1. MARCH 2016 | VOLUME 11 | ISSUE 3
THE C US O I S S UE
People:
Often the Forgotten
Aspect of Business
Continuity
BY JAMES GREEN
NEW!
Team Builder
Compliance:
Focus on These
5This Year
BY JASON SKEMP
THE ONLY ALL-DIGITAL, ALL-BUSINESS RESOURCE FOR CREDIT UNIONS

2. 9
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BY SCOTT MCCLYMONDS
The Strategic and Profitable Nature
of Member Portfolio Management
What is member portfolio management? If the term conjures up images of old-school
analytics, then you’re getting it all wrong. The scope of member portfolio management
goes wider and deeper into a credit union, ultimately resulting in an uptick in profitability.
Learn how to leverage it to your CU’s advantage.
CEO VELOCITY
C R E D I T U N I O N B U S I N E S S | M A R C H 2 0 1 6 | C U B U S I N E S S . C O M
I
n the last two issues of this column I have
covered the approaches of Doug Fecher and Steve
Hennigan in serving moderate income Americans
and the cultural changes their credit unions are
undergoing to accommodate their new direction.
I’d like to take a different focus in this issue and speak
with you about something I call member portfolio
management.
If you have attended any credit union conferences
in the last few years, you know the cousin of member
portfolio management, also referred to as big data or
analytics.
In fairness to CEOs, executive teams and boards,
the people who sell and make presentations on big
data and analytics have made these topics as hard to
understand as trying to take apart the transmission of
my F150 and put it back together. In other words, it’s
either way too esoteric to make any practical sense, or
it’s so detailed that executives’ eyes glaze over.
Actually, I don’t even use the terms “big data”
or “analytics” anymore. I cringe when I’m asked to
speak on “big data.” Those are words used either to
sell software or do tactical campaign management, and
that’s not what we’re about here.
What Is Member Portfolio Management?
So what is member portfolio management? Member
portfolio management breaks the entire membership
of your credit union into critical, digestible parts so
you can build appropriate strategies for each member
group.
Just think about your loan portfolio for a minute.
It has different risks, maturities and ALM concerns.
Similarly, your members have different attrition risks,
profitability levels, revenue mixes, demographics,
levels of financial health, preferences and life events.
Member portfolio management is the opposite
of the mass-market approach taken by most of your
competitors. It is a commitment to deeply understand
the very people you exist to serve. It takes your team’s
knowledge of your members to a whole new level
and changes how you operate. Here are a couple of
examples from credit union CEOs I have written about
in this column:
• Doug Fecher at WPCU in Dayton, Ohio is breaking
his membership into financial health groups called
“Thriving,” “Coping” and “Vulnerable.” He and his
team are learning as much as possible about each
group and are restructuring their entire company to
meet the needs of each group.

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• Joe Newberry at Redstone FCU in Huntsville, Ala.
has done something similar by focusing on the life
events of his members’ experience. Redstone has
created new product approaches as well as changes
in the way it interacts with members. The credit
union continues to learn, test and innovate
Member Portfolio Management Is Not Your Father’s
Analytics
How are these approaches to member portfolio
management different from typical analytics efforts?
In every way!
Typical analytics efforts generally focus on cross-
selling more products and meeting budget numbers.
You need more mortgages and want to convert indirect
borrowers into checking account holders, so you find
members who are most likely to acquire those services
and create marketing campaigns to cater to them.
Usually the marketing department, digital banking and
front-line business units are involved, but generally
executive management is far removed from this
process because of its tactical nature.
In contrast, the approaches taken by Doug, Joe
and other CEOs who have embraced member portfolio
management are strategic, far-reaching and longer
term. Their scope is the entire credit union, so CEOs
and their executive teams need to be deeply involved
to formulate new strategies, invest in technology and
train employees.
Member Profitability Groups
Not long ago I spoke at a credit union conference,
and my topic was “Six Ways to Increase Profits with
People.” One person took offense that I was speaking
to a group of not-for-profit executives on the topic
of profitability, so I hope you’re not offended by the
profitability discussion I’m about to embark upon. I
know you are not for profit, but you know as well as I
do what the regulators want to see. More importantly,
profits enable you to impact your communities
and serve disadvantaged members. So with those
disclaimers in place, let’s get to it.
I have previously written in this column about the
need to segment members into profitability groups. I
prefer four groups because they are easy to wrap my
mind around, and I typically use the football terms End
Zone, Red Zone, Field Goal and 4th & Long to describe
them. End Zone is 10 percent of your members and 90
percent of your profits. Red Zone is another 10 percent
of members but only 20 percent of profits. Field Goal
is about 30 percent of your members and 5 percent of
profits, and 4th & Long is about 50 percent of your
members and takes away 25 percent of your profits.
Creating these groups does not make value
judgments on whether or not you should have them
in your credit union. You should have them all and
serve each one well. The profit groups simply provide
a basic level of understanding around the practical and
regulated reality called profitability.
These four profit groups are fundamental building
blocks of member portfolio management. You
wouldn’t dream of going to a board meeting without
knowing your financial numbers, and likewise you
shouldn’t dream of going without being prepared to
discuss these member profit groups.
CEO VELOCITY

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CEO VELOCITY
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Let me show you why having this discussion
about member profitability groups is so important.
The dashboard below is from a member portfolio
management system my team and I have constructed.
You should be taking something like this to your board
meetings.
The bar chart in the top left shows the typical 90/10
split, meaning 90 percent of profits come from 10
percent of members. The other metrics show numbers
of households in each profit group, high-level reasons
for profitability, cross-sell ratios and attrition risk.
This particular information is at a high enough
level for your board to understand and use to make
meaningful decisions. Once they begin assimilating
the information and letting it percolate for a while, they
will desire additional details.
Changing the Conversation
Memberportfoliomanagementchangestheconversation
in your credit union and in your boardroom. Instead of
focusing on only financial metrics, credit risk, ALM
and numbers of new accounts, you can have very
active discussions about your members. And those
types of discussions will drive strategy, innovation and
ultimately profitability.
If you read last month’s CEO Velocity column,
you know Steve Hennigan of SACU has been having
these types of conversations with his board for several
years. It took some time for his board members to fully
grasp the discussion. Now their paradigm has shifted,
however, and SACU is much more member focused.
Fueling Your Not-for-Profit Mission
In closing, let me just reiterate that I am not suggesting

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you use member portfolio management to focus solely
on your most profitablemembers. WhatI am suggesting
is that you take an approach similar to Doug Fecher at
WPCU, who has his team focus equally on the three
levels of financial health that exist in his member base.
Such an approach actually fuels your not-for-
profitmission because it creates a much deeper, clearer
and actionable understanding of your members.
Similar to what is happening at WPCU and SACU, that
understanding will help you and your employees take
better care of your members.
Next month I’ll continue this discussion by
showing how member portfolio management fits into a
credit union’s strategy and daily operations.
Scott McClymonds of
CEO Velocity coaching
and consulting specializes
in helping credit unions
acquire and retain
profitable members. His
unique approach to member
portfolio management
enables credit unions to
better understand and serve their members while
building profitability and brand strength. Subscribers
to “Credit Union BUSINESS” can ask Scott questions
about how getting to know their members better
can generate greater returns. He can be reached at
479.263.0774 or scottm@ceovelocity.com.
Scott
McClymonds
and
CEO
Velocity
help
financial
institutions
like
yours
increase
earnings,
member
loyalty,
and
employee
productivity.
Scott
has
helped
hundreds
of
CEOs
and
senior
managers
find
answers
and
solutions
to
tough
questions
like:
• Who
are
your
most
profitable
members,
and
how
vulnerable
are
they
to
attrition?
• Where
can
you
find
more
of
them?
Are
they
already
doing
business
with
you?
• How
does
your
strategy
need
to
be
adjusted
to
improve
your
results
by
20%
or
more?
• What
technology
updates
will
give
you
the
highest
payback?
• How
should
you
develop
your
most
promising
leaders?
Email
scottm@ceovelocity.com
to
request
a
free
paper
on
how
to
find
and
close
earnings
gaps
in
your
credit
union.
“Scott
McClymonds
is
one
of
the
most
creative
strategists
in
the
financial
services
industry.”
-­‐
Elio
Spinello,
Principal,
RPM
Consulting
scottm@ceovelocity.com ceovelocity.com
479.263.0774
CEO VELOCITY