October 3, 2023 • 14 mins
Listen to a conversation with George Hofheimer, the advisor and author of "Banking on the Human Scale." As we navigate the challenges that credit unions face in the digital era, George illuminates the path ahead, offering strategic insight into blending technological investments with the human service that defines credit unions. The traditional face-to-face service is not lost, but rather enhanced as George makes a compelling case for a harmonious merge of the old and the new. This conversation is an essential precursor to the upcoming Manchester Swoboda Credit Union Conference, in November, that aims to unravel the challenge of credit unions and their digital appetite.
At the Swoboda Credit Union Conference, George Hofheimer shares his wisdom, this time focusing on simplifying operations in the digital era. George expounds on how credit unions can prioritise investments and redefine senior recruitment in the digital age. The digital transformation, laden with complexities, becomes less daunting as George guides us through. George gives us a taste on this digital landscape while retaining that unique human touch.
Talking Credit Unions is a regular podcast dedicated to informing credit union practitioners, leaders, and opinion formers on a variety of industry topics. The podcast is sponsored by the Swoboda Research Centre.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Well, registration is now open for the Swaboda Credit
Union Conference on the 24th ofNovember in Manchester.
Now it really soundsinteresting in this conference
because it's starting to get togrips with this real digital
future question what do creditunions need to ensure that they
(00:20):
can win in this changed worldthat we're living in?
They call the conferencedisturbance and transformation
and the future of your membersand your credit union, and I
think it will stretch creditunion thinking about the extent
required and change in a digitalera and the business and
operational transformation thatwe thought we'd gone through
(00:43):
apparently still needs to beundertaken.
The Swaboda team want to makesure we understand that this is
not an IT event.
Yes, it's a discussion abouthow we change our business and
operations to cope with theonslaught that a digital future
requires.
Now, the last decade, many of ushave lived through the credit
(01:05):
union adaption to online banking, smartphone apps and many of us
use open banking for loanunderwriting.
Some are even starting to takeadvantage of the API based
technology.
You know APIs are theapplication program interfaces,
if you like.
It's the thing that sets therules and protocols to allow
(01:26):
different software programs totalk to each other and share
data and functionality.
The best example I can give youis when the weather app on your
phone is probably using API toget the current weather data
from another service to give toyou while you're asking for it.
But anyway, this is just thebeginning of a digital,
accelerated form of AI.
(01:49):
Members will expect financialand other services to be in real
time, in fact all the timeeverywhere seamless,
personalized, predictive.
The rapidity and depth ofchange will be profound.
I thought we'd done with allthis, but apparently we were
only at the beginning.
Anyway, this conference goodbecause it's pulled together
several people to help usunderstand the next onslaught of
(02:12):
disturbance and transformationin a digital era.
We've got Dr Leader Glyptis,professor Karen Elliott, sean
Milley, paul Rooney and GeorgeHofheimer from the USA.
Now, george founded theHofheimer strategy advisors back
in 2020 to advise credit unions.
Previously, george was the headof research and development at
(02:33):
USA based Filene ResearchInstitute.
He was there 15 years andbefore that he was the chief
learning officer at QS, you know, the Credit Union Industries
Education Association.
He was there for eight yearsand George began his career in
international business,including members of the first
group of Peace Corps volunteersto the former Soviet Republic of
(02:58):
Uzbekistan.
George is in demand as anadvisor and researcher, and
devising creative ways to matchthe needs of business and
society has been a constanttheme of his career.
I managed to get old of Georgeahead of this conference,
especially as he's just recentlybrought out a book called
Banking on the Human Scale and Iasked him, george, in a world
(03:19):
dominated by scale andtechnology, smaller
community-based financialinstitutions like credit unions
have the chance to serve morepeople and serve them better by
making banking more human.
That's one of our sort of USPs,it's what sets us apart.
But your book presents the wayforward that continues with the
(03:40):
human scale idea.
But how do credit unionsmaintain a human touch in this
digital era?
Speaker 2 (03:46):
Yeah, as it relates to technology and credit unions,
we find ourselves in a bit of apickle, regardless of whether
you're on this side of theAtlantic or the other, and that,
regardless of which creditunion you're talking about the
largest one in the world, whichis Navy Federal, to the smallest
one in the world, which youknow could be several hundred
pounds or several hundreddollars of and collective
(04:08):
individuals is that technology'smarch is not going to stop.
And how do we figure out howtechnology fits into our model?
And what I've observed, mostlywith larger institutions in the
US and Canada, is that we tendto overindex on technology's
(04:28):
impact on our business model andwhat we try to do is emulate
the largest institutions, whichrealistically have budgets that
are I don't know how manymultiples of what our budget are
in terms of technology.
We try and meet them at thatsame level.
Realistically, it's not goingto happen.
(04:48):
I believe a figure that I justsaw for JP Morgan Chase, which
is the biggest national bankhere in the United States and
probably one of the largest inthe world they spend $12 billion
on technology every year.
I share that bit of data withperhaps a $2 billion institution
here in the States and theybecome a little meek around this
(05:11):
.
The key is to be very strategicwith our investments.
The thesis that I'm trying toput forward with the book that I
just wrote and some of the workthat I do with credit unions is
to figure out what can werealistically do with technology
to make it emulate what creditunions are quite good at, which
is the face-to-face,person-to-person type of service
(05:31):
.
The way that we've been talkingabout it here with credit unions
is what are the table stakes,if you want to use a poker
analogy, just to be able to sitat the table to say we are a
modern institution is usuallybeing able to see what your
balances are, being able totransfer money either to people
(05:51):
or organizations and to gain anunderstanding of what are my
credit offers and to be able toclose a loan.
I know that there's a lot oftechnology involved with that,
but where we tend to get offtrack is by listening to vendors
that have really interestingand great ideas, but
realistically it's not going tohave a huge impact on the
(06:14):
members of the credit union.
So what I like to do is saylet's try and figure out how
technology can emulate the goodold days of being able to serve
people on a face-to-face basisand just being able to satisfy
consumers around.
Hey, I want to be able to openup an account online without
having come into a branch.
That, to me, is a table stakestechnology.
(06:35):
It's not cheap to do, but Ithink it's something that we
should all aspire to.
That's not to ignore all of thegreat technological
advancements that we're startingto see, and I always urge
caution around those types ofinvestments on a large basis for
smaller institutions like RedUnion.
We just simply don't have thebalance sheets to invest in all
of those technologies.
(06:55):
So it's an activeprioritization.
Speaker 1 (06:58):
George, is another aspect of this change the way in
which we recruit and hirepeople.
Do you think there are changesin attitude towards what we can
expect from future leaders incredit?
Speaker 2 (07:11):
unions.
Yeah, you know it's reallyinteresting.
I think the default for mosthiring managers or boards of
directors when they're lookingfor leaders or any positions
within credit unions was doesthis person have a financial
services background?
Do they have an operationsbackground and do they have a
lending background?
So I mostly work with CEOs andthat used to be the default when
(07:33):
there was a vacancy of a CEO,nine times seven out of 10, that
person would be from one ofthose three areas finance,
operations or lending.
What we're starting to see isthat's changing and it's a
little bit different today,where more technology
professionals are becoming CEOs.
Interestingly, more marketingand communications professionals
(07:54):
are becoming CEOs.
If we can kind of extrapolateout from there, just from the
CEO level, how do you bring theright talent into the
organization?
The first thing that's soimportant is to be able to have
a very clear purpose andunderstand who you are as an
organization and how people fitinto that.
There's a kind of cliche inhiring.
It's like hire for talent,train for skills, and I've seen
(08:18):
that manifest itself pretty wellwithin organizations that have
a very strong understanding ofthe purpose of what they're
trying to achieve within theirorganization.
So bringing someone in from asales perspective, for example,
that may not have financialservices background but has the
same ethos and understanding ofwhere the organization is going,
can be a really potentcombination.
(08:39):
That's just one vivid example,but you can think of it from a
variety of technical areas,George.
What?
Speaker 1 (08:44):
about measuring success.
Credit Union that achieves allof its social goals but returns
a loss on the balance sheetmight develop some sort of
ethical fatigue.
Board members may lose socialskills hard.
Is that double bottom linesuccess achievable where the
(09:06):
credit union fulfills its socialgoals and at the same time
delivers a healthy profit?
Speaker 2 (09:12):
But I think sometimes we do get it a little bit
backwards in that we focus toomuch on the social outcomes
rather than the businessoutcomes.
And I am not a hardcorecapitalist by any means, but I
do prescribe to the notion nomargin, no mission.
So if you don't have theresources and the capital to
(09:34):
invest in social initiatives orany types of initiatives, you're
just not going to be a goingconcern.
So one of the things that I'mtrying to get through to my
clients and work with them on isan allocation of your budgeted
net income at the end of theyear to allocate for quote
unquote, do good initiatives,and that context looks different
(09:58):
for every organization, but Ithink that that's the right way
to think about.
The ordering is that we have totake care of our business first.
We have to ensure, especiallyin a regulated entity like a
credit union or organizationsthat are in the banking world,
we need to have the propercapital and safety and soundness
in place in order to do the funstuff.
(10:20):
In fact, I'm here in the stateof Virginia and I'm working with
a credit union right now namedChartway Credit Union, which
used to serve the big naval basehere, and last night they had
their big foundations, gala,where they help support children
that are going through reallydifficult medical times.
Now they and they support thisfoundation really strongly from
(10:42):
a financial perspective.
But they wouldn't be able to dothat if they didn't have a very
, very strong operations and aprofitable, profitable model.
So that comes after we'vefigured out quote unquote
figured out the margin side ofthe equation.
Speaker 1 (10:58):
George, finally, I need to ask you about strategy
days, and many people will havethe temptation, coming back from
their planning days, to takethe papers and the ideas and
stick them in the top drawer ofthe desk and turn immediately to
the 150 urgent emails, thestaff issues and the entry from
(11:21):
hell.
George, first of all, do yourecognize that this happens and
also have you any tips for usreturning from our planning days
as to what we can do?
Speaker 2 (11:31):
Yeah, that is very recognizable and I think you're
speaking of just general humannature around prioritization.
But I think the chances ofsuccess increase If you take
this idea of simplifying reallywhat the problem is that you're
in business to solve and thenamplifying that really simple
(11:53):
thing that you're trying toachieve.
So, in the course of thestrategy making that I help
credit unions with, we reallyfocus in on what is the problem
you're trying to solve andfundamentally, that's really
what strategy is about and thewhole founding of credit unions.
Initially we had very tightgroups of people that we would
(12:16):
serve and it was very clear whatwe were trying to do, what
problem we were trying to solve.
Now, as we go out into thecommunity, it gets more complex
and we have all of these thingscoming on us from technology,
from society, and the tendencyis to try and be things all
things to all people or tryingto look at all of these broad
problems, and my advice would beto really simplify on that
(12:38):
floor problem that you're tryingto solve and then amplify it
back to the staff so you justkeep it really really simple.
That being said, I don't knowif that's going to solve it, but
in my experience.
Those types of approaches tendto enable people to focus much
better than they would before.
Speaker 1 (12:55):
George, thanks for sharing some of your thoughts
regarding the digital future andwe look forward to hearing the
full story from you at theconference in Manchester in
November.
Speaker 2 (13:05):
Yeah, me too Look forward to seeing old friends
and hope to see them soon.
Okay, take care, Chris.
Speaker 1 (13:11):
Well, it's a big thank you to George Hofheimer
and looking forward to seeinghim at the Swaboda Credit Union
Conference on the 24th ofNovember in Manchester.
If you go on to the SwabodaResearch Centre website easy to
find just put in Swaboda intoyour research engine and up
(13:31):
comes their website and you cansee under events that there are
your registration documentsthere.
So that's Disturbance andTransformation, the future of
your members and your creditunion, and I guess it'll stretch
credit union.
Thinking about the extentrequired to change in what we
thought was the digital erathat's gone.
Apparently it's the digital erathat's just about to start.
(13:52):
So here we go again and just toremind everybody, it's not an
IT event but it definitely isabout what IT is going to do to
us.
Well, registration is now open for the Swaboda Credit
Union Conference on the 24th ofNovember in Manchester.
Now it really soundsinteresting in this conference
because it's starting to get togrips with this real digital
future question what do creditunions need to ensure that they
(00:20):
can win in this changed worldthat we're living in?
They call the conferencedisturbance and transformation
and the future of your membersand your credit union, and I
think it will stretch creditunion thinking about the extent
required and change in a digitalera and the business and
operational transformation thatwe thought we'd gone through
(00:43):
apparently still needs to beundertaken.
The Swaboda team want to makesure we understand that this is
not an IT event.
Yes, it's a discussion abouthow we change our business and
operations to cope with theonslaught that a digital future
requires.
Now, the last decade, many of ushave lived through the credit
(01:05):
union adaption to online banking, smartphone apps and many of us
use open banking for loanunderwriting.
Some are even starting to takeadvantage of the API based
technology.
You know APIs are theapplication program interfaces,
if you like.
It's the thing that sets therules and protocols to allow
(01:26):
different software programs totalk to each other and share
data and functionality.
The best example I can give youis when the weather app on your
phone is probably using API toget the current weather data
from another service to give toyou while you're asking for it.
But anyway, this is just thebeginning of a digital,
accelerated form of AI.
(01:49):
Members will expect financialand other services to be in real
time, in fact all the timeeverywhere seamless,
personalized, predictive.
The rapidity and depth ofchange will be profound.
I thought we'd done with allthis, but apparently we were
only at the beginning.
Anyway, this conference goodbecause it's pulled together
several people to help usunderstand the next onslaught of
(02:12):
disturbance and transformationin a digital era.
We've got Dr Leader Glyptis,professor Karen Elliott, sean
Milley, paul Rooney and GeorgeHofheimer from the USA.
Now, george founded theHofheimer strategy advisors back
in 2020 to advise credit unions.
Previously, george was the headof research and development at
(02:33):
USA based Filene ResearchInstitute.
He was there 15 years andbefore that he was the chief
learning officer at QS, you know, the Credit Union Industries
Education Association.
He was there for eight yearsand George began his career in
international business,including members of the first
group of Peace Corps volunteersto the former Soviet Republic of
(02:58):
Uzbekistan.
George is in demand as anadvisor and researcher, and
devising creative ways to matchthe needs of business and
society has been a constanttheme of his career.
I managed to get old of Georgeahead of this conference,
especially as he's just recentlybrought out a book called
Banking on the Human Scale and Iasked him, george, in a world
(03:19):
dominated by scale andtechnology, smaller
community-based financialinstitutions like credit unions
have the chance to serve morepeople and serve them better by
making banking more human.
That's one of our sort of USPs,it's what sets us apart.
But your book presents the wayforward that continues with the
(03:40):
human scale idea.
But how do credit unionsmaintain a human touch in this
digital era?
Speaker 2 (03:46):
Yeah, as it relates to technology and credit unions,
we find ourselves in a bit of apickle, regardless of whether
you're on this side of theAtlantic or the other, and that,
regardless of which creditunion you're talking about the
largest one in the world, whichis Navy Federal, to the smallest
one in the world, which youknow could be several hundred
pounds or several hundreddollars of and collective
(04:08):
individuals is that technology'smarch is not going to stop.
And how do we figure out howtechnology fits into our model?
And what I've observed, mostlywith larger institutions in the
US and Canada, is that we tendto overindex on technology's
(04:28):
impact on our business model andwhat we try to do is emulate
the largest institutions, whichrealistically have budgets that
are I don't know how manymultiples of what our budget are
in terms of technology.
We try and meet them at thatsame level.
Realistically, it's not goingto happen.
(04:48):
I believe a figure that I justsaw for JP Morgan Chase, which
is the biggest national bankhere in the United States and
probably one of the largest inthe world they spend $12 billion
on technology every year.
I share that bit of data withperhaps a $2 billion institution
here in the States and theybecome a little meek around this
(05:11):
.
The key is to be very strategicwith our investments.
The thesis that I'm trying toput forward with the book that I
just wrote and some of the workthat I do with credit unions is
to figure out what can werealistically do with technology
to make it emulate what creditunions are quite good at, which
is the face-to-face,person-to-person type of service
(05:31):
.
The way that we've been talkingabout it here with credit unions
is what are the table stakes,if you want to use a poker
analogy, just to be able to sitat the table to say we are a
modern institution is usuallybeing able to see what your
balances are, being able totransfer money either to people
(05:51):
or organizations and to gain anunderstanding of what are my
credit offers and to be able toclose a loan.
I know that there's a lot oftechnology involved with that,
but where we tend to get offtrack is by listening to vendors
that have really interestingand great ideas, but
realistically it's not going tohave a huge impact on the
(06:14):
members of the credit union.
So what I like to do is saylet's try and figure out how
technology can emulate the goodold days of being able to serve
people on a face-to-face basisand just being able to satisfy
consumers around.
Hey, I want to be able to openup an account online without
having come into a branch.
That, to me, is a table stakestechnology.
(06:35):
It's not cheap to do, but Ithink it's something that we
should all aspire to.
That's not to ignore all of thegreat technological
advancements that we're startingto see, and I always urge
caution around those types ofinvestments on a large basis for
smaller institutions like RedUnion.
We just simply don't have thebalance sheets to invest in all
of those technologies.
(06:55):
So it's an activeprioritization.
Speaker 1 (06:58):
George, is another aspect of this change the way in
which we recruit and hirepeople.
Do you think there are changesin attitude towards what we can
expect from future leaders incredit?
Speaker 2 (07:11):
unions.
Yeah, you know it's reallyinteresting.
I think the default for mosthiring managers or boards of
directors when they're lookingfor leaders or any positions
within credit unions was doesthis person have a financial
services background?
Do they have an operationsbackground and do they have a
lending background?
So I mostly work with CEOs andthat used to be the default when
(07:33):
there was a vacancy of a CEO,nine times seven out of 10, that
person would be from one ofthose three areas finance,
operations or lending.
What we're starting to see isthat's changing and it's a
little bit different today,where more technology
professionals are becoming CEOs.
Interestingly, more marketingand communications professionals
(07:54):
are becoming CEOs.
If we can kind of extrapolateout from there, just from the
CEO level, how do you bring theright talent into the
organization?
The first thing that's soimportant is to be able to have
a very clear purpose andunderstand who you are as an
organization and how people fitinto that.
There's a kind of cliche inhiring.
It's like hire for talent,train for skills, and I've seen
(08:18):
that manifest itself pretty wellwithin organizations that have
a very strong understanding ofthe purpose of what they're
trying to achieve within theirorganization.
So bringing someone in from asales perspective, for example,
that may not have financialservices background but has the
same ethos and understanding ofwhere the organization is going,
can be a really potentcombination.
(08:39):
That's just one vivid example,but you can think of it from a
variety of technical areas,George.
What?
Speaker 1 (08:44):
about measuring success.
Credit Union that achieves allof its social goals but returns
a loss on the balance sheetmight develop some sort of
ethical fatigue.
Board members may lose socialskills hard.
Is that double bottom linesuccess achievable where the
(09:06):
credit union fulfills its socialgoals and at the same time
delivers a healthy profit?
Speaker 2 (09:12):
But I think sometimes we do get it a little bit
backwards in that we focus toomuch on the social outcomes
rather than the businessoutcomes.
And I am not a hardcorecapitalist by any means, but I
do prescribe to the notion nomargin, no mission.
So if you don't have theresources and the capital to
(09:34):
invest in social initiatives orany types of initiatives, you're
just not going to be a goingconcern.
So one of the things that I'mtrying to get through to my
clients and work with them on isan allocation of your budgeted
net income at the end of theyear to allocate for quote
unquote, do good initiatives,and that context looks different
(09:58):
for every organization, but Ithink that that's the right way
to think about.
The ordering is that we have totake care of our business first.
We have to ensure, especiallyin a regulated entity like a
credit union or organizationsthat are in the banking world,
we need to have the propercapital and safety and soundness
in place in order to do the funstuff.
(10:20):
In fact, I'm here in the stateof Virginia and I'm working with
a credit union right now namedChartway Credit Union, which
used to serve the big naval basehere, and last night they had
their big foundations, gala,where they help support children
that are going through reallydifficult medical times.
Now they and they support thisfoundation really strongly from
(10:42):
a financial perspective.
But they wouldn't be able to dothat if they didn't have a very
, very strong operations and aprofitable, profitable model.
So that comes after we'vefigured out quote unquote
figured out the margin side ofthe equation.
Speaker 1 (10:58):
George, finally, I need to ask you about strategy
days, and many people will havethe temptation, coming back from
their planning days, to takethe papers and the ideas and
stick them in the top drawer ofthe desk and turn immediately to
the 150 urgent emails, thestaff issues and the entry from
(11:21):
hell.
George, first of all, do yourecognize that this happens and
also have you any tips for usreturning from our planning days
as to what we can do?
Speaker 2 (11:31):
Yeah, that is very recognizable and I think you're
speaking of just general humannature around prioritization.
But I think the chances ofsuccess increase If you take
this idea of simplifying reallywhat the problem is that you're
in business to solve and thenamplifying that really simple
(11:53):
thing that you're trying toachieve.
So, in the course of thestrategy making that I help
credit unions with, we reallyfocus in on what is the problem
you're trying to solve andfundamentally, that's really
what strategy is about and thewhole founding of credit unions.
Initially we had very tightgroups of people that we would
(12:16):
serve and it was very clear whatwe were trying to do, what
problem we were trying to solve.
Now, as we go out into thecommunity, it gets more complex
and we have all of these thingscoming on us from technology,
from society, and the tendencyis to try and be things all
things to all people or tryingto look at all of these broad
problems, and my advice would beto really simplify on that
(12:38):
floor problem that you're tryingto solve and then amplify it
back to the staff so you justkeep it really really simple.
That being said, I don't knowif that's going to solve it, but
in my experience.
Those types of approaches tendto enable people to focus much
better than they would before.
Speaker 1 (12:55):
George, thanks for sharing some of your thoughts
regarding the digital future andwe look forward to hearing the
full story from you at theconference in Manchester in
November.
Speaker 2 (13:05):
Yeah, me too Look forward to seeing old friends
and hope to see them soon.
Okay, take care, Chris.
Speaker 1 (13:11):
Well, it's a big thank you to George Hofheimer
and looking forward to seeinghim at the Swaboda Credit Union
Conference on the 24th ofNovember in Manchester.
If you go on to the SwabodaResearch Centre website easy to
find just put in Swaboda intoyour research engine and up
(13:31):
comes their website and you cansee under events that there are
your registration documentsthere.
So that's Disturbance andTransformation, the future of
your members and your creditunion, and I guess it'll stretch
credit union.
Thinking about the extentrequired to change in what we
thought was the digital erathat's gone.
Apparently it's the digital erathat's just about to start.
(13:52):
So here we go again and just toremind everybody, it's not an
IT event but it definitely isabout what IT is going to do to
us.
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