How To Make Mistakes Matter
A significant gap exists between executives' perception of how much they trust their employees and how trusted employees actually feel. We can bridge this gap by fostering a trust-based environment which involves encouraging mistakes as learning opportunities and ensuring clear communication and follow-through on employee contributions. Could this forward-thinking approach also lead to growth?
In this episode of Grow Your Credit Union, hosts Joshua Barclay and Becky Reed welcome on Brian Lee, President and CEO of Landings Credit Union to talk about trust in leadership and “making mistakes matter.”
Plus: We explore why pursuing growth at all costs is a flawed strategy AND examine strategies for maintaining a healthy balance sheet in the post-COVID era.
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FULL TRANSCRIPT
Intro
Joshua Barclay:
Credit union leaders, welcome to the show. These are today's topics: credit union growth. We all want it, but how do you grow efficiently and responsibly for long-term success? We talk about the biggest changes in the way credit union leaders manage their balance sheets in the post-COVID economy. We're talking about the rise in employee distrust and what you can do to rebuild the trust of your team.
Welcome to Grow Your Credit Union. This is the podcast where credit union leaders gather, learn, and grow. I'm your host, Joshua Barclay. With me today is my co-host, Becky Reed. Becky, say hello to our audience.
Becky Reed:
Howdy, y'all.
Joshua Barclay:
Before we begin today's show, I want to first mention our brand-new sponsor, Strum Platform. They help credit unions accelerate deposit, loan, and relationship growth with smarter marketing analytics. We'll talk more about Strum Platform later in the show.
Becky, you know where I am right now? I'm in the opposite of where you are culturally. Salsa speaking. When I say salsa speaking, I mean, do you remember that old salsa commercial?
Becky Reed:
Yes, it says, "Where do you get your salsa? New York City."
Joshua Barclay:
New York City, Becky. I am recording at Central Park West. I'm getting the full inflation experience. I'm on tour: Inflation Hardcore 2024. If you want to experience inflation at a level 10, and you're not already, head on over to New York City, and you can spend $16 on a beer.
With that being said, Becky, let's introduce today's guest. I'm talking about the President and CEO of Landings Credit Union, Brian Lee. Brian, welcome to Grow Your Credit Union.
Brian Lee:
Hey, happy to be here, guys.
Segment 1
Joshua Barclay:
If I had a dollar for every time I heard the word "growth," I'd be retired on the beach with a talking parrot, listening to Jimmy Buffett tunes from a beachfront bar. But with all the talk about growth, credit union leaders still can't agree on the best way to achieve it.
When we say growth, what are we really talking about? Is it member acquisition? Are we increasing products per member? Boosting total assets under management? Or something else? As margins get tighter, leaders must choose the right path to growth and, more importantly, how to achieve it responsibly.
Brian, you've gone from CFO to CEO. You know the numbers better than most. How do you balance responsible, efficient growth with the idea of growth at all costs?
Brian Lee:
It's a great question. So, I like that you talked about the beach. I love the beach. I love surfing. And one of my favorite quotes is by a guy named Jon Kabat-Zinn, who said, "You can't stop the waves, but you can learn to surf."
I use that often when I even think about how we approach growth—that it isn't this steady thing. And back when I was in high school, I learned how to surf. And when I first saw it, right, I'm like, "Hey, you just go on out there, paddle out there, jump on the first wave you see, and you're good to go."
But as you watch people out there who know how to surf, you'll see them take a little while on the beach. They'll watch the waves, go out there, sit on their board for a while out in the ocean, and they're patient. They wait. Pretty soon, if you're one of those people like me, an over-eager beginner, you're going to learn that if you don't catch the waves at the right time, you're going to have a horrible day, and it's not going to be any fun.
I think it's similar when we approach how we grow. I try to take what the economy is giving us. I try to take what our community is giving us, what our membership is giving us. At times, there's not this linear growth pattern that we can go at. We can't always just assume, "Hey, we're going to go at 10% growth in loans and deposits and everything all of the time." And so sometimes, you have to understand that different days, different months are different.
As we learn to be a little patient, as we learn to kind of sit back and say, "Hey, when are those right times to grow? Where are those right times to do certain specials, whether for deposits or loans?" There's a lot of patience that goes into it. It's not a sprint. It's not even a marathon that has this endpoint. You know, we have 70 years of history behind us.
I'm not looking to say, "Hey, I just want to grow this in the next 10 years and move on." I want to say, "Hey, this is just an endless opportunity to continue growth." So without an endpoint, just saying, "Hey, take every day, every month we're given, every year as its new thing."
Joshua Barclay:
I love the surfing analogy. You know, you're talking about picking your spots, not forcing anything. It's almost like a zen-like approach to growth where, when the opportunity arises, seize it but don't just mindlessly chase it. Becky, what is your philosophy around efficient growth?
Becky Reed:
You both said a couple of things that I'm going to double down on a little bit. Josh, you mentioned acting like it was 2019, pre-COVID. For any of us who've been through that change from 2019 to 2020, everything that most leaders knew about managing a balance sheet went out the window when COVID happened, and interest rates started increasing.
We had been living in an artificially low-interest rate environment for almost two decades. Most leaders of credit unions knew absolutely nothing about an interest rate environment that was sub-one percent. What I saw when interest rates started increasing was your general ALM 101 people were not acting like they understood what to do in a rising rate environment. They didn't increase their loan rates quickly enough, and they had to increase their deposit rates super fast because deposits were running out due to the competitive nature of increasing rates.
That helped me understand that we had a problem in our industry—that most leaders, whether they be a CFO, a CEO, or other C-suite folks, cut their teeth on a quarter-point interest rate from the Fed. What you do in a quarter-point interest rate environment and what you do in a five-percent interest rate environment is not at all the same. It went from a quarter-point to five percent in like a year. I mean, it was just unprecedented. And so, it was really scary.
But when you talk about growth, growth can be anything you want. You mentioned: Is it members? Is it asset size? Is it loans? Is it deposits? What is it? Is it the number of branches? You have to make sure that the board and the C-suite are aligned on what that means.
It is very dangerous, in my opinion, to incent an executive, particularly a CEO, on a blanket growth statement. If you say, "You get a bonus if you grow the credit union," well, what exactly does that mean? Does it mean deposits? Well, I can tell you that as a CEO, there is a lever that I can pull that's going to grow deposits tomorrow, and that's offering an 8% CD. I'll get all the deposits I want. But is that the best thing for the credit union? No.
But if you've given me a bonus or salary incentive language that says all you have to do is grow deposits to X, well, you're probably incenting the wrong thing. You have to be really intentional about the language you're using around growth metrics and incentive structures, including for your staff, to make sure that it is healthy growth—that it is the right kind of growth.
Joshua Barclay:
Yeah, Becky, you bring up a good point. Both of you obviously bring up great points about trying to wait for the wave. But my question for you, Brian, is how do you go about managing expectations so that the board does understand, "Look, there aren't any waves right now. This isn't going to be some parabolic growth." I know you want it, and I know you fantasize about it, but how do you manage the expectations so that you do have the opportunity to wait for the right wave?
Brian Lee:
I think there's an understanding, and I talk to my board a lot about it, that this is a very long-term play—that the health of the credit union is overall the most important. Even in those discussions, like you mentioned, incentives—I’ve pushed back on certain incentives and said, "Hey, I don't want to be incented on this because, yeah, if you want loan growth, I can go get loan growth tomorrow. I can buy some participations. I can crank up indirect lending. I can do stuff, but that doesn’t mean it’s right for the credit union."
And I think you see this in the overall financials sometimes of certain credit unions or banks. You can see where the wrong behavior is incentivized, and it puts the credit union in a bad situation. Then we start wondering why we see mergers and horrible endings for credit unions that should be able to last for a long time.
And so I think it starts with that—understanding between the board and the executive. Every credit union is different, right? There are going to be credit unions that grow at different rates, have different fields of membership. This is just something I believe in, and my board has agreed with me on, and they don't push me when I say, "Hey, you know what? We're going to slow down loans for the next six months because I don't want to be in a position where I'm borrowing a ton of money or overpaying for deposits."
It puts us in a position that now we're stuck, and we can't make the right decision when rates go down or whatever that next thing is. We don't want to be stuck in a spot just because we've been forced to grow in whatever area.
Segment 2
Joshua Barclay:
Given the current climate of inflation and fluctuating interest rates, many credit union leaders face significant pressure to manage their balance sheets more efficiently. Brian, you've seen how economic volatility can challenge a credit union's balance sheet. You assumed the role of CEO in January 2020, just before the pandemic. Fast forward to today, and the pace of change has only accelerated in both the economy and technology. So my question for you, Brian, is in your time as CEO, how have you had to adjust your approach to managing the balance sheet?
Brian Lee:
Well, I love what Becky said earlier about how it doesn't matter if you've been a CEO for the last 30 years or you just started right now. These are all new scenarios we're running into, right? There are different cycles, but what's happening now with rates, with the amount of cash in the system, this is different than anyone's ever seen. I've talked to CEOs that have been doing this for 30 years, and they're still kind of like, "Well, let's see what happens."
You know, they don't have a playbook for this. And so, yeah, I did have great timing at the beginning of 2020, took over the role, had great plans, and then you have to start looking and saying, "Wow, what do we do in this scenario?" Can we put ourselves in this situation where we're not losing in any one scenario?
I try to look at it like that. I plan ahead by looking at the balance sheet and saying, "Okay, what are all these scenarios that can happen if rates move up?" And a lot of times, even from the regulatory side, we're kind of forced to look at rates moving up.
But now we're looking at, "Hey, what happens when rates move down?" And so if we can play with all these scenarios and say, "Man, in any scenario, I don't want to lose big. If I can lose less in most of these scenarios, and maybe I'm not hitting the big home run, but I'm steadily growing, steadily achieving whatever our success metrics are, and I'm not losing big in any area," then I'm comfortable with that.
I've set up this balance sheet where we're managing risk, we're taking chances where we can, and we're looking to the future to say, "Okay, when that next thing happens, when rates move down, are we then positioned to say, 'Hey, we can still pay the bills and we don't have to do these big cuts or adjustments because we're set up whether rates are high or low?' We have our margins, we have our ability to take care of our members and our community, and all those things that are important."
Joshua Barclay:
Becky, what were some of the biggest things that you saw during your time in terms of changes when it comes to balance sheet management?
Becky Reed:
I think the interesting thing that I've seen during my tenure in the credit union space is the data modeling that Brian mentioned. He said he has a model that he can go into and pull different levers to see what's going to happen. Of course, AI is going to be able to do some predictive modeling, and you can already buy software programs that do that. But AI is going to make that exponentially faster and more real-time, looking at today’s data and projecting out.
The challenge that we've had, and have had in the industry, is we're always looking in the rearview mirror. Thank you very much. We're always focused on what happened last month, what happened last quarter. I mean, for goodness’ sake, our call report data, the peer analysis data, doesn't even come out until the end of the quarter following when the data was collected.
So we're still, as an industry, focused on the past, and I think it's really important to start using these models and the tools available to us now to start looking at, "Okay, if I do this, if I raise this interest rate a little bit or lower that one a little bit, or maybe put a little more into loans, a little less into investments," whatever that mix is, that can help you decide what to do because you're looking at different paths. That just wasn't available 10 or 15 years ago, not without spending exorbitant amounts of money on huge data models that cost six figures. That was the challenge that I'm noticing now, looking back.
Joshua Barclay:
Brian, when you're thinking about managing risk—because you mentioned you're looking at all these different scenarios—you mentioned the wave analogy earlier where you're looking for waves as sort of growth opportunities, but you're also looking for waves as risks. There's the risk waves; there are the growth waves. You're looking at both, right? We're just going to stick with this surfing analogy for the whole episode. Why not? I'll find a way to throw it in segment number three.
But thinking about managing risk, has anything—slicing and dicing the data, looking at the what-ifs—probably changed since before COVID. So I guess what I'm really trying to figure out is, what is one thing you can isolate for the audience where you're like, "I had to really rethink the way I look at X or Y or Z?"
Brian Lee:
I think, to me, it was even coming into the role. We’d been sitting in low rates; we’d been in this environment where you could kind of predict certain things. And I think with everything else that was going on with COVID, it was kind of the same thing of, "Man, I don't know what's going to happen tomorrow, so I need to keep some options open on how to react to what happens." I think risk management is knowing that you can't control everything, and so you have to be ready for multiple scenarios.
Whether it's, all of a sudden, we went from saying, "Man, I've got so much liquidity, I would love for it to be gone," and then within months, people were like, "Oh crap, I have to borrow money. I have to do these rate specials. I have to do everything because I'm in trouble." Just when you think things are stable, something's going to change. So we have to be in a position where we can react to that. That's why we build up our net worth; that's why we have these different ratios to say, "This is safe and sound, and we're not too extreme in any area."
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Segment 3
Joshua Barclay:
When it comes to being a great leader, having the trust of your employees is essential. However, if your employees don't feel trusted, this could hinder their faith in your leadership. According to a PWC survey, 86 percent of executives say they trust their employees. But guess what? Here's the kicker, folks: only 60 percent of employees feel trusted.
Brian, you've adopted a leadership philosophy around trust. You trust that your employees will make mistakes, and in some ways, you encourage it. I think that could be a great way for leaders to gain more trust from their employees. So, Brian, can you please share your leadership philosophy around your mantra, "Make mistakes matter"?
Brian Lee:
Yeah. I think, first of all, it doesn't make sense for us to go through all these processes—interviewing people, hiring someone—and then not trusting them to actually do the job we've asked them to do. Sometimes we're so afraid that someone's going to make a mistake, right? We put all these controls and black-and-white rules in place.
There are certain things we need to protect from risk, but there are so many times where we don't want to let someone make a decision because we're afraid they're going to make the wrong decision. When you're in a leadership role, you look at it and say, "Man, here's how I would do something. I want to clone myself and have everyone do it the same way I would."
It's really hard as a leader to then look back and just say, "Hey, you know what? If I'm very clear on what the end goal is and where we want to be, there are a hundred different ways to accomplish this." If I can allow my team to create that opportunity to learn something new, lead a new project, or make difficult decisions, if we get there eventually, that's the point.
And now they've learned something, the credit union is better for it, we've developed people. When you do that, you have to be ready for people to fail. They're going to make mistakes. And so that's why I love that saying of "Make mistakes matter," because it's not about carelessness. It's not just like, "Hey, go start throwing water balloons at the members as they walk in." It's saying, "Hey, within these parameters, how do we create opportunities to learn?"
And when you do make a mistake, when something does go wrong—because it will—everything always fails; that's kind of how it works. You say, "What did you learn from that?" Sometimes it's that individual; sometimes it's other people on that team. I've learned some of the greatest lessons in my career by watching other people make mistakes as well. So sometimes that's good for the rest of the team around you. We have to be willing to do that and accept that, man, someone's going to make the wrong decision, but in the long term, we're going to be better for it because now we've all grown from this mistake.
Joshua Barclay:
Becky, when you were leading Lone Star, how much flexibility did you give your team to fail? When is it okay to make a mistake, and when is it absolutely not okay to make a mistake?
Becky Reed:
Well, we clarified that most of the time, if it had to do with a regulation, a law, those were the kinds of things that you really didn't have any wiggle room about, right? I mean, Reg Z is Reg Z. It's not like you can just create your own loan documents and have somebody sign on a napkin—that's just not something you can do.
However, if you are trying to improve a process, if you are trying to make a member happy, or if you are trying to support your coworker, then absolutely, let's try new things and be innovative, make mistakes, and learn from that. One of the things that we did was provide an opportunity for people from all over the organization to participate in a project.
Maybe we were going to research getting a new piece of software, for example, or let's say we were going to implement something—it could be software, a platform, a program, a service, whatever it might be. Because all people in the organization are effectively impacted by whatever it is we're doing, it doesn't matter if they're working in the back office or the front office or wherever—they're probably going to be impacted by what the credit union is doing as a whole.
And so, allowing people who normally wouldn't get to participate in a project like that—like, let's say, a member service representative. Usually, it's the leaders in the organization that participate in the project team and move forward, but the member service person's voice is not in that equation. They don't get to experience that.
So we would put together these small teams, and they would get to go through a process iteratively and fail. They would get to see the team fail. They would get to see each other fail. They would get to witness people fail, having disagreements about how to move forward and how that got resolved. So we just created a culture of fail fast, pivot, and learn from those mistakes, like Brian said, whether it was your mistake or someone else's, and it's okay—nobody died, we're moving forward, it's all right, let's move on. That's what we did at Lone Star.
Joshua Barclay:
Let's talk a little bit about the overall sort of premise of the stat that 60 percent of employees in this survey did not feel trusted. So back over to you, Brian—by allowing your team to make mistakes matter, do you feel that increases the sense that your employees are trusted? I mean, shoot, if you trust me to go make mistakes and I don't need to ask you to do everything, I feel like I would feel trusted. Has that played out at your credit union?
Brian Lee:
Yeah, I think so. It's funny—I used to do a lot of work with young professionals in the industry. One thing that we heard several times was, "Hey, our credit union felt they needed to put it out there and say, 'Come up with ideas. Here's a suggestion box,' or they would ask different demographics of their employees, 'Hey, what about this?'" And they said, "Hey, I'd work really hard on something or some great idea, and it would go nowhere. Or I wouldn't hear back, or they'd be like, 'Yeah, no, we're not doing that.'" And so, I'm never doing that again.
There's nothing more discouraging for whether you're a young professional or later in your career than when we're saying, "Hey, bring great ideas, bring your best self every day to work, let's work as a team," and then we never let someone participate in that teamwork. That's when those statistics are off.
So if we actually live that and say, "Man, let's bring someone in that I'm not sure if they can handle this, but let's let them try it," they're going to say, "Hey, I was trusted enough to jump in and lead this thing that's maybe not even in my job description, and it gave me an opportunity." That's why I think we can get that a little closer. And then also, it's celebrating those, looking at the results of those, and going back and saying, "Wow, here's what we accomplished, or here's what we learned from either the failure or the successes." And then let's move on to the next thing and keep it going—not backing away from that intensity.
Joshua Barclay:
Becky, anything to close out? I know you do a really good job of giving that freedom to your employees. From your standpoint, did you see an increase in your team feeling like they were trusted when you gave them that room to make mistakes and be creative?
Becky Reed:
That wasn't a question—trust wasn't a question that we asked on our employee survey every year, but I think it goes along with feeling valued and having the leaders in the organization walk the talk. It probably was the case when people submitted things to an idea suggestion box that somebody in the organization looked at those and decided which ones would go forward and which ones wouldn't. It was just a lack of communication—the person who submitted the idea didn't get any feedback.
So, of course, you're not going to do that again because you have no idea: Did they like it? Did they not like it? Did somebody else take it and run with it? You know, you just don't know. It just went into a black hole. So I think that communication and doing what you say you're going to do is paramount to establishing that trust relationship between the leaders of the organization and the staff. At the end of the day, just do what you say you're gonna do.
Close
Joshua Barclay:
Well said. That brings us to the end of the show. Brian, give us your final thoughts.
Brian Lee:
It's an interesting time to be leading a credit union right now. There are so many amazing people out there doing some really great things. I'm just happy to be part of it. We don't know what's going to happen, but I think the more that we put trust in our teams, trust in how we analyze risk, and then, when it comes down to it, how we take care of our members and keep that long-term view of saying, "Hey, we're here for a reason. We're owned by a membership; they need things that we need to provide for them. This isn't a selfish industry, so we need to make sure that we're here a long time to make sure they're taken care of."
Joshua Barclay:
And where can our listeners get ahold of you if they're listening and thinking, "Oh, Brian said some awesome stuff; I'd love to reach out to him?"
Brian Lee:
You can reach out to me on LinkedIn—I'm on there quite a bit—or email me at blee@landingscu.org.
Joshua Barclay:
Becky, give me your final thoughts. Sorry, that was aggressive. Becky, please hand me over your final thoughts.
Becky Reed:
So, you know, it's a tough world out there as a leader, especially being a CEO, and Brian can attest to this, and so can I. It is a very lonely place to be. It can get really hard when you see all of this stuff happening, and a lot of it you just have no control over. You're in a reactionary role, trying to figure out what's going to happen tomorrow.
All I can say is, after being in this industry for almost 30 years, I can tell you that tomorrow is a new day, and the sun will come out tomorrow. So keep the faith.
Joshua Barclay:
And Becky, where can people get ahold of you?
Becky Reed:
LinkedIn is the best place to find me—Becky Reed. You'll figure out where in the world is Becky because I'm all over the place. So just follow me on LinkedIn. That's probably the easiest way. Of course, becky@banksocial.io—you can email me as well, but LinkedIn is probably the best way to see what I'm up to.
Joshua Barclay:
Awesome. Listen, I want to thank our guest Brian Lee. I want to thank my co-host Becky Reed, and I want to thank our sponsor Strum Platform. They help credit unions accelerate deposit, loan, and relationship growth with smarter marketing analytics. And lastly, but definitely not least, a special thanks to you, our listeners, for continuing to support and listen to another episode of Grow Your Credit Union.
Remember, if you like the show, please follow us on your podcast player of choice and share an episode with someone who would benefit from listening. If you want to be a guest or would like to talk about sponsorship opportunities, head to growyourcreditunion.com to learn more. Thank you for listening, and we will see you next time. Take care and buh-bye.