Why Pay for Therapy When Your Tellers Provide It for Free?
Members really only want to go to your branch when they have an issue. Is your frontline equipped enough to handle the challenge? In this episode of Grow Your Credit Union, hosts Joshua Barclay and Becky Reed, bring on Darlene Hilton, the VP of Lending at Lone Star Credit Union to share her wisdom across a variety of topics including:
Personal north star metrics
The real reason members come to the branch
Enhancing frontline capabilities
The real fun starts whenever you press play. Alternatively, you can read the full transcript below.
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FULL TRANSCRIPT
[Joshua Barclay]
What metric truly defines a credit union's success? Then, we're tackling the evolution of banking branches. And finally, we're discussing the power of human touch in financial marketing.
Welcome to Grow Your Credit Union, where credit union leaders gather, learn, and grow. I am your host, Joshua Barclay, and I am with my lovely co-host, the talk of Texas, Becky Reed. Becky, welcome.
[Becky Reed]
Hello, everybody. Hi, Joshua.
[Joshua Barclay]
Becky, you know what's interesting is today – actually, I'm lying, it's not today but this month – is my 20-year anniversary of my very first job. Do you know what that is, Becky?
[Becky Reed]
Do I know what a 20-year anniversary is? Yes, I've had multiple ones of those, Joshua. Thank you very much for reminding me. But I do know what your first job was, but I'd love for the audience to know because it's actually pretty funny.
[Joshua Barclay]
So, my very first job at 18 years old, I was the rat mascot at Chuck E. Cheese, the restaurant arcade for children. I made $6.90 an hour, I danced at children's birthday parties. Some of the kids were nice, some of the kids were mean, some of the kids would stomp on my feet and try to knock off my rat helmet.
But that was par for the course. Becky, what was your first job?
[Becky Reed]
Well, nothing as exciting as that, I can tell you. But actually, my first job was probably before Chuck E. Cheese [Laughter] was even around. But I worked in a movie theater in the ticket booth, and this was back in the days when we had the paper tickets, kind of like what you see at a fair, that would pop out of the machine.
I would tell it how many tickets to pop out, and it would pop them out. We had no cash register, we had no computer, we had no calculator, so I had to memorize what the prices were. So, two adults, two children was $12 or whatever. And so then I had to count back change because only cash, we didn't have credit cards or any kind of electronic payment, right?
So, I had to count in my head the change that I would have to provide to people. So, that was my very first job.
[Joshua Barclay]
Ooh! Becky, that is too much math for me. Are you ready to kick the show off? Because we have a guest that I'm very excited about, the VP of Lending at Lone Star Credit Union, Darlene Hilton. Darlene, welcome to Grow Your Credit Union.
[Darlene Hilton]
Hi, Josh. Hi, Becky. Thank you for having me. Such a pleasure.
[Music]
[Joshua Barclay]
As of June 2022, Lone Star reported total assets of around 162.48 million. Now that's obviously changed. But the point that I'm trying to make here is that when we're looking at the success of credit unions, that total assets metric is always thrown around as the be-all, end-all of success metrics.
But there are so many other metrics that are key indicators of a credit union's success – member growth, net promoter score, net interest income. So, what I'm really trying to find out is if total assets is really the North Star metric, and I'll take that a step further. Which single metric would you choose to represent success to your member and why?
[Darlene Hilton]
That one's probably an easy one for me because of having worked on a call center side for so many years in a collections side. The net promoter score or customer service index is the most important for me. And if I'm talking to a member, there's nothing worse than when you start having a conversation with somebody and you get the deer-in-a-headlight look because you get so deep in the weeds, and they're like, "I have absolutely no idea what you're talking about." Well, years ago, the first time I ever saw financials for the credit union, I thought, "Oh, my God.
I have no idea what this is." And if you try that with a member, unless that is something they live in, they have no clue. So, being able to talk about a net promoter score and explain what it is and how it comes about and the fact that it's their feedback that drives that net promoter score, it has been incredibly popular because people want to know what they want to know.
And what I mean by that is you have people who will come in and they will see less of staff that they've been used to seeing in a branch. They automatically assume, "Oh, my gosh. Did they get fired? What happened? They're not here." And when you say, "No, we have moved our staff around," they're thinking, "Oh, are you closing your doors?
Did people get fired? Did you have layoffs?" Because they only know what they know.
So, when you're able to sit and discuss what a net promoter score is and how it is actually achieved because after you've had an interaction with us, we actually want to talk to you and find out, how was your interaction? You get to learn an awful lot through that net promoter score. You can learn about what their knowledge is.
How was their experience? How in depth or how sticky are they with the credit union? How many products do they use with you? And you can do it without being intrusive. So, you don't feel like you're being bombarded, you're not grilling somebody. But when you're discussing net promoter score, and you bring up a topic of it, they'll go, "Well, what does that mean?" And it opens that door for you to relay information to them that they may have never had any idea of.
They may not know a product that you have, and it gives you an opportunity to strengthen that relationship.
[Joshua Barclay]
I love that, Darlene. You are really looking at the satisfaction of the member as the ultimate metric. I love that. Becky Reed, you have one metric to encompass your credit union success. Which metric are you going with?
[Becky Reed]
Okay. Well, I'm a former credit union CEO, and I remember going over the financials with Darlene on many occasions. As an executive, I lived and breathed the financials. And for me, what was much more important than asset size was ROA or return on assets. And to me, that gave an indicator of the financial health of the organization.
Now, trying to explain that to a member is challenging and difficult. And of course, credit unions are not for-profit financial institutions, right? We're not supposed to make a profit. However, that profitability metric is something that helps the credit union grow and offer products and services to the members that it serves.
So, for me, return on assets was the most important metric that I focused on.
[Joshua Barclay]
If you could give me the SparkNotes explanation of return on assets, give it to me.
[Becky Reed]
All right. So, you take what you earn, you subtract what you spend, and then you express that as a percentage. That's it.
[Joshua Barclay]
And you feel like that is more of a North Star than total assets under management.
[Becky Reed]
Oh, 100%. Because there are $10 million credit unions that are exceedingly successful, and if you have a $10 million credit union that has a 200-basis point or 2% ROA, they're doing some pretty fantastic things for their members. And alternatively, you can look at a $2 billion credit union that has a 0.2 ROA, and that tells you that they're probably not doing what's in the best interest of the financial institution from a fiduciary responsibility.
There's something happening there. They're either overspending, or they're having a lot of losses, or there's something financially wrong with the credit union. Not necessarily meaning that you're going to have layoffs or anything bad is going to happen, but that definitely limits the credit union's capability to assist its members in the best way possible.
[Joshua Barclay]
Becky, I want to ask you, why in the heck is the industry so obsessed with total assets under management? It is like the way we describe every institution when they walk in the room, we have to acknowledge their assets under management. Why do you think that is the case?
[Becky Reed]
Well, bigger's always better. I think there's a little bit of bragging rights there, I have never really understood why, but I think it kind of matches ego. I mean, frankly. So, big credit union, big ego. That's just what I think. Unfortunately, smaller credit unions, they struggle for many reasons because they're resource poor.
The big credit unions tend to get more attention. So, I think that that is probably more the reason why we think about assets in that way. Big ego, big assets.
[Joshua Barclay]
Ego, assets under management is not a metric that signifies efficiency and profitability.
[Music]
[Joshua Barclay] In 2009, banks had around 100,000 physical branches. Today, banking industry has around 72,000 physical branches. That is a steep drop in the number of total branches. However, credit unions do not appear to be seeing that kind of rapid decline in physical branches. According to Forbes, as of 2022, 78% of adults in the US prefer to bank via a mobile app or website.
And get this – only 29% of Americans prefer to bank in person. So, my question to the both of you, as the digital banking experience gets better and better, the in-branch experience does not seem to be innovating and improving at the same pace. Becky, let's start with you. If you were tasked with innovating the in-branch experience, what are the first three things you would focus on and why?
[Becky Reed] Well, first of all, I have innovated the in-branch experience, and that happened at Lone Star where we went to a remote-first workforce in the back office. And in the front office or the branch, we placed employees that were often referred to as universal employees, and those employees are people who are well-versed in a variety of topics and can help the member that comes in.
Because at the end of the day, the reason why people don't want to come into a branch or prefer a mobile option is because doing a teller transaction, it's pretty simple, Josh. It's not like brain surgery, right? And so a machine, frankly, and this is going to be controversial when I say this, but a machine can do a teller transaction.
What people really want when they come into a branch is they want to be able to get a problem solved. Just your day-to-day transactions, moving money back and forth, depositing a check, balancing your checkbook, whatever the case may be, that can all be done with a mobile app, no big deal. But when you have a problem, so when you have a fraud instance, somebody has taken over your account, your debit card gets stolen, your information gets hacked, something catastrophic, you have a death in the family, all of those things, you really want to sit down and talk to a person, and when you go into the branch...
And unfortunately, there are some branch experiences where you're walking in, you're distressed, and there's no one that can help you. You're told to go sit in a waiting room where you sit for three hours. And then you walk in, and you finally get somebody to assist you, and they tell you, "Oh, I'm not the right person.You need to call this 800 number."
What?
Credit unions are different. And so when you walk into a branch, you don't need to walk in and see 10 people at a teller line. That is not why you're there. You're there so you can talk to somebody who is educated in the products and services the credit union offers so that they can help you. The reason that so many branches are disappearing is they are leaving communities that are no longer profitable.
I'll give you three guesses on what types of branches are leaving those kinds of communities, and they're not credit unions. Unfortunately, there are people out there that are underbanked, and now it's even worse, there are banking deserts out there that have been frankly abandoned by the traditional financial institutions because they're not viewed as profitable.
[Joshua Barclay] Darlene, what's your take on this?
[Darlene Hilton] I agree 100% with Becky, and I'll be very honest. When we did the renovation of Dallas, this was just a huge eye-opener. Because when members came back in after that branch was renovated, it was some of the things that they said that have really resonated with me. So, the ambience of the branch itself says an awful lot to that member coming in.
Not meaning, "Oh, my gosh, it's got to just be the most glitzy thing." No. But they are looking for things to be modern because they equate that to the stability and the safety of their financial institute. They're looking for the person to help them because that's why they're there. They can do everything else either through the drive-thru, online, mail it in, whatever they choose their option to be, but 99% of the time, it's because they need something done right then and there, and they need to walk out with something in their hands.
So, they need somebody who is educated and can handle whatever they need done. Or if they're not the person, they can put that person in contact with them immediately, right there while they are sitting in front of them.
When somebody comes in, they're going to give you feedback that you may never get any other way because the person who's doing mobile banking is not going to provide you any feedback. And it's being able to listen to that feedback and act on that feedback because they might tell us what we're doing that makes it a challenge to do financial transactions or be their financial institute of choice.
So, for me, it is absolutely making sure that that branch is beautiful vision. There's options, both a teller and the machines, but the education piece behind it to be able to handle whatever is being brought in the door and being done timely and efficiently and providing them with answers to things they don't even know they need.
Because they may come in for something else and they have other things that are a caveat behind it.
[Joshua Barclay] Here's my question to that point since you're both in agreement that the branch is really for problem resolution. Are the branches designed right now to accommodate people in those scenarios as you're suggesting?
[Becky Reed] Well, I think most of the branches that you go into, no. So, there is this whole open concept thing that we have going on, right? Well, when you have everything open, that all looks really great, but there's no privacy. So, we just talked about the fact that when people come in, they're probably looking to solve a problem.
And that means they may need to be taken somewhere where they can have a private conversation with somebody, not in a lobby with 10-foot ceilings and tile floors that are echoing. So, I think that in some cases, branches of all types get it right from a visually appealing aspect, but they don't get it right from a privacy aspect most of the time.
[Music]
[Joshua Barclay]
Jim Marous, the OG of financial reporting, released the 2023 State of Financial Marketing Report in November of 2023. According to the report, the top three marketing priorities for banks and credit unions are the following. Number one, deposit and checking growth. Number two, customer and member acquisition.
Number three, deepening relationships and improving share of wallet. Now, my favorite quote from this report is, "As a new era unfolds, success will favor those institutions that are willing to invest in both technological and human capabilities to gain deeper customer insights and to deploy personalized solutions that create value."
So, what I want to do is I want to talk about investing in human capabilities. The one thing I keep hearing over and over again is, "We want to segment our members and send them offers via email automation." I do not believe that marketing automation is the best road to growth for credit unions. I actually believe the frontline staff, the tellers, and call center folks are the strongest growth channel that credit unions currently have.
So, Darlene, you were the former VP of Member Services. Do you agree that the frontline staff is the best growth lever inside of a credit union? And if you do agree with me, what ingredients does a frontline staff need to have to be the ultimate growth channel for a credit union?
[Darlene Hilton]
Oh, Josh, you're singing my song. [Laughter] You know this is very near and dear to me. Everybody thinks that you can market, and you can get everything that you need from it. But we just sat and talked about the people who come in the credit are there because they have an issue. They need that face-to-face interaction.
They need to have something taken care of. Well, when we sit and talk about how do you make somebody want to be part of your financial institute, they have to feel like they're valued. They have to feel like what they're bringing to the table is reciprocated. We all know what it's like. You get a telemarketer call, and you might be polite for the first question.
Maybe the second you say no, and then they just continue, and they won't take no. And what do you end up doing? You hang up, and you do it because you don't have a relationship with them. It's the same way if you are walking in a store and it's not something that you're interested in or you're never in there.
You'll turn around, walk out, you'll ignore something.
But if you are working with a financial institute, you're working with a credit union, and you are face to face, or you have called in and have spoken to somebody who you have developed a relationship with, and you have the trust they are going to do the best thing for you, and they've proven it, you're going to continue to use that resource.
You'll bypass other resources with the credit union because you want to go back to that same person, and that's because you have built that relationship. It's trust, first and foremost. So, if everybody has that same mentality inside your organization, they all have the strong communication skills and the active listening skills, you have the ability to replicate that opportunity and the interaction among each of your branches.
If you can replicate that somebody else who answers that phone or you're face to face with knows their products in and out, and they are able to explain and answer the question and sound confident or provide you with a resource, again your confidence level is significantly higher.
If they know how to do their job, meaning that they know the step-by-step instructions but they know how to use the software, the equipment, if you have machines inside the branch that the member is able to do, can they walk them through the process and listen to and understand the level of the person who's coming in and speak to that level so that no one walks away feeling embarrassed or condescending.
You have the skill set in place and all of that is based off the training that you are introducing to your staff members, and you're making sure that it is duplicated across all of your branches. Because that member, no matter where they go, has to have the same experience over and over again. Because if they know they get one experience in one branch, and a different experience from a different branch, it causes the waiver in the confidence of the entity all together.
My last piece on it is your folks have to know how to negotiate. And what I mean by that, you think, well, why would a teller need to know how to negotiate with somebody? Well, if you understand your products, you have to help sometimes make that member understand why. And it's negotiating with them to realize what are the things that are important to them and help them understand why this product, the service, or the action that is being taken is in their best interest.
[Joshua Barclay]
Becky, is the frontline staff the ultimate growth lever in a credit union?
[Becky Reed]
Well, you know that I'm a huge technology enthusiast, and I believe that in order to create a seamless experience for the member, the technology has to be easy and intuitive. And I think that credit unions in general fail at that, and I think that that's why credit unions as an industry are looked at as being behind the curve as it relates to technology.
Because most credit unions don't have as good of an app as Chase. I mean, we just don't, for a lot of different reasons. That being said, the tellers or the frontline staff or the universal employees or whoever it is in your branch and in your call center, are that first line of contact. And frankly, the members probably don't know the VPs and the directors and the chiefs and whatever.
They don't know any of those people. But who they do know is Jane who sits at the desk when they walk into the office or Julie when they call in on the telephone. And that's why when Darlene mentioned earlier about people freaking out when their favorite employee is no longer there, well, that's why.
Because to them, Julie is the credit union.
And so one of the things that I tried to do as a CEO is those frontline employees, those member-facing employees, we call those employees foundational employees. So, when you think about a pyramid, you think about the foundation of the pyramid. And those employees, without those employees and that member contact that those employees provide, you can't build the rest of the pyramid or the house or whatever it is that you're trying to build.
And we go back to ego again, right? [Laughter] So, I'm a CEO, I run the organization, I have a great ROA, woohoo. But to the member, they don't even know who I am, but they do know Julie. And they don't care about profitability, they don't care about any of that. But word of mouth and that net promoter score that we talked about earlier is a thousand times better than an email.
[Music]
[Joshua Barclay]
Darlene, before we wrap, do you have any parting leadership advice for aspiring credit union leaders or current credit union leaders who are just looking to get some insights and kind of level up?
[Darlene Hilton]
The best way to put it, as Richard Branson has made it so clear over the years, take care of your people, educate your people, provide them with what they need, and they're going to make you shine. If you put the time and energy and educate your staff, they're going to bring your membership up where you want it to be, they're going to make your growth where it needs to be, and your members are going to be loyal.
If you have loyal employees, you're going to have loyal members.
[Joshua Barclay]
You heard it first. Darlene, thank you for joining us on the podcast. If people would like to get in touch with you, what is the best way that they can reach you?
[Darlene Hilton]
You can either call me directly, or the work email of dhilton@lonestarcu.org.
[Joshua Barclay]
And Becky Reed, if the listeners want to get ahold of you, how should they go about doing it?
[Becky Reed]
The best way is LinkedIn, I'm on there all the time.
[Joshua Barclay]
Excellent. If you want more, reach out and talk to them. They are very friendly, and they are here to help. This has been another episode of Grow Your Credit Union, the place where credit union leaders gather, learn, and grow. My name is Joshua Barclay, and if you liked the show, please subscribe to the podcast, tell others.
And if you want to be a guest on the show, feel free to reach out to Becky Reed and I via LinkedIn, and we'll be happy to discuss future guest opportunities. Thank you for listening and we will see you next time. Take care. Bye-bye.