Conference 7.286::dcu

    
>   Accountability Mapping
>    
>   Mr. Cockburn reviewed his December, 1993, and January, 1994, Accountability
>   Maps.  The following changes were made to the January, 1994, Map:
>    
>   1.  Under Overall Accountability of the Position and Authority Matrix
>   Guidelines - STRATEGIC PLANNING:  before the word "set", add "participates
>   with the Board to establish and".
>    
>   2.       Under Priority Goals  2.  Continue Quality Initiative, Add another
>   item to read "Improve Employee Response Rate to Survey".
>    
>   3.  Under Priority Goals, 3.  Meet Loan Growth and Loan Quality Goals:
>   delete the third item.
>    
>   4.  Under Priority Goals, 4.  Increase Usage of Non-Branch Delivery
>   Systems, first and second items:  delete the numerical figures.
>    

    This is very confusing.  Would it be possible to see these
    Accountability Map in its entirety rather than seeing just the changes
    to the map?
>   e.  Bonus Dividend
>    
>   Mr. Kinzelman's Dividend Refund Proposal Ideas:
>    
>   1.  Come up with a measure of each member's profitability for DCU,
>       combining savings, checking, loans, etc.
    
>   3.  The money should be distributed as:  the more profitable the member,
>       the more dividend money they should receive.
>    
>   4.  The member dividends might also be limited to relationship members
>       only.
 
    Now who is proposing a "class" system?
       
>   Mr. Cockburn explained that the proposed budget
>   includes further increases in dividends and further reductions in loan
>   rates.  
    
    Now there's some good news for a change.
    
>   Ms. Dawkins asked Mr. Kinzelman where he feels the funds for this proposal
>   should come from.  Mr. Kinzelman explained that the funds would be
>   available by reducing capital.  
    
    Why not from the obvious places -- the below budgeted dividends and the
    above budgeted profit?  Did anyone run any calculations as to how much
    this would have impacted the capital ratio?
    
>   Mr. Cockburn explained that Mr. Gransewicz is incorrect in stating that the
>   members have a negative opinion of DCU.  DCU has improved in every category
>   of the member survey.  
    
    I noticed this reported in the recent "Network".  This certainly
    doesn't correlate with the responses in here, does it.
    
    > He also added that a bonus dividend would equal a
>   small, insignificant amount of money for each member, but would
>   significantly reduce DCU's capital ratio.

    Maybe this answers my question on the impact to the capital ratio.  I'd
    like to see some real numbers, though.
    
    
>   Ms. Ross explained that, although some of DCU's net income success is due
>   to the confidence of the membership, a lot of it was do to very favorable
>   market conditions, which cannot be sustained.  
 
    But someone in here said that the Feds would not raise interest rates. 
    I guess Ms. Ross wouldn't agree with that (for that matter, neither did
    Mr. Greenspan).   

>>   4.  The member dividends might also be limited to relationship members
>>       only.
> 
>    Now who is proposing a "class" system?
    
    You mean who has accepted that he still has to work within the bounds
    of the current system and at least try to do some good for as many
    members as possible while attempting to make it more pallatable to
    the pro-relationship memebrs.
    
    I see nothing wrong with this ...  He is doing what you advocate ...
    work within the existing bounds.
    
>>   Mr. Cockburn explained that the proposed budget
>>   includes further increases in dividends and further reductions in loan
>>   rates.  
>    
>    Now there's some good news for a change.
    
    Borrowing and savings rates are dynamic, and I don't see how eexactly
    they fit into the budget process.  What does fit in is the expected
    earnings due to the interest rate spread.  They should be adjusted as
    required to be a) competetive, b) meet market needs, c) maintain
    capital ratios etc. d) account for potential losses.
    
    I cannot budget for fixed interest rates the way DCU seems to want
    to.
    
    Stuart

>   Mr. Cockburn explained that the proposed budget
>   includes further increases in dividends and further reductions in loan
>   rates.  He further noted that it is far better to reward the members by
>   paying better rates than to reward some members after the fact in the form
>   of a bonus dividend or interest refund.


What I don't understand is how this relates to EXISTING loan customers
(VISA excluded).  If Mr. Cockburn believes that reducing loan rates for new 
loans (only) is a satisfactory means of rewarding members, I don't think he's 
serious about "rewarding members".  

Brian

It is not clear to me which way is best to reward DCU members.
I can see a case where a bonus dividend is better:
	- for example: the DCU cost of money was lower than plan and
	  so the DCU is rewarding members by rebating a portion of the
	  interest paid.

	As a member, I would feel good about that.

I can see where DCU mgrs would think: gee, we
need to give out a bonus dividend at the end of the year. We need to
factor that in the interest rate on loans and therefore add .5% to it.

Gim

    After all it is EXISTING loan customers and EXISTING savers who have
    given DCU it's profit ... It's teh EXISTING customers who should be
    rewarded according to what they hgave DCU last year, inthe same
    manner as paying GAINSHARING to employees.
    
    You pay it to the employees who earned it, not the employees who will
    be earning it next year ... they could well be different employees!
    
    Stuart

    
    I'd rather play it a bit conservative and make sure DCU covers its cost
    of operations, cost of funds, stashes some away for a rainy day
    (equity) and then returns a certain percentage to the membership.  This
    is the formula used at LAFCU.  They've done it for 57 out of 58 years with
    pretty impressive results.  Their capital ratio has been increasing but
    at a slower pace since they re-invest in the membership (loyalty and
    future business, aka profits).  
    
    Which is truly better positioned for the longterm?  A credit union with
    a 9.8% capital ratio that has very little membership loyalty and problems
    with members not bringing their business to them.  Or a credit union with
    a 7% capital ratio and a fantastically loyal membership base?  DCU
    NEEDS TO FIX ITS MEMBERSHIP LOYALTY AND PARTICIPATION PROBLEMS.  WE
    NEED TO RE-ESTABLISH OUR CREDIT UNIONS ROOTS, APPROACH AND ATTITUDE.
    Bonus dividends and interest rebates will go along way towards
    convincing DCU members to bring their business to DCU, just like
    LAFCU's members bring their business to LAFCU.
    
    Nobody will put it in these terms but I believe there is a REAL problem
    here.  I believe it stems from a long, long stretch of bad attitude and
    approach on DCU's part.  There were MANY good people turned away for
    loans in the past who were welcomed at our competitors.  I am always
    amazed when I speak to people how many old horror stories they have to
    tell.  I see "relationship banking" and its negative approach to the
    membership ("abusers" and "members carrying other members") as a
    continuation down the road to membership alienation.
    
    I really do hope the membership rejects the "relationship BANKING" 
    approach in the upcoming election.  The time is right.  All we need are
    enough people that believe DCU is capable of being a credit union again.
    

            
>>   Mr. Cockburn explained that Mr. Gransewicz is incorrect in stating that the
>>   members have a negative opinion of DCU.  DCU has improved in every category
>>   of the member survey.  
>    
>    I noticed this reported in the recent "Network".  This certainly
>    doesn't correlate with the responses in here, does it.

    Never confuse notes with the real world. While it is possible that the
    opinions expressed here are truly representative of the membership as
    a whole I would never use that assumption to make business decisions.

    If this conference was truly representative 2 years ago Phil would have
    been the top vote getter in that election - not 4th. Paul would
    probably have been in the top 3 - not 6th or 7th. And Chris and I would
    probably have been elected. Certainly a count of this conference would
    have suggested that more then 4 Real Choices would have been elected.

    This is not to say that I have complete confidence in the member survey
    either. I know how such things can be "managed." But I wouldn't ignore
    the survey either. I think that all inputs should be considered.

    			Alfred

You gain customer loyality by offering the best
service possible at the best possible price. 
I think the DCU has a way to go in that respect.
On this we have no disagreement.

I do again question the use of bonus dividends as a 
means to achieve that end. Someone at work gave the
analogy that a bonus dividend is very similar to
getting a tax refund by having the IRS over withhood
during the year. And I do know of folks who do that just
to get a refund on April 15th.

Gim

RE: Note 765.1 by PATE::MACNEAL

    
>>   Mr. Cockburn explained that Mr. Gransewicz is incorrect in stating that the
>>   members have a negative opinion of DCU.  DCU has improved in every category
>>   of the member survey.  
>    
>    I noticed this reported in the recent "Network".  This certainly
>    doesn't correlate with the responses in here, does it.

I take it you are not familiar with the responses from DIGITAL
questionnaires that field service sends out.  The numbers are typically
high, but yet when you talk to people they say something different.

The key thing to note here is DEC gets beat up by customers and in the
press because of our failures, but when you ask internally about this, up
come the results showing how we have improved...

You would think there is a link between DCU and DEC...

>    Maybe this answers my question on the impact to the capital ratio.  I'd
>    like to see some real numbers, though.

You too?  Chuck has no idea what the numbers are -- he is just against the idea.    
    
	- mark

    
    Re: .6
    
    > -< Bonus dividends are MUCH MORE than money >-
    
    EXACTLY!!!  That IS the point!  So as not to get sidetracked, however,
    bonus dividends perse could turn into a red herring if we are not
    careful.  I am not committed to seeing bonus dividends return as
    a norm.  They are just one way that occurs to me that the DCU
    could show its COMMITMENT TO ITS MEMBERS.  That is what *I* am
    interested in and that is precisely why Phil is absolutely right
    in saying dividends are MUCH MORE than money.  The money is NOT
    the point; the people are.  To people who try to manage by
    profit margins and capital ratios, however, it appears not to make
    sense.  By managing for customer/member satisfaction and investing
    in the membership first, they'll get their precious capital ratio
    and a lot more.  It is SO SIMPLE.   It just astounds me why people
    cannot see this.  No wonder Deming took his genius to Japan.  There's
    too few here who could listen and hear him.
    
    fwiw,
    Steve
    

�Or a credit union with
�    a 7% capital ratio and a fantastically loyal membership base?  DCU
�    NEEDS TO FIX ITS MEMBERSHIP LOYALTY AND PARTICIPATION PROBLEMS.  
    
    When dealing with this particular management, it might help if you
    could quantify this for them.  They are busy looking at 70,000 members
    and the results of their latest customer satisfaction survey.  Perhaps
    if your information on lack of membership loyalty was presented in the
    same terms, they'd put more stock in your point.

>   Mr. Cockburn explained that Mr. Gransewicz is incorrect in stating that the
>   members have a negative opinion of DCU.  DCU has improved in every category
>   of the member survey.  

Lets try this. I'm dissatisfied.  Steve's dissatisfied.  Alfred's dissatisfied.
There are members who have a negaitive opinion.  Either Mr. Cockburn doesn't
have a grasp of English grammar, he's engaging in hyperbole, or those who are
unhappy don't count.

As to bonuses, they are a "feel good" manoeuver.  It is, in fact, irrelevant
what size they are.  It could be 1 mil, but with proper PR, the goodwill
generated could be fantastic.  I also want to know why earlier refunds and
added rebates were fair, but they are not now?  I suspect that the definition
of fairness changed when the BOD collectively supported relationship banking,
removing the imposition on the relationship members of the abusers.

Lastly, I am fiercely loyal to my other credit union because of their attitude. 
I was looking to do some out-of-the-ordinary financing a few weeks ago.  My
credit union rep spent an hour and a half with me going over alternatives.  The
decision came to be that the bank across the street was better prepared to help
this time around -- the CU rep knew my needs, worked with me, knew what was in
the marketplace, and gave me the best suggestion for the situation.  My CU rep
and the CU didn't make a dime off of me and it cost them 90 minutes of
personal rep time, but you can be sure I'll be back to her when I need
something else special!

This is where I want the defCU to be.  Lisa is quoted as saying that the
defCU's mission is to raise the cap ratio.  I contend it is to serve the
members.

In some ways, this is very similar to some of the woes in Digital.  I serve in
a very visible place as a representative of Digital MCS.  Customers ask
questions that I (and co-workers) answer or we pass to engineering groups.  The
answers I get back are typically "Tell the customer that ..."  It seems that
the engineers don't realize that my customers are their customers.  Similarly,
it seems that the DCU's mission has gone from serving the membership to serving
the DCU.

BobW

    Phil,
    
         I saw that the Board approve dividend payments at this meeting.
    What would have been the effect of someone proposing an amendment to
    increase the dollar amount of the motion?  Would that serve the 
    purpose of a "bonus divendend" or does the motion only set a ceiling
    on the amount DCU may legally pay out.  Do you have the precise wording
    of the motion and the citation in the bylaws regarding the motion
    needing to be made at a specified frequency?
    
                                                         David

    
    RE: .13
    
    I guess an amendment could have been attempted but I think we all know
    what the vote count would have been.
    
    If memory serves me right, it was described as a technicality and I
    don't think it was our Bylaws that required it.  I think is was some
    government rule or regulation.
    

    re: -1,
    
         Thanks Phil.  My question was formed based upon two things, one is
    an other director's abstention on the bonus dividend question as not
    being a valid motion and two where does the line exist between
    management perogative and board setting policy.  I don't question your
    sense as to the outcome, I was just curious as to why the Board had to
    ratify the dividend dollar amount.  I had remembered some earlier
    discussion around NCUA and the bylaw changes with respect to members
    rights versus Board's rights versus management's rights and I don't
    have a good sense as to where the various limits are.
    
         Just out of curiousity, was this the first time this vote had been
    taken during your tenure?  If so, is it a recent requirement or an
    obscure one that came to light during the recent audits or something
    entirely different?
    
                                                    David

    
    RE: .15
    
>    where does the line exist between
>    management perogative and board setting policy.
    
    David, damn good question!  A case in point... At this point in time,
    the Board has NEVER OFFICIALLY VOTED TO APPROVE the Gainsharing plan
    for DCU employees.  Why?  Because the Human Resources Committee (Lisa
    Ross, Paul Milbury, Tom McEachin) decided it was Chuck Cockburn's
    perogative.  The Board was asked to vote yea or nay on whether it was
    Chuck's perogative to design and implement a plan that re-distributes
    part of DCU's bottom line net income as a bonus plan for DCU employees. 
    Some contend that gainsharing is compensation and Chuck sets compensation
    for employees.
    
    I contend that this is NOT within his authority since this plan is based
    on DCU's end of year net income.  It is a redistribution of our net
    income for a purpose which the Board has not formally approved.  The
    Board must approve the DCU budget, which contains compensation.  Yet
    this is "compensation" which for some reason we now don't have to
    approve?  So can Chuck design another bonus plan, call it
    "compensation" and implement it, without Board approval, and continue
    to subtract money from our net income?  Where is the line here?
    
>         Just out of curiousity, was this the first time this vote had been
>    taken during your tenure?  If so, is it a recent requirement or an
>    obscure one that came to light during the recent audits or something
>    entirely different?
    
    To tell the truth, I can't remember doing it last year, but if we did
    it would be recorded in the minutes.
    

    re: .15, .16
    
    In the quarterly statements I get from the two other credit unions I'm
    active in, the announcement of the dividend rate is always listed as,
    "...the Board of Directors voted to set the dividend rate...".  I
    wonder if it isn't an NCUA regulation that the BoD set the dividend
    rate.
    
    Bob