When Pamela O'Connell took the helm at Heartland Credit Union eight years ago, she was faced with a lot of angry, frustrated and betrayed employees.

In 2000, the $79 million, St. Paul, Minn.-credit union was in the final investigatory stage of an embezzlement case involving O'Connell's predecessor, according to NCUA records. Staffers had grown close to the CEO, who had been with Heartland for 20 years, O'Connell said. At the same time, collections were at an all-time high and the loan portfolio was in disarray, overwhelming the one staffer responsible for overseeing it.

O'Connell took a couple of breaths, attacked the sorest areas first and by the summer of 2001, Heartland was finally back on strong financial footing. For her efforts in bringing the credit union out of that dark period, O'Connell has been named the 2009 Credit Union Times Trailblazer CEO of the Year.

It's a recognition that caught her by surprise. Her staff had gone behind her back and submitted the application. O'Connell learned that she had been selected just days after her January birthday.

"I had just gotten off the Statue of Liberty," she said. "I was totally blown away that they would do that for me. Just the thought of them thinking enough of me to nominate me, it was unexpected."

O'Connell remembered a time when many of those same staffers were not sure who to trust following the embezzlement case years ago. During her early days at Heartland, hours were spent just letting employees vent. She said it was essential for the healing process and to get back to what really mattered going forward: serving the members.

"I remember saying 'this week, we will focus on being angry,' and then, as weeks went by, there was less anger. I think a big part of it was getting a regiment back in place. If you know what you're going to do each day, even if it's rote for awhile, that helps."

The first area that needed immediate attention was collections. Heartland had an enormous amount of them, and O'Connell knew the task was so monumental that outsourcing was the best route.

Meanwhile, more calls were made to members to come up with installment plans. Loan applications were also taking too long to process, she said, adding her goal was to implement a 24-hour turnaround.

A vice president of lending was hired in June 2001 and several staffers were shifted around to make room for two lending specialists. By late fall 2001, lending had been streamlined and cleaned up. O'Connell hired an operations vice president around that same time to help manage the credit union's day-to-day functions.

During Heartland's revitalization, O'Connell noticed a shift in attitude within the membership. Understandably so, many of them had tons of questions about their funds and the credit union's future following the embezzlement case.

"By March 2001, the questions from members had stopped. We were trying to turn things around, and we had members asking questions every day [in the beginning]. That's the toughest part; you [could not avoid answering] their questions. But you needed to get to a point where the case would be done and you could move on."

When O'Connell came aboard, Heartland had 11,744 members and $55 million in assets. Today, the credit union has nearly $79 million in assets and 8,849 members. The membership drop came from five farm cooperative credit unions that merged into Heartland, which resulted in some eligibility overlap and some member attrition after the merger.

Soon, the board and senior staff were contemplating ways to diversify Heartland's field of membership. They discovered that many of the credit union's select employee groups shared the same industries with Land O'Lakes Inc., the national, farmer-owned cooperative food and agricultural cooperative with annual sales of more than $6 billion.

In 2003, Heartland was approved to obtain a community charter. This move was a long way from the financial institution's founding in 1939 as Farmers Union Employees' Credit Union when its seven owners bought one share for $5 each at their first organizational meeting.

"We were thinking if something should happen to some of the SEGs, we would have the community charter," O'Connell explained.

To build its presence in the area for the first time outside of SEG buildings, Heartland opened a branch in a strip mall in Regal Heights, a new development. True to her conservative nature, O'Connell signed a five-year lease with a two-year out option. The credit union was one of the first lessees along with a few small restaurants, a drug store, clothing outlet and another credit union. However, the small branch wasn't getting a lot of foot traffic at the time, O'Connell recalled.

A search was soon launched to house Heartland's main facility. Time was of the essence as the credit union had lost the lease on the corporate campus of one of its primary SEGs and was given less than 90 days to move. A bigger building was spotted three miles north of the Regal Heights location and members soon caught word.

Two months before the strip mall branch lease was up, excitement had built about visiting the new branch, O'Connell said. The move was taxing. Eventually, the Regal Heights branch closed and employees jammed into Heartland's other seven branches as construction began on the new facility. Computers and servers were contained at a warehouse with a garage heater mounted on the wall and no restrooms.

The new main office finally opened in October 2006. Unfortunately, the economy started to decline and new subdivisions that were supposed to bring in homes and businesses nearby were put on hold. Housing values also began to drop.

Three of Heartland's branches had to shut down, and credit union expenses increased because of accelerated build out costs and severance packages to long-time staffers at an out-of-state branch.

The bleak projections revealed that Heartland would not make a profit for 18 to 36 months from date of completion of the main office. Still, O'Connell didn't let the downturn affect her goal of bringing first-class service to members. She consistently scrutinized the budget, line by line, and as a result, Heartland was able to show a profit within nine months of moving into the main office.

"We're getting good foot traffic. It's amazing on Saturdays," said O'Connell, adding that both drive-thrus and a loan officer are available on that day. "People were worried that it might be too much coverage but it turned out to be the right decision."

O'Connell then turned her attention toward the conversion of Heartland's core processing system. Her background in information technology helped along with an "excellent team" that met weekly and ran numerous test cycles that led to the conversion's completion in May 2008.

The change was not without its bugs. Online banking was the biggest frustration due to a system incompatibility. And even after a week of testing, for unknown reasons, 60 debit cards just refused to work. New cards were eventually ordered.

"After a month-and-a-half in, we looked back and said 'we're doing good, we're still standing," O'Connell said. "I've been through conversions before, so I was surprised at how far along we were."

Out in the community, Heartland is known for its alliances with local schools, food banks and charities. It offers its main office's community room for free to members and organizations that may the need the space for gatherings. Last fall, Heartland received the Dora Maxwell award for social responsibility in Minnesota and placed second at the national level.

Although Heartland is not a large credit union, O'Connell said she is a firm believer in staff training. The credit union has a full-time certified trainer. At last year's staff training day, senior staffers cooked pancakes and sausages. Employees are awarded at the annual appreciation night with anniversary, volunteer and team member recognitions, the latter voted on by staff only.

O'Connell admitted she is a "control freak" in that she "controls the riffs," but she abhors micromanagement. Weekly meetings are there for the department heads to fill her in.

"If they come to me with an issue, I give them my feedback. But for me to drop in the middle of a situation and just drop my feedback, that would be wrong."

New hires are taken aback when O'Connell will stop in the hallway and talk beyond the customary greeting. She's worked on Saturdays, and during Minnesota's brutal winters, you may see her out on the sidewalks shoveling snow so members can safely enter the main branch.

"I wouldn't ask them to do anything I wouldn't do," she said of her staff.

Pot luck dinners and wine and cheese socials ("it costs about $75, it's not expensive") are staff morale boosters. Her staff of 27 is comfortable enough with each other to e-mail jokes and friendly wagers are made on things like who can sell the most Credit Unions for Kids candy bars.

Twice a year, employees are encouraged to bring specific ideas on how to improve the credit union. It also helps to have a progressive board always thinking about how Heartland can further grow its membership, O'Connell said.

Heartland's collections overhaul appears to be working. O'Connell said there were only two foreclosures last year. Fortunately, layoffs have not affected most members, but there's still stress behind the economy's uncertainty, she pointed out. The credit union actively encourages members to scale back credit card debt and build a savings cushion.

O'Connell is also involved in a Filene Research Institute project involving members paying themselves first.

"Being CEO here is a lot easier because of my staff. What's really nice is I can go and ask the loan officers questions and they are receptive. I listen to them, they listen to me. It's a two-way street. We're all working together to be 'better, bigger, stronger,' which is one of our mottos."
--msamaad@cutimes.com

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O'Connell Empowers Staff to Help Heartland CU Emerge From Dark Period

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