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

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

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

It's a recognition that caught her by surprise. Her staff hadgone behind her back and submitted the application. O'Connelllearned that she had been selected just days after her Januarybirthday.

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

O'Connell remembered a time when many of those same stafferswere not sure who to trust following the embezzlement case yearsago. During her early days at Heartland, hours were spent justletting employees vent. She said it was essential for the healingprocess 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 bigpart of it was getting a regiment back in place. If you know whatyou're going to do each day, even if it's rote for awhile, thathelps."

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

Meanwhile, more calls were made to members to come up withinstallment plans. Loan applications were also taking too long toprocess, she said, adding her goal was to implement a 24-hourturnaround.

A vice president of lending was hired in June 2001 and severalstaffers were shifted around to make room for two lendingspecialists. By late fall 2001, lending had been streamlined andcleaned up. O'Connell hired an operations vice president aroundthat same time to help manage the credit union's day-to-dayfunctions.

During Heartland's revitalization, O'Connell noticed a shift inattitude within the membership. Understandably so, many of them hadtons of questions about their funds and the credit union's futurefollowing the embezzlement case.

"By March 2001, the questions from members had stopped. We weretrying to turn things around, and we had members asking questionsevery day [in the beginning]. That's the toughest part; you [couldnot avoid answering] their questions. But you needed to get to apoint where the case would be done and you could move on."

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

Soon, the board and senior staff were contemplating ways todiversify Heartland's field of membership. They discovered thatmany of the credit union's select employee groups shared the sameindustries with Land O'Lakes Inc., the national, farmer-ownedcooperative food and agricultural cooperative with annual sales ofmore than $6 billion.

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

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

To build its presence in the area for the first time outside ofSEG buildings, Heartland opened a branch in a strip mall in RegalHeights, a new development. True to her conservative nature,O'Connell signed a five-year lease with a two-year out option. Thecredit union was one of the first lessees along with a few smallrestaurants, a drug store, clothing outlet and another creditunion. However, the small branch wasn't getting a lot of foottraffic 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 onthe corporate campus of one of its primary SEGs and was given lessthan 90 days to move. A bigger building was spotted three milesnorth of the Regal Heights location and members soon caughtword.

Two months before the strip mall branch lease was up, excitementhad built about visiting the new branch, O'Connell said. The movewas taxing. Eventually, the Regal Heights branch closed andemployees jammed into Heartland's other seven branches asconstruction began on the new facility. Computers and servers werecontained at a warehouse with a garage heater mounted on the walland no restrooms.

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

Three of Heartland's branches had to shut down, and credit unionexpenses increased because of accelerated build out costs andseverance packages to long-time staffers at an out-of-statebranch.

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

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

O'Connell then turned her attention toward the conversion ofHeartland's core processing system. Her background in informationtechnology helped along with an "excellent team" that met weeklyand ran numerous test cycles that led to the conversion'scompletion in May 2008.

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

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

Out in the community, Heartland is known for its alliances withlocal schools, food banks and charities. It offers its mainoffice's community room for free to members and organizations thatmay the need the space for gatherings. Last fall, Heartlandreceived the Dora Maxwell award for social responsibility inMinnesota and placed second at the national level.

Although Heartland is not a large credit union, O'Connell saidshe is a firm believer in staff training. The credit union has afull-time certified trainer. At last year's staff training day,senior staffers cooked pancakes and sausages. Employees are awardedat the annual appreciation night with anniversary, volunteer andteam 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. Weeklymeetings are there for the department heads to fill her in.

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

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

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

Pot luck dinners and wine and cheese socials ("it costs about$75, it's not expensive") are staff morale boosters. Her staff of27 is comfortable enough with each other to e-mail jokes andfriendly wagers are made on things like who can sell the mostCredit Unions for Kids candy bars.

Twice a year, employees are encouraged to bring specific ideason how to improve the credit union. It also helps to have aprogressive board always thinking about how Heartland can furthergrow 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'sstill stress behind the economy's uncertainty, she pointed out. Thecredit union actively encourages members to scale back credit carddebt and build a savings cushion.

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

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