Conference 7.286::dcu

587.0. "NAFCU conference trip report" by PLOUGH::KINZELMAN (Paul Kinzelman) Mon Jul 20 1992 13:00

	Trip Report
	18-JULY-1992
	by Paul Kinzelman

	Reason: I attended the 25th annual NAFCU conference in Boston.

	Cost: $530 conference fee plus an estimated $30 in expenses

NAFCU stands for the National Association of Federal Credit Unions.
This is a national association and the conference was attended by about
2000. Many were volunteer directors, but there were some credit union
employees. The conference was scheduled for Tuesday afternoon through
Saturday afternoon, but the major days of interest to me were Thursday
morning through Saturday noon so that's when I attended.

It was interesting and useful to meet other people from other credit
unions and learn what they see as issues and learn something about
their policies. There were credit unions present of all sizes.

Thursday morning the  highpoint of the entire convention, when Dr. Lester
Thurow, Dean of the Sloan School of Management at MIT spoke. His talk was
excellent as I knew it would be. I highly recommend folks hear him speak
anywhere if you get a chance.

To quickly summarize his talk, he made the following points:

1) The world will be a very different place after Jan 1, 1993 because
Europe will be a combination of the economies of the individual economies.
Europe and specifically Germany will write the rules by which we all must play.
The US does not have the economic power to prevent the center of the world
economy from moving to Europe, nor even to affect many of the rules.

A major thrust of this "new economy" is to keep Japan from doing to Europe
what Japan did to the US.

He includes many of the old "iron curtain" countries as part of Europe and
points out that the land area and population of this new Europe is close to
the size and population of China. These new countries will add tremendous
raw resources (including farmland) to the world market and depress prices.

2) It doesn't matter anymore where resources are located because most of the
valuable industries primarily require brainpower. Furthermore, the Communist
countries have been big on education for years. The most brilliant
mathematicians are from Hungary. The most brilliant physicists are from
Russia.

3) The major problem in the US is an inferior workforce due to poor education.

4) A further problem is that we focus and invest primarily in new product
research. Japan invests primarily in new process. So we invent new stuff and
Japan makes what we invent and we lose. The US is not willing to pay top
salaries for top people to go into process so we can't possibly compete.

5) As an analogy, he said that capitalism is like football. The whole world
plays the game of football. However, in this country our football has lots
of timeouts, breaks, and substitutions. Football played in other countries
is a completely different game. Their football (we call it soccer) has
no timeouts, breaks, or substitutions. The message is that we'd better find
out how to play the same game that the rest of the world is playing.

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I went to the following "breakout" sessions:

"NCUA Region 1 Update": Layne Bumgardner is the NCUA head of our region.
The following is what I remember of his main points...
Region 1 contains 1700 CUs (credit unions). Our CUs have been receiving
an influx of money because of the CUs slowness to lower interest rates
as the prime has fallen.

Don't hand over responsibility for policy to management, especially the
investment policy.

He emphasized the need of tight internal controls [we at DCU know all about
that, don't we?].

In our region, there are about 190 problem CUs, about the same number as
last year, but there are fewer dollars at risk.

There have been two charter applications granted this year. New CUs are
difficult to start. NCUA should look at new ways to make starting a CU
easier.

There have been 29000 total charters granted by NCUA since credit unions
began, but currently there are only 8900 CUs now in existence.

NCUA examiners are taught and are informed about investments.

The comment period for the spousal reimbursement law is about over. The
comments received are about 60% for and 40% against the proposed law. This
is the law that allows credit unions to pay spouse-of-vounteer expenses
for travel to conferences provided the expenses are publicized at the
annual meeting. Currently I don't think there's a guideline.

Somebody asked if the issue of mergers of CUs is affecting the issue of
"common bond" with respect to congress. CU members are supposed to have
a "common bond". For instance, at DCU, our common bond is that we all work
or are connected with Digital. If we merge with an unrelated credit union,
we have no common bond with the other members, so banks seeking to
tax CUs can say that our merged CU is no longer a CU and should be taxed.
Layne didn't really know the answer to this question.

Somebody else asked about the Rhode Island situation. Layne believes that
most members have gotten their money back, but the mess is still not
cleaned up yet. They are "making progress".

I spoke to Layne afterwards about
the non standard bylaw approval process. He said that our nonstandard
change to the special meeting section (merely changing the number of
signatures required) must be sent to the other five NCUA regions and each
region must approve the change. He's awaiting word from the other regions
before approving our change. He did indicate that NCUA generally will
approve most non standard bylaw requests unless they are way out in
"left field" but otherwise was characteristically noncommittal.

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"Home Banking via Telephone": I saw only part of this talk. The speaker
arrived late so I went to the "Quality..." talk (below) for part and
then returned. The speaker was from AT&T and was speaking about a new
phone with a single 5"x7" or so touchscreen. This screen could be programmed
by the user for speed dialing, bill paying, ATM functions, etc. Even the
telephone dial buttons were a portion of the screen. It was interesting but
the target cost to buy was $500. It is currently being tested in some
community and bank right now. The goal is to reduce the need for tellers
at the bank if customers can do most of their business by using this
"programmable" phone.

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"Quality Service as Seen Through the Eyes of Your Members": This talk was by
representatives of a credit union in San Diego. They had done an incredible
job of putting into place a plan to encourage and evaluate member services.
The handout consisted of an 80 page manual containing their process which
included "mugging" as in presenting a coffee mug filled with candy to
employees that went beyond the call of duty. There were numerous other
incentive and evaluation programs. They really had their act together.

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"Implementing Strategic Planning": I have to say I'd not seen "aerobic
lecturing" previously. When he was done, his shirt was literally soaked.
He spoke interestingly enough about IBM's history of success and then
about the success of their PC effort who's success depended on IBM's
turning its back on the recipe for their previous success. The message
here is that everything is going to be different from now on (similar
to Lester Thurow's message). Also, banks will be out to get us because we
are taking away their business. He gave out a list of "Guidelines for
Effective Strategic Planning". Don't get trapped by pretty strategies.
Much of this talk was interesting, but not directly applicable to CUs.

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"New Product Development and Testing": The main points I got were:
	1) Formalize the process of designing new products
	2) Be proactive rather than reactive
	3) Do annual review of all products
	4) Research competitors

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"Pay-for-Performance Plans": This talk concerned about the relationship
between the board and the CEO. Too many credit unions have an informal
or no process for the board to establish goals for the CEO. Only about
10% of credit unions have a CEO incentive program (bonus for performance).

He gave a case study he did for some credit union (assets about $500M,
350 employees; DCU has $350M, 250 employees). The study took 6 months
and cost $35K. He was actually called in by the CEO of that credit
union because the CEO felt like he was not getting a direction from
the board. The speaker established goals and measuring criteria for
the board to use in measuring the CEO of the credit union. These
criteria included member survey feedback.

	A condensed version of this might be a candidate for a future
	"Network". Thanks for being proactive about letting us know about
	this kind of stuff...


	re "spousal reimbursement law":

	Just when I was ready to let this one go... Does this mean 
	that payment by credit unions of "spouse-of-vounteer expenses
	for travel to conferences" is currently *not* legal? If so,
	I think there is an action item... If not, what will this
	law change?

					Tom_K

re: .0

Thanks, for the trip report, Paul!

It's quite refreshing to be kept up to date on what's going on.

-Jack

I don't know for sure, but I think it's up to the discretion of the board
to decide what gets reimbursed. Cozy, isn't it? I spoke to one person
there and he paid the airfare for his spouse, but the credit union paid
the "spouse entertainment package" fee - that was a collection of sightseeing
trips for the spouse while the director was at the conference. It was on the
order of $300. I think what the rule does is require the board announce to
the members at the annual meeting the fact that it's being done.

	Is the following, then, a correct understanding?

	Current rule:

	The CU can pay pretty much anything it wants to, and it doesn't 
	have to tell anyone.

	Proposed rule:

	The CU can pay pretty much anything it wants to, but will have
	to disclose such expenditures at the Annual Meeting.



				Tom_K

Re: .4
I don't really know. My speculation agrees with your understanding however.

RE: .1

Thanks for the info Paul!  I rathered enjoyed reading and learning
about CU and some of the problems that they face.  I agree
with the previous author about including some of this info in
our glossy happy talk paper.

In fact:  It would make sense for the next happy paper that they mention
the spousal law change and tell members where they can vote!

	-mark

    
	Credit union members can address their opinions of the new spousal
    rules to the regional NCUA office:
        
    		National Credit Union Administration
    		Mr. Layne Bumgardner
    		9 Washington Square
    		Washington Ave. Extension
    		Albany, NY  12205
    
    IMO, the current trend of 60/40 favoring the proposal is due to the
    fact that many regular members are not aware that it is being
    considered.
    
    I would have no problem with it IF the entire membership approved it
    and it was fully disclosed in the annual report.  I do have a problem
    with it if it is the default and their are no disclosure provisions. 
    

    Is the rule limited to a spouse?  Or does a significant other qualify?

Again, I don't know, I haven't seen the proposed rule, but if it's like most
other government bureaucracy sorts of things, it probably has to be spouse.