Earn Trust With a Spreadsheet of Your Flaws
Innovation often comes with some disagreement. It's crucial to have employees who can voice alternative, and potentially better, ideas. But how can you best show your team vulnerability and instill in them the confidence to express dissent?
In this episode of Grow Your Credit Union, hosts Joshua Barclay and Becky Reed welcome Mike McWethy, Executive Vice President, Texans Credit Union to talk about:
Creating a healthy culture of debate
The criticality of onboarding tech talent
Opinions on a credit union hit-piece
Remaining human in an automation-driven world
The fun starts when you press play.
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FULL TRANSCRIPT
[Joshua Barclay] How can credit union leaders foster an environment of vulnerability to spark employee growth? We'll tackle the challenge of attracting and retaining top talent. Plus, in an age of automation, can credit unions keep their human touch and maintain their core mission?
Welcome to Grow Your Credit Union. I am your host, Joshua Barclay, and I am with my co-host, the legend of Texas, Becky Reed. Becky, hello.
[Becky Reed] Howdy y'all.
[Joshua Barclay] Becky, before we get things cracking, I want to know something. What's your favorite thing about your hometown? It could be the people, the places, the sights, the sounds. I'm curious.
[Becky Reed] Alright, so we have a saying in Texas: "I wasn't born here, but I got here as quick as I could," and that was the situation with me. I was actually born in California but moved to Mansfield, Texas, which is here in North Texas. And today, Mansfield, Texas has maybe 100,000 people. It's just south of Arlington where the Texas Stadium is and the Rangers play.
It's just a suburb of Arlington. But when I moved there, it was like a town of 5,000 people. And what I love most about the Mansfield of back then, the 5,000 people and true story, I actually rode my horse to the Dairy Queen through the drive-thru. And that is one of my favorite memories, riding my horse through the Dairy Queen drive-thru.
That was something fun to do on a summer day.
[Joshua Barclay] Wow, Becky. I was going to talk about my Connecticut upbringing, but I have not ridden a horse through a Dairy Queen window. I don't think I'm going to follow up with that. We have a great guest today. Actually, our guest today is also out of the fine state of Texas. Today, we welcome the executive vice president of Texans Credit Union, Mike McWethy.
Mike, welcome to Grow Your Credit Union.
[Mike McWethy] Thank you very much. Glad to be here.
Segment 1
[Joshua Barclay] PWC found a fascinating gap in their survey. As it turns out, less than half of the CEOs surveyed think their organizations truly welcome dissent and debate. Now I have to assume that diverse viewpoints and healthy debate fuel innovation and growth. So, Mike, could you share how you create a culture within your credit union where leaders can actively encourage dissent and debate?
[Mike McWethy] I think a lack of dissent really comes from a lack of trust. It's about how do you build trust on the team? And so our organization, we had a new CEO about four years ago, brought in myself and a new CFO, and that was the first thing: how are we going to build trust for us to start this new venture?
And our first step was just defining the culture. It's hard to say what is good if the definition of good is different with every person. That's both in financial performance and culturally. And so we defined our culture. We called it the EPIC program. Our core values are excellence, people, integrity, and collaboration.
We took a deep dive to say, what are those behaviors specifically that we would see that would be elevated for us? And then we created a leadership program and defined what those attributes are of high-performing leaders for us. And the next one was just start to build trust. We took a few steps and in a variety of ways to do that.
The first one was just be vulnerable ourselves, starting off by the leadership team, just talking about their flaws. I've got a spreadsheet full of my own flaws that I like to look at, but it really resonated with a lot of people when we were just open with it. And I would say, not too long ago, I was struggling with public speaking.
It was difficult, and here's the things that I did in order to try to overcome that, and etcetera, etcetera. And then we layered up from there. There's a lot of evidence that if you can have a friend at work, then you seem to open up a little bit and really try to get on board with what the organization is trying to do because you're a part of it.
You're bought in more if you can have a friend at work. So we formed a fun committee and their charge was to create opportunities for people to make a best friend at work And so we do all sorts of things for our employees, both onsite and offsite. There are plenty of days where not very much work's getting done because we make intentional efforts in order to celebrate each other.
And I think the last thing really is just to show the way. At the end of the day, you're building trust. You're building relationships. You're buying into the concepts that we're trying to go. Okay. Now, how do we debate? Cause debates where the magic happens. And if you've been in an authoritarian environment where the boss needs to be felt as though they've got the way and you need to be a good soldier and do what they say, then that doesn't breed a lot of debate.
You get scared. So how do you do that? You got to show it. And so the four of us at the top of the organization, we like to debate a lot. And it was really jolting. You should have seen the look on people's faces when I'm arguing with a CEO in the boardroom in front of all the VPs and directors. You could pick their jaw up off the floor just debating openly.
And that's I think that's really the last step is just show the way. They need to know how to debate without fear of pain of reputation or fear of offending others.
[Joshua Barclay] When we talk about vulnerability, Becky, what is your experience with creating that type of environment in your credit union that you once led?
[Becky Reed] Mike is right. You have to walk the talk, and it does absolutely start with trust, because everybody needs to understand and experience that debate that he just talked about and that vulnerability. Look, a lot of people think that when you are at the C level in an organization, that you are beyond reproach.
But at the end of the day, we are just people. Now, perhaps our experience has led us to the place. We are, we're probably really good at executing things, but that doesn't mean that we execute people. So we have to listen to people and just because you become a C level suite individual. does not mean that you just turn off your ears.
What I have found is the most difficult thing to do as a top level leader at the organization. If we're talking about a hierarchy here. So let's talk about the CEO. a couple of times. And what I can tell you is that getting people to argue with you, getting people to tell you, no, is challenging. I am not the greatest at slowing down.
Some people just can't keep up with that pace, but very rarely will people actually look me in the eye and say, Becky, I can't keep up with that. You're expecting something that I'm just unable to accomplish. And the truth is, I run at light speed. Not everybody does. Now. The downside to running at light speed is I analyze stuff almost not at all.
So I have to surround myself with people who do analyze things. I have to respect their slowness, what I would consider slow, right? Because I need that. Cause I'm going to jump off a dang cliff. I need the people to go, Becky, have you looked over the cliff to see how high it is? I know I don't care.
I'm jumping over it anyway, cause I need to get to the other side. So experiencing that with a leader, that you can tell them, no, you can come up with differing opinions. That is exactly that healthy debate and mirroring that and showing people what that looks like. Talking about it is one thing, but actually letting people experience it is another.
I can say all day long, I have an open door policy, but if I slam the door in your face, when you come to me, then it is not obviously true.
Segment 2
[Joshua Barclay] The tech talent race is heating up in the financial sector. According to a Peak 10 study, 76 percent of financial institutions have recently created new IT roles. However, filling these positions is proving to be a tough challenge for half of them. Mike, as the EVP, you're one of the individuals leading that talent hunt.
So this challenge isn't unique to you, right? every single credit union leader I talked to is having issues with acquiring and retaining talent. Mike, what has worked for you when it comes to recruiting and retaining it talent,
[Mike McWethy] This is a massive issue across the credit industry. it's a big topic that we've been talking about a lot and a lot of different circles and conferences. there's a huge talent gap study I saw, but the other day that showed financial industry is the number one industry seeking out this talent.
And you've got chase bank bragging about their 12 billion budget for technology. They've got more. Tech talent, then Facebook and Twitter combined, they're converting themselves into a technology company that offers financial services. And so that's the world, in front of us and credit unions are most of them, and I'll talk to honestly, do not have a single developer, even, in larger credit unions that I would consider, and it's astonishing.
So for us, we, knew that we needed to invest in that and have that talent to create the experiences that will differentiate us. And honestly. The first thing credit unions are just going to have to decide to do is pay market rates for the talent that we need in order to thrive. And that means not just dipping your toe in the water in order to try to get a beginner developer or beginner talent.
You need to decide that this is a path you're going to do. And if you're going to. If you can't be good at this, then you're just going to have to pay more because there's a lot of people competing for this talent. And if you can maybe get a recruiter or find a way in order to get that talent. I'm seeing many credit is not being able to retain them, right?
Because a lot of times you like, okay, there's here, this is your project. Go into the basement, ho's and drink your diet Coke and code this language until the project is done. you can only do that with so many projects before that person says, you know what, I'm out of here. This is not challenging, right?
So after you get this type of talent, you're really going to have to challenge them to a variety of different projects and listen to them. Pull out of them ideas, don't be the CEO or the leader with the God complex that just because you were good as a CFO means you're really good at software development.
That's not the case, right? You've got to hire this talent and listen to them. That's Steve Jobs mantra, right? Don't hire smart people and then tell them what to do. That's idiotic. You got to listen to them, elevate them, give them variety of work and then help them find a way to level up their own talent.
That's really what is desired from a lot of these younger individuals in the it development world is they want to grow in their own skill sets. What are the things that the credit union is doing in order to help them enable them to level up, learn more languages, learn more techniques. A lot of times credit unions only send their executives to conferences.
these individuals really need to have. a lot of investment in themselves for them to feel challenged to do well. And then I'd say the last nugget is they really need to be celebrated. When they create this experience, when they create this software, when they create this integration, it would be very helpful if we said, Hey, everyone, look at the great job this employee did.
So if you want to keep that staff, you're going to have to do those things. But at the end of the day, if you're not willing to pay money for them, then I'm not sure what the answer is.
[Joshua Barclay] Becky, Mike talks about paying better salaries, challenging this talent, celebrating this talent. What else can credit unions be doing to attract and retain the top tech talent that they need?
[Becky Reed] it's utilizing our power of collaboration through CUSOs. So at Lone Star Credit Union, back in 2015, we completely overhauled our technology infrastructure. And the architect that provided us that service, we could never have afforded ourselves. As a matter of fact, that enterprise level talent, first of all, we couldn't have afforded him As a full-time employee.
And second of all, to Mike's point, after he would've implemented the project, he would've been bored. There was nothing else for him to do. So that would've been wasted talent and wasted money that we had spent at Lone Star, and that was one of the reasons that I felt that Pure IT needed to be created.
So what we did is we used him fractionally. We got to have enterprise talent for a very specific use case. And then he was able to go on and help other credit unions while still earning a market level salary that pure it was paying so that he could help other credit unions. So the way that I think smaller credit unions can benefit from utilizing the best tech talent is through the power of our collaboration and the superheroes in that scenario, which are CUSOs.
[Joshua Barclay] Is this a circumstance where credit unions do not have the money to pay for top talent, or is this a situation of the credit unions just need to learn how to reallocate capital? And move it to this tech talent.
[Becky Reed] Well, credit unions, this is not really in our wheelhouse. Mike mentioned that as well, but at the end of the day, yes, we are technology companies that are providing financial services, but our core tenant is to help the members. And so it isn't intuitive to feel like a technology person, a top, six-figure salary person and so that is something that every credit union has to decide.
Most credit unions in our industry do not spend the same percentage of their budget on technology that includes people as other industries do. So a lot of industries spend 50%. technology and credit unions generally do not. They spend 50 percent on products and services. That might include technology, but it mostly includes people that are helping the members.
Segment 3
[Joshua Barclay] An opinion piece in the Wall Street Journal by Scott Hodge raises an eyebrow on credit unions core mission. Scott argues that credit unions have veered from their original mission of helping those with modest means moving towards a more profit-oriented approach. All while maintaining their tax-exempt status.
Mike, do you agree with Scott's take?
[Mike McWethy] Now, it sounds like a typical talking point, but at the end of the day, we're charged with serving our members. I get a little worried sometimes when I see some credit unions seemingly losing sight of that, putting in a lot of effort to do some charitable work that's great, and they should and we should all do that, but at the end of the day, our charge, the reason we were created and formed was to help our members, and I think we do that very well, and I think at the end of the day.
Net interest margin is declining for every financial institution, and it has been for a long time. So survivability is really the issue, not, you're not seeing a lot of corporate jets with a credit union name on the side of it, right? We are trying to survive at this point, and so we're doing what we can in order to provide value to the members.
If you go back to, I don't want to Go down the route of trying to talk about taxation. But the reality is, if you look at the Federal Credit Union Act, it was done in 1934. Between 1929 and 1933, 9, 000 banks closed, and they were not providing loans and accounts to your average person. If you look at the Federal Credit Union Act, you don't see Small means written anywhere except for the charge for boards to look out for those with small means to make sure they're not getting improper rates But that's not the charge and at the end of the day most banks thousands of banks are S corps who are not paying taxes so it's give me a break, but the biggest issue is the fact that credit unions are struggling because While banks will say that we've got it great, the reality is we have a lot of restrictions.
For instance, we cannot charge more than 18 percent on loans. banks are charging significantly higher rates in order to provide services to all sorts of consumers. We don't have that ability and so it's, It simply makes it more difficult if we cannot generate more revenue in order to cover the losses of saying yes to more people, then we have to make it up in volume or scale or something else in order to survive.
[Joshua Barclay] Becky, I want to push over to you something that Mike just talked about, which is survivability things are difficult for all financial institutions right now. And I have a controversial question for you, Becky is the original mission of credit unions to helping the under banks and the underserved.
Is that still a viable path to profitability?
[Becky Reed] I would say yes, it's a viable path, but profitability isn't the end goal and the Our regulators, I think, and the regulations that, that all financial institutions, but in particular credit unions, which Mike alluded to, we in the credit union space are very limited on how we can earn revenue.
And we can't go out and raise capital like a bank can. The only way we are allowed to build capital is through the income statement. because of that, we are forced to earn revenue and forced to make a profit. I'm using air quotes when I say this. We are forced to make a profit in order to maintain our capital ratios in relation to our asset size.
And that is a very challenging process. proposition that other financial institutions do not have to follow. So because of that, if we have a ROA of 0. 10, that's 10 basis points, that is unacceptable to our regulators. It doesn't matter if we're 10 percent capitalized. So that is really what is driving some of this.
At the end of the day. A financial cooperative doesn't have to make a profit. That's not a requirement. And it isn't in the 1934 credit union, federal credit union act. Profitability is nowhere in there. It is serving the members. The people who own the financial institution are the ones who are directing the products and services that are provided to the other members.
And just self sustainability should be ok. And no, there are plenty of people out of modest means that are absolutely underserved that could pool their resources together to start their own credit union in order to help their fellow man. You know how many credit unions were chartered last year? Three.
Three. Yet, there are plenty of people who want to start a credit union, so no. I think that the mission of credit unions, the people helping people philosophy, and what credit unions stand for, a financial cooperative, is still a viable model. And I would argue, it's the only model that's going to work in a Web3 environment.
Segment 4
[Joshua Barclay] The bank automation market is set to soar to an impressive 8. 2 billion by 2027. Credit unions have traditionally prided themselves on their close-knit, personalized approach and strong community ties. And that stands in stark contrast to the impersonal nature associated with automation.
Mike, considering this as credit unions, increasingly adopt automation to keep pace with larger banks. Do you think there's a risk? That credit unions are undermining their core mission by losing that personal touch that distinguishes them.
[Mike McWethy] I'm not sure that I would couch it that way to say it's losing their mission. I think they're losing their differentiation. Meaning the value proposition, in my view of credit unions, is the relationship, the trust that is occurring there. A lot of consumers are, excluding myself, I love Amazon, I love being able to click on something and it just magically appears on my doorstep in hours.
But, so efficiency and speed is, terrific, but, There are still components in people's lives where they would like to have a trusted dialogue with a human in order to get through a transaction, right? I often say, when I'm asked, are we going to put the electronic, ITMs in the teleline? And the answer is, no, and simply because our members had to bypass an enormous amount of technology options in order to get out of their car.
And we're in Texas. So most of the times it's really hot. So they had to walk through the heat. walking through an oven in order to get out of their car in order to get into the branch. And they did that because they wanted to have a human engagement. I want to be the type of organization. that provides that to those consumers who need the helping hand, who want the dialogue and the relationship building that occurs.
So it just seems foreign to me, trying so hard to remove the one thing that we're really good at differentiating ourselves from. I know that's a polarizing opinion. There's a lot of credit unions who are, who don't subscribe to that thinking because efficiency is something that we need to do. And I think you need to become more efficient.
I think, we're going more cloud-based. We are using chatbots. We are doing a lot of things that are creating efficiencies, but I'm also trying to double down on the human connections and trust-building between people, because I believe that is the differentiation between credit unions and other financial institutions.
[Joshua Barclay] Becky, you're very forward-thinking when it comes to technology in particular. So my question to you is how do credit unions walk that fine line of automation? And personalization.
[Becky Reed] I love what Mike said about the fact that people walking through an oven, they're going through a lot of trouble in order to talk to a person. And I think that human interaction is absolutely important. Now, does that have to be in person, human interaction? Maybe not. And when I look at.
The younger generation, so I'm talking about Millennials, Gen Z, and then the Alpha generation, those folks are more connected than ever. They are connected with people all over the world, and they have in real-time. interactions with people 24 seven and the people who they engage with mostly are considered a community and credit unions are a lot like that.
Credit unions are communities, but what are we doing at the credit union community? In order to engage those generations, and arguably even the older generations could engage in this type of technology, utilizing a personal touch, talking to a human, and also using technology. So let me give you a scenario.
In a gaming community, people talk in real-time to other people. We have a lot of people on a discord server. Why don't we have a credit union discord server? Where somebody is talking to them from the credit union and they're able to give feedback. At BankSocial, where I work now, we have real-time feedback from people who are using our app, who immediately, as soon as they download an update, they are telling us what they like, what they don't like, what bugs are happening.
And so I think that there are ways we can utilize technology, but still keep that personal touch because to Mike's point, it absolutely is a key differentiator, but the younger generations are expecting that real-time communication, so why not give it to them?
[Mike McWethy] It's interesting when you look at a lot of studies of those who are opening their accounts online in the credit union space, they are doing it within a two-mile radius of a physical branch. They want to know that there's a human there for them. They still yearn for that type of relationship.
They're going to transact and engage digitally, but they want to know that there's a human there that they can dialogue with. So to Becky's point, I think we need to do those things. I just think we need to do both of them and we need to do them both well, because if you don't do both of them well, then I think you're going to struggle.
Closing
[Joshua Barclay] Let's wrap up the show. Mike, do you have any final thoughts or leadership advice that you would like to impart on our listeners?
[Mike McWethy] The tenet of what I was getting at on a lot of those topics are really just trying to humanize the experience and humanize the engagement internally within the organization. I think a lot of new leaders try to posture themselves as being the know-it-alls or that they need to have all the answers, that's really not the best answer come to find out.
I think people will follow you up that hill in the battle. If they know who you are and what you're about. And I think that sort of transfers a little bit into how you operate as a credit union and what people are attracted to in our industry. So for me, it's just about humanizing the experience, both internally and externally.
And I think good things will happen.
[Joshua Barclay] Becky, do you have any plugs or final words for our guest
[Becky Reed] I'm going to say that from a technology perspective, I've said this before, a frictionless, member experience is preceded by a frictionless employee experience and our employees are the ones who are helping our members every single day. So it's important to focus on culture. It's important to focus on human relationships and it's important to focus on the end result with the member.
If we have happy employees, we're going to have happy members, so people over profit power to the people.
[Joshua Barclay] That brings us to a close. Thanks, Mike. Thanks, Becky. And a special thanks to you, our listeners for supporting the show. This has been another episode of Grow Your Credit Union, the podcast where credit union leaders gather, learn, and grow. If you like the show, please subscribe, tell others, and.
If you want to be a guest or a sponsor, feel free to contact us on our website, growyourcreditunion.com. Thank you for listening. And we will see you next time.