedefined by our members and not ourselves,” Pereira said. “We'rejust a means to an end, and we mean to make that end as easy aspossible for our members.”