Shortfalls in operating model alignment

Transformation will have a significant impact on your credit union’s operating model — including its front-end delivery, target operating model, support capabilities, and business and technology synergies. It is crucial to understand common shortfalls in these areas and implement strategies to mitigate them. This will help ensure that your credit union receives the full benefits of transformation.

Target operating model (TOM)

It is essential to understand the organizational implications of your credit union’s transformation programs and set tangible target state goals. A properly documented target operating model (TOM) will enable your organizational leaders to consider transformation efforts in a holistic way — and frame key changes in relation to each other. Proper documentation of your TOM also helps provide potential target model options for evaluation, facilitates decision-making, and helps your credit union understand potential trade-offs.

“Central 1 has been working on transforming our financial analysis and planning (FP&A) function in partnership with MNP. After working through our current state analysis, we created a TOM based on what we felt was optimal for our organization,” says Emma Hider, CFO of Central 1 Credit Union. “This was a collaborative effort between our finance department, FP&A, and lines of businesses — as input across the business was required to ensure we mapped out an optimized approach. While we are still working through our transformation, we are well-positioned to successfully transform this area.”

However, many credit unions execute transformation efforts without clear TOM definitions. This shortfall leads to a general lack of integration, decision-making silos, operational redundancies, and an inability to scale over time. It is crucial to clearly articulate your TOM to accurately define the target state that your credit union is working towards. This will help set appropriate transformation goalposts.

Front-end delivery

Many credit unions prioritize improving the front-end delivery models of core products and services during the transformation process. While it is easy to set lofty strategic goals while leading these programs, these often prove difficult to deliver at the front-end — or lose sight of the core needs of your members.

Shortfalls in this area often cause the gap between transformation strategies and the front-end delivery of complex product, service, member, partnership, and delivery channels to widen even further. It also creates mixed signals around your credit union’s ultimate value proposition and causes general confusion among its internal and/or external stakeholders. Clearly link back to your credit union’s core value propositions and member personas during the design of its product and/or service delivery models to mitigate this shortfall.

It is crucial to purposely lead transformation programs with the end user / member in mind to prevent shortfalls in this area that may hinder your credit union’s transformation progress and outcomes.

Support capabilities

Large-scale changes related to your credit union’s TOM and the delivery of its front-end products and services often require you to transform the support capabilities of your organization. These support capabilities are the traditional middle- and back-office groups that are core to your credit union’s business activities.

Traditionally, most transformation programs prioritize changes to the front office — which provide immediately visible results and benefits to members and external stakeholders. However, many credit unions have shifted transformation efforts to include middle- and back-office functions in recent years. This is due to the longer-term benefits related to cost reduction, efficiency gains, and overall simplification of the operating model.

It is vital to both consider and focus on improving all operational capabilities of your credit union to avoid shortfalls in this area. Support functions are critical components of a successful transformation program — and help to establish a strong foundation that will become a competitive advantage to your credit union.

Business and technology synergies

It is necessary to include both business and technology components in your credit union’s transformation program. The respective requirements of each are supported by each other and must be considered through a balanced weighting process.

Gaps in transformation programs frequently occur when business leaders articulate needs without understanding the technology foundations required to meet those needs or execute those changes. Conversely, gaps also occur when technology leaders inform business strategies that may be limited by the organization’s current applications and/or platforms. Including representatives from both areas at the transformation governance table can help your credit union avoid shortfalls in this area during the transformation process.

According to Ian Burns, President and CEO at Servus Credit Union, synergies go beyond just business and technology within individual credit unions:

How to mitigate shortfalls in operating model alignment

Large-scale transformations typically span three to five years — with long-term strategic, operational, and financial implications for your credit union. Therefore, it is necessary to take the right steps to mitigate shortfalls in your credit union’s operating model alignment to achieve successful outcomes from transformation.

Deliver your credit union’s transformation with a pragmatic target and/or end state in mind. This is necessary to prevent unintended scope expansion over time and avoid shortfalls in operating model alignment.

Running transformation in a holistic manner that clearly defines and aligns the various components of your credit union’s operating models can help you anticipate and/or address the downstream implications of key changes. Additional suggested mitigations to avoid shortfalls in your credit union’s operating model alignment during the transformation process include:

Identify your target state

Clearly indicate the end date — and state — of your credit union’s transformation. It is important to be as specific as possible to help you set realistic expectations and obtain buy-in and alignment from your credit union’s enterprise stakeholders.

Define your operating model

Defining your operating model will provide a tangible illustration of your credit union’s target state vision — and help you turn this vision into reality during the transformation process. Include all key areas of change and the implications of those changes to the front-, middle-, and back-office functions of your credit union.

Conduct transformation progress checks

Progress checks will help your credit union provide updates on the transformation process to its executive leaders, steering committee, and front-line team members. Communicate milestones in the context of your end-to-end transformation roadmap to clearly illustrate your progress.

“To involve and engage all Beem team members on our journey, we host live forum sessions every two weeks, opening the door for each employee to gain clarity, ask questions, and feel informed on our progress toward building Beem,” says Brian Harris, CEO of Beem Credit Union.

“These conversations have been critical as we work to create a sense of togetherness while we build Beem together and work through the various elements of change that transformation brings. Through transparent and open dialogue, the team understands that we don’t always have the answers, but our intention is that they have a clear understanding of where we are heading.”

Frame decisions and trade-offs

Involve both business and technology stakeholders during your credit union’s transformation. This will help you clearly articulate any trade-offs and/or compromises made during the process, as well as make coordinated, data-driven decisions.

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