Is Your Credit Union Too Complex?

Ray Ozzie, formerly Microsoft’s chief software architect, once famously said:

Complexity kills. Complexity sucks the life out of users, developers and IT. Complexity makes products difficult to plan, build, test and use. Complexity introduces security challenges. Complexity causes administrator frustration.

And how about this statement, one I have frequently shared with credit union clients:

The more complicated the infrastructure, the greater the opportunity for failure.

Then there is a concept called The Paradox of Choice, a dilemma outlined by psychologist Barry Schwartz and which suggests that an abundance of choice has “made Americans not freer but more paralyzed, not happier but more dissatisfied.”

In each of these three observations we find that the possibility exists for excess complexity in areas such as product/service choice, organizational structures, and delivery systems to conspire to make organizations less effective and perhaps even prone to institutional failure. I think credit unions are not immune to this threat.

As I study credit unions through the lens of our Credit Union Industry HealthScore, I routinely find that those credit unions with a clearly-articulated value proposition and simplicity in product, service and delivery channel options are much healthier presently, were much healthier throughout our last recession, and are positioned to have a much healthier existence going forward than their industry peers.

Unfortunately, this describes a rather limited number of credit unions relative to the total number of credit unions making up the industry. The greater majority are looking at runaway complexity which is causing great frustration and underwhelming performance. 

So what are credit union leaders to do about this? Jettison products? Slow the adoption of new delivery channels? Eliminate positions? Return to paper ledgers?

If the challenge were to be simplistic, then perhaps we could say “yes” to each of these options above, but the real answer to most of these questions is, of course, “no.” The solution is not to be simplistic, but simple.

To illustrate, I’ll reflect on a conversation I had years ago (1994!) when I was working as a mortgage officer at a credit union. We had just launched our new in-house solution and I was a newly-minted graduate of CUNA’s week-long mortgage training school. A member called to inquire about our mortgage offering, and I hardly waited for the question to come out before I began to dazzle him with our new options and my command of quoting mortgage rates in 8ths. I said, “well, on our 30 year fixed rate option you can get nine percent for no points, but we can get you down to eight and seven-eights for 2 points, of course there is the option of taking a higher rate, nine and one-eighth, which allows you to gain a little cash back to cover closing costs but those options only work for a 30-day lock. If we’re talking 60-day lock then….”

At some point during the conversation I was talking to a beeping phone – a beep that was telling me that the member had hung up. He was no doubt bewildered by my “intelligence.” The funny thing, however, is that you see variations of this way of communicating to members today, not only on mortgage loans but on all products. Check out most any credit union website and you will find unnecessary product complexity which overwhelms the ability of a member to answer their most basic questions about products – not to mention overwhelms the ability of our personnel (in this case our Internet staff) to explain our products.

So back to the notion of simplicity. Simplicity is often defined as, “the quality or condition of being easy to understand or do.” If operational simplicity becomes a credit union objective, then it is the objective of the credit union to ensure that its moving parts are easy to understand and easy to use and/or support – for members and employees alike. The best way to get to this point is to start by asking a very basic question:

How do we bring simplicity to our operations?

In seeking answers to this question you begin to understand what causes complexity in the first place. Understanding the root cause of complexity makes it much easier to bring simplicity to an organization because you will know without a doubt what factors contribute to unmitigated/unnecessary complexity. As they say in so may self-help programs, admitting a problem is the first step to recovery.

As an aside, I would hazard a guess that most credit union leaders would chiefly blame compliance requirements for driving unhealthy complexity, but consider this situation. A few years ago at a planning session I was facilitating we began to discuss improvements in lending operations. The perception was that it was taking too long for members to route through the loan process which, it was believed, contributed to application fallout and declining volume. I can’t recall exactly how the issue came to light, but it turned out that one problem was that the credit union required members to come in and place their original signature on four copies of the same document. Why did they do this? Because they thought it was a compliance requirement. Yes, compliance adds steps to many processes, but the complexity in this case was not driven by compliance but by an uninformed staff.

In any case, I believe that every credit union can attain operational simplicity, a simplicity which enables more effective communication to members about products and services, more effective and focused staff training, more relevant products and services, and easier-to-use delivery channels. To get there, however, requires a commitment to being simple in the first place.

If simplicity is something you want to bring to your credit union, here are a few questions to get you started on the path of discovery. The answers will at least get you thinking about the problems you face, if not uncover the solutions that will drive the simplicity you desire. 

How do we bring simplicity to our operations?
What are our most complicated products?
What are our most complicated procedures?
What is the most complicated thing our members must do to do business with us? 

Use these questions or create your own, but in all cases drive for simplicity. The alternative, to paraphrase Ray Ozzie’s comments, is death by complexity.

For additional background, I recommend:

Barry Schwart’s TED Talk, which you will find here:

Ray Ozzie’s Dawn of a New Day memo, which you will find here:

View the Latest HealthScore Trends

Glatt consulting’s trend chart page has been updated to include Q4 2018 financial data. The trend charts illustrate year-over-year score changes for our overarching credit union HealthScore, and for each of the 17 component scores making up the HealthScore. You’ll find charts on the main GC website at

Interested in receiving a complementary report on your own credit union? Subscribe here.

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HealthScore Update: 20th Straight Quarter of Improved Health and Performance

GC Q42018 HealthScore Update Header Image. Photo by Isaac Smith on Unsplash

Wilmington, NC (March 13, 2019) – Credit union strategy consulting firm Glatt Consulting Group, Inc. announced today that the Credit Union Industry HealthScore, a composite score measuring the health and performance of US-based credit unions, improved on a year-over-year basis for the 20th straight quarter. The current HealthScore, calculated using 4th quarter 2018 data, sits as 5.862 and represents a 3.2% year-over-year score improvement. The continued consolidation of poorly performing credit unions into healthy credit unions, along with overall industry improvements in return on assets, financial efficiency, membership and loan growth, contributed to score gains.

The Credit Union Industry HealthScore measures overall credit union health, which is calculated by scoring/grading credit union performance across 17 different key ratios. Grading is based on a 10-point scale, with 0 reflecting poor performance and 10 reflecting exceptional performance. The Credit Union Industry HealthScore has been calculated and published by Glatt Consulting since 2009.

Driving Growth

Credit unions have been on an unprecedented run of year-over-year performance improvement supported in large part by consistent membership growth coupled with loan growth (scores improved by 5.69% and 7.07% respectively). Historically membership growth has been a lagging metric for credit unions, and though it remains the industry’s second-lowest scoring component of the 17 making up the HealthScore, scores are at the upper end of the historical range. Although new industry growth has pressured scores for charge offs (scores for charge offs were in decline from 2016 through the first quarter of 2018), charge off scores seem to have turned a corner, having improved for three straight quarters.

Of Note

One score to note that has been in decline for 6 straight quarters is the score for Cash and Short-Term Investments to Assets. This ratio is an indicator of the level of cash and liquid assets available to meet share withdrawals or additional loan demand. As loans have grown, and as credit unions have shifted assets from lower yielding short-term investments to loans, this score has gone down. This has generally been beneficial for credit unions, with the tradeoff in lower scores for the ratio being higher scores for Return on Assets.

Top Performer

The industry’s highest scoring credit union in the fourth quarter, with a score of 8.97, was Churchill County Federal Credit Union based in Fallon, NV ( The credit union holds assets of $49.8M and serves approximately 2,590 members.

The credit union is a reflection of the strength of Nevada overall, which boasts the highest average HealthScore of all of the states. The Nevada HealthScore average is 6.81. The state’s current level of performance is much improved as compared to recession-era data. The state reached a low-point in the fourth quarter of 2010 with an average HealthScore of 4.51.

Summary HealthScore Data

With regard to score trends, 13 of the 17 HealthScore components saw year-over-year score gains. They are:

  1. Net Worth: Up 1.95%
  2. Solvency Evaluation: Up 1.72%
  3. Return on Average Assets: Up 24.48%
  4. Efficiency: Up 17.52%
  5. Delinquent Loans to Total Loans: Up 4.09%
  6. Net Charge-Offs to Average Loans: Up 1.86%
  7. Texas: Up 0.53%
  8. Loans to Assets: Up 6.19%
  9. Deposits Per Member: Up 1.97%
  10. Loans Per Member: Up 5.16%
  11. Borrowers Per Members: Up 2.57%
  12. Loan Growth: Up 7.07%
  13. Membership Growth: Up 5.69%

Components that saw a year-over-year decline in score include:

  1. Operating Expenses to Average Assets: Down 2.46%
  2. Cash and Short-Term Investments to Assets: Down 6.46%
  3. Regular Shares to Total Shares and Borrowings: Down 0.07%
  4. Asset Growth: Down 14.15%

A HealthScore data report, including the top 20 credit unions by HealthScore, is available for download here.

About Glatt Consulting Group

Glatt Consulting Group, Inc. is a credit union consulting company based in Wilmington, NC. Founded in 2006, Glatt Consulting specializes in aiding credit unions in areas including strategy, organizational structure, governance, and leadership development.

We’re happy to serve as a resource on articles related to overarching industry performance, and we welcome your use of the trend material, properly credited to Glatt Consulting. If you have questions about this quarter’s report or CU industry trends overall, contact the firm at or (888) 217-5988.

Photo by Isaac Smith on Unsplash

Q4 2018 HealthScore Reports Sending Soon

We’re crunching Q42018 HealthScore numbers for every credit union and for the industry as a whole. Subscribers should be receiving their reports starting tomorrow, Friday, March 8. Would you like to subscribe? Reports for credit union board members and executives are complementary. Learn more and/or subscribe here:

HealthScore Update: Top Credit Unions for Q3

We’ve wrapped up a bit of number crunching and have an update on the top HealthScore performers for Q3 2018. Congratulations to these credit unions for a job well done!

View the score details in the images below, or download a PDF file. Visit our Healthscore subscription page to order a complementary report for your credit union.