Improving Business Performance with Internal Culture

Improving Business Performance with Internal Culture
(It’s a bigger piece of the pie than you think.)

The good news: the number of credit union members in the U.S. has increased by almost 4.5 million over the past three years, thanks in part to the well-publicized bad behavior of banks.

The so-so news: only 33% of all U.S. adults are credit unions members.

The bad news: about 8% of members leave their credit union each year.

“The only thing of real importance that leaders do is to create and manage culture.”
–Edgar Schein, professor MIT Sloan School of Management

According to a recent CUNA study, if fewer than 20% of your members have joined within the past four years, your growth may not be sufficient to outpace your attrition or to see any gains in product usage. To strengthen your credit union, you not only need to focus on attracting new members – it’s also crucial to find ways to improve retention and increase share of wallet among existing members. That means finding a way to increase the number of members who are loyal to your credit union. This is where internal culture comes in.

On average, only 22% of credit union members are “truly loyal” to their credit union. “Truly loyal” means they choose your credit union as their primary financial institution, recommend the credit union to others, and contact the credit union the next time they need a financial product or service. These members are proven to use more products and services than those who only meet one or two of the “truly loyal” criteria. And true loyalists are three times more likely to have actually recommended your credit union than members who don’t meet all three criteria.

“The thing I have learned at IBM is that culture is everything.”
–(Louis V. Gerstner, Jr. former CEO IBM)

So, how do you cultivate truly loyal members?

In this business, the price of admission includes a couple of key factors: competitive loan rates, minimal service charges or fees, broad range of services, and high quality of service. While you may not be able to make significant changes to the first three, the last factor is within your immediate control. Service quality depends on the performance of your staff. The performance of your staff is directly impacted by the mindset and environment of your credit union as a whole: your internal culture.

Internal culture encompasses the personality of your credit union – what you collectively value, how you do things, your commonly held beliefs and expectations. It manifests itself everywhere: in how your employees treat one another, the care they take in performing their jobs, and the way they treat your members. An organization’s senior leadership is directly responsible for defining its culture and typically has a significant influence on the organization’s culture – but remember that culture also reflects the collective mindset of employees. When your employees understand and embrace your organization’s culture, it translates into a better and more consistent member experience. Consistently good experiences build trust and loyalty, which in turn build business.

Gallup has a method of assessing customer loyalty for a variety of industries based on factors that go beyond traditional satisfaction. They ask questions about things like whether or not the brand treats you fairly, delivers on its promise, can be trusted, treats you with a sense of respect, makes you proud; whether or not you would recommend the brand to a friend; and whether you could even imagine a world without the brand. These questions aren’t just about whether or not a customer’s needs are being met; these questions are about connection and passion.

When a member connects with your credit union’s culture, they are more likely to grow into a true loyalist. When a member experiences a disconnect with your culture, there’s often an equally high level of negative passion. Who’s usually the make-or-break factor here? You got it: your staff. Whether or not you as a leader have taken the time to understand and shape it, your internal culture is impacting your credit union’s success right now – both internally and externally.

Your Internal Culture Impacts Your:


Employees

Individual and collective employee performance can be affected either positively or negatively by the corporate culture you embrace. (www.kellyservices.com, “Corporate Culture Affect Employees”)

The cost of losing an employee is about 38% of the departing employee’s annual wage. (John Dooney, manager of strategic research at the Society for Human Resource Management)

Members

Industry has discovered the value of loyal customers: they buy more, buy more often, are cheaper to serve, have higher retention rates, and are more profitable than newly acquired customers. (Arthur Middleton Hughes, “How Customer Service Builds Loyalty and Profits”)

The cost of acquiring new customers is five times the cost of servicing established ones. (Reichheld, The Gallup Management Journal, “The Constant Customer”)

When a brand inspires both rational loyalty and emotional attachment, customers will continually reward it with their business. (The Gallup Management Journal, “The Constant Customer”)

Financial Performance

Sustained success has to do with managing culture. Organizations change without an awareness of what drives the organization’s culture may be the reason close to 90% of all projects fail. (Toby Elwin, “The Cost of Culture, a 50% turnover of the Fortune 500”)

Examples from an 11 year Harvard Business School study show a variety of areas in which companies with the “right” culture outperformed their counterparts: revenues were 4.1 times higher, stock price was 12.2 times higher, and return on investment was 15 times higher. (www.renovacorp.com, “The Impact of Corporate Culture on Economic Performance”)

According to a study by the Hay Group, failure to consider cultural integration is a common and often disastrous mistake made by merging firms. (Jesse James, “The Importance of Corporate Culture to Merger Success”)

How can you make sure your credit union’s internal culture is helping you cultivate truly loyal members?

Be you. People can usually tell whether you are putting on an act or being genuine. And nobody is better at being you than…well, you! Find what makes your credit union unique, cultivate it, and celebrate it. Help your employees understand this unique story and make it their own.

Use your inside voice. Good internal communication is crucial to the success of your internal culture. It’s the difference between functioning like a herd of cats versus a school of fish. When your employees understand and believe in the culture, their customer service will make sure your members understand and believe too.

Share the love. Cultures that recognize the contributions of employees will be stronger, truer, and longer-lasting than cultures where behavior is forced by top-down decrees. If leaders and employees don’t have a strong sense of team, it can undermine your culture very quickly. Employees who feel the love are more likely to inspire similar feelings among your members.

Walk your talk. Remember that actions speak louder than words. Every interaction (no matter how small) is an opportunity to affirm your brand in the eyes of your employees and members. Your brand is a promise you make to your members; your culture is how your employee team lives, breathes, and delivers on that promise.

It’s a marathon, not a sprint. Your culture is your credit union’s personality, not its wardrobe. A strong culture endures over time, responding to changes in environment with the steadiness of self-awareness. Evolution is a natural and healthy trait of organizational culture; chasing fads is not. Customers seek long-term relationships with brands they know they can trust throughout the test of time.