C. Myblog

Lessons Learned: Are You Passing Up A Great Opportunity?

November 23, 2009

The frequency and magnitude of surprises in 2009 have created a unique learning opportunity that should not be passed up.  Too often, after navigating through a strategic challenge or opportunity, managements move on to the next issue without identifying the lessons learned from the most recent experiences.  This need not be a complex exercise.  In fact, identifying lessons learned can be as simple as answering:

  • What happened?
  • Why did it happen?
  • What is the lesson learned?

Determining why something happened is the key to the lesson.  For example, assume that auto loans have grown 10% so far in 2009.  It might be tempting to identify the lesson learned as:  Even in a down economy, we can grow auto loans at a double-digit pace.  However, the real lesson to be learned lies in why they increased.  For example:

  • Did they grow as a result of a new focus on sales and service?
  • Did they grow primarily because major competitors were losing money and/or had a liquidity crunch and therefore had to cut back on lending?  If so, how long will that last?
  • Did they grow because competitors have gotten out of auto lending due to profitability concerns?
  • Did they grow due to a one-time program like Cash for Clunkers?
  • Did they grow because of offering the lowest rate?

It may not be possible to be certain why auto loans grew, but it is possible to explore the potential reasons and draw a conclusion.

In analyzing lessons learned from the unprecedented events experienced in 2009, also consider key areas of the organization and environment that are impacted:

  • Underwriting:  How effective has our underwriting been at assessing risk?  What could make it better?
  • A/LM decisions:  Did the decisions we made have the desired financial impact?
  • Member behavior:  How did our members behave with regard to spending, borrowing, etc.?
  • Net worth adequacy:  What have we learned about the adequacy of our net worth in light of experiencing higher loan losses, unexpected rate conditions, corporate capital write-downs, NCUSIF assessments and looming threats to non-interest income?  Have these experiences confirmed our long-held beliefs about the right amount of net worth for our institution or should we target a different level going forward?
  • Competitors:  How did their circumstances, financial condition and decisions impact us?

While the previous five issues are key, taking the time to discuss and document lessons learned from any recent experience is invaluable.  Such a process leads to better decision making, fosters strategic thinking (in a time when many are consumed with putting out fires) and creates opportunities for cross-departmental learning.  As a result, the organization is stronger and better able to address challenges and take advantage of opportunities when they arise.

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