essential lending training william jason goodwin arkansas tech university · 2018. 8. 28. ·...

Running head: ESSENTIAL LENDING TRAINING 1

Essential Lending Training

William Jason Goodwin

Arkansas Tech University

ESSENTIAL LENDING TRAINING 2

I. Student Information

William Jason Goodwin

[email protected]

T01202559

Arkansas Federal Credit Union

AVP Direct Consumer Lending

II. Project Site Information

Arkansas Federal Credit Union

P.O. Box 9 Jacksonville, AR 72078

III. Stakeholders Information

Dustin Cole

VP Indirect Lending

[email protected]

We will meet as often as needed and upon availability but no less than once

every other week throughout this project.


ACKNOWLEDGEMENTS

I would like to acknowledge and thank all of the willing participants in the surveys and

interviews. I know their time is valuable and I especially appreciate the leaders within Arkansas

Federal Credit Union for taking the time to be candid and insightful during their interviews.

LIST OF ABBREVIATIONS

AFCU Arkansas Federal Credit Union

CUNA Credit Union National Association

DCL Direct Consumer Lending

ELT Essential Lending Training


TABLE OF CONTENTS

Background ......................................................................................................................................5

Purpose of Project ............................................................................................................................7

Problem Identified ...........................................................................................................................8

Research Methods and Materials .....................................................................................................9

Analysis and Findings................................................................................................................... 10

Recommended Action Plan ...........................................................................................................12

References ......................................................................................................................................17

Appendix A ....................................................................................................................................18

Appendix B………………………………………………………………………………………20


Background

Arkansas Federal Credit Union (AFCU), previously Little Rock Air Force Base Credit

Union, began in the 1950’s as a small financial cooperative to assist in the financial needs of

base personnel. Over the years, select employer groups were added to AFCU opening

membership to much more than just military personnel stationed at Little Rock Air Force Base.

The addition of employees of the State of Arkansas and their families to the field of membership

was a pivotal point in the growth of AFCU. This actually prompted the name change. Fast

forward to circa 2004 and AFCU is, and had been for quite some time, the largest financial

cooperative in Arkansas. Following the retirement of the CEO and the hiring of a new CEO with

a differing skillset, AFCU doubled its asset size over a span of 5 years. AFCU experienced

extreme growth in a relatively short amount of time. This growth was primarily due to the credit

union’s focus on lending. Production on existing loan programs was streamlined and increased.

In addition, AFCU took on and developed new lending programs, mostly due to the direction of

the new CEO. One of these was the Indirect Lending program, now the most lucrative lending

program in the credit union.

This extreme growth changed the overall environment of the organization. The credit

union could no longer function as they did when they were five times smaller. AFCU leadership

responded by making some strategic organizational structure changes specifically in the area of

lending over the next several years. The first major change was disbursing Loan Officers from

the previously centralized location of the Telephone Branch to all outlying branches. Loans were

then underwritten, processed, and funded in each branch. This change was made in an effort to

make the member experience more personal. Prior to this restructure, members would have to go

into a small office and call a Loan Officer in the Telephone Branch to apply for a loan. Although


this was a necessary change to meet the new service standards of the organization, it came with

its own set of struggles. After a few years, inconsistency among lending staff became rampant

and ensuring regulatory compliance was a daunting if not impossible task. The response was

gradual but targeted. First, consumer loan processing was centralized. This ensured loan

documentation was consistent and accurate. It also made loan processing regulations more easily

manageable. It was much easier to get a department of ten employees on the same page than over

eighty employees scattered across the state. A few years later, consumer loan underwriting was

centralized for the same reason. This change made the same improvements to consistency and

regulatory compliance as the previous. A few years later, these newly centralized departments

were combined to form Direct Consumer Lending (DCL). DCL is currently in operation.

I have had the privilege of managing all three of these newly formed departments. The

changes have made drastic improvements to the organization. However, in spite of the arduous

work put in by many dedicated employees to improving the overall direct lending function of the

credit union, a key deficiency remained. The initiation of the loan process still resides on the

frontline in the individual branches. The frontline has the highest rate of turnover in the credit

union. In 2015, according to a turnover and staffing report performed by the Credit Union

National Association (CUNA), frontline employees account for 18% for turnover through

replacement of vacant positions (Strozniak, 2015). New frontline lending staff is constantly

cycling through due to internal promotions, retirements, and terminations. This has in some ways

brought us full circle to our original struggle with inconsistency in the member experience. As

business increases, so does the struggles to control these issues. Volume has continued to grow

and credit unions in general are now “carving out a larger share of the overall U.S. consumer

lending market at about 10%” according to CUNA Mutual Group (2016). The member


experience must be improved and standardized to ensure the future success of the organization as

it continues to grow.

Purpose of Project

The purpose of this project is to identify potential deficiencies in training and

development causing inconsistent service to members of the credit union, specifically in the area

of lending. Over the years, the credit union has deployed many different training approaches to

combat this issue. Some have lasted longer than others but all have ultimately failed. Seemingly,

retention of information and skills learned in initial lending training is limited. High turnover is

definitely a contributing factor but it is not solely responsible. Very limited follow up to training

and inconsistent exposure to various lending scenarios have also added to the deficiency. The

primary source of this deficiency seems to lie in the lack of transfer of learning. According to

Caffarella (2002), “transfer of learning is the effective application by program participants of

what they learned as a result of attending an education or training program” (p.211).

Credit unions were created as a cooperative to serve those that the banks would not.

Consistent, personal, and accurate service is at the core of the credit union existence. A recent

article in Credit Union Journal highlighted the credit union movement’s moto of People Helping

People ("day in the life of a credit union," n.d., p. 24). Without consistent, compliant, and

personal service, the movement as a whole will fail to meet that moto.

The credit union continues to grow and will continue to have a need for comprehensive

new employee training and ongoing development. According to the United States Credit Unions

Industry Report (2017), credit unions increased employment by 2.4% by 2017 and are projected

to increase by 3.5% by 2018 (p. 7). Consistency and compliance issues only compound with


additional employees. It is paramount that this issue be controlled. The reputation and financial

ability of any credit union lacking in these areas is at risk.

Problem Identified

The problem is inconsistent service, specifically in the area of lending. Members are

given different information at different locations. Adequate follow up on loan applications is

dependent upon the location the member visits or avenue through which they apply. The overall

workflow is unorganized. Communication between frontline lending staff and support lending

staff is lacking. Doing business with Arkansas Federal Credit Union is often more difficult than

the financial institution down the street.

The next major organizational structure change should address the overall issue of

improved and consistent lending service. This problem goes beyond a simple transaction. Our

industry has evolved. Members look for the path of least resistance and the most positive

experience. They want it easy, personal, and meaningful. All financial institutions essentially

offer the same products. The credit union must differentiate itself by providing an easy,

memorable, and consistent experience. All financial institutions must adhere to the same basic

regulations. The credit union must provide this positive experience while ensuring regulatory

compliance.

If this problem is not resolved, AFCU will face difficulty on two levels. From the

member perspective, poor or inconsistent service creating inconvenient experiences in lending

will negatively impact the reputation of the credit union. According to Mia Perez, Chief

Administrative Officer at Louisiana Federal Credit Union in LaPlace Louisiana, the member is in

control of the credit union’s brand and will relay that brand based on their experience (Mertz,

2016). “While we can say who we are, create a great website, and present ourselves in a certain


way, at the end of the day the consumer says what our brand is” (Mertz, 2016, p. 22). The credit

union is in control of the experience. “It’s about the promise and the product and how you

present that. All those things have to align. If they don’t, the consumer gets confused,” Perez

(2016) states (p.22). She goes on to say, the experience is owned by everyone in the

organization, likewise, it can be broken by anyone in the organization (Mertz, 2016).

From a compliance perspective, failure to adhere to regulatory requirements can result in

fines to the credit union and to the individual not complying. This can affect the financial

resources of the credit union, potentially altering their ability to support specific lending

programs and the corresponding staff. “So many things can go wrong if a culture of compliance

is not instilled at a credit union. Every employee presents a risk” (Bankston, 2016, p. 32).

Research Method and Procedures

My primary sample with be all lending staff hired since July of 2016. This will target

employees who should have had adequate time to receive training and some level of experience

in lending. The sample will include frontline and support staff. It will also include any internal

staff that has transferred into a lending department. The sample will be queried regarding their

initial training and on boarding experience, their lending specific training once they reached their

respective location, and any ongoing training to ensure retention and consistent delivery of

lending services. This information will be gathered via written survey (See Appendix A).

According to Salkind (2012), “the best application of sampling in theory and practice can

probably be found in survey research” (p.198).

My secondary sample will be the leadership of the lending departments in the credit

union. These are the people that have hired and currently oversee those from the preceding

sample. I will ascertain their perspective regarding the current training and development of


lending staff. I plan to gain their insight via face-to-face or phone interview, depending upon

availability (See Appendix B). Salkind (2016) describes interviews as “oral questionnaires”

(p.198).

Analysis and Findings

The intent behind this research was to check the temperature of new lending employees

in regards to lending training they may or may not have received from various sources over the

last six months. Since the turnover rate is relatively high on the frontline, where the majority of

lending staff resides, I wanted to determine the level of training given to new employees and

their comfort level after receiving it. I followed up with questions directed to leadership in

lending capacities to get a better understanding of their expectations and assumptions.

Analysis

I requested a report from Human Resources listing all lending staff hired in the last six

months. I emailed a survey invitation and attached a short survey with ten questions (Appendix

A). Questions 1-7 were each divided into three categories: Interviewing and Sales, Credit

Analysis, and Follow Up and Loan Closing. Participants were asked to rate each category in

relation to the question on a 5-1 scale from Strongly Agree to Strongly Disagree. Questions 8-10

were freeform in nature, asking participants the usefulness of the training, possible areas of

improvement, and general comments. Out of 29 surveys sent, 15 were returned giving this

method a 51.72% return rate. Salkind (2012) states a 35% return is the average expectancy for

mailed surveys. Out of the 15 surveys received, 14 were used. One exclusion was due to the

interviewee not yet beginning any lending training.

I prepared a written interview for leadership within each section of the lending division

and over frontline staff. Out of 8 requests for an interview, only one was unable to participate


due to scheduling conflicts. The questions were intended to glean the perspective of leadership in

regards to the current lending training structure and their thoughts concerning future needs. All

interviews will be included in the research and summarized in the findings section of this report.

Findings

For the surveys, the overall level of agreement represented across all three categories

within the questions sat heavily in Agree (4). Upon examining the individual categories, the

pattern across ratings was relatively consistent. All of the Strongly Disagree (1) ratings and the

majority of the Disagree (2) ratings were in the Follow Up and Loan Closing category. The

broad picture seems to indicate a greater dissatisfaction with the Follow Up and Loan Closing

Category than the other two (see graph below). The remaining questions of the survey offered

scattered results. However, there were two common themes. A request for more hands on

experience was mentioned multiple times, as was better and more detailed instruction on loan

closings. The latter was reinforced by the ratings on the first seven questions.

Figure 1. Lending essentials survey questions 1-7. This graph expresses the level of agreement with the questions

posed divided into three primary categories in lending.


The written interviews were given to lending leadership members of very different

perspectives. Some were over retail positions, others over business divisions, others over

mortgage lending, while the remainder held support office roles. Despite the differing

perspectives and daily responsibilities, many similarities existed across the interviews. All

interviewees expressed the importance of ongoing training in some fashion. Some thought the

training needed to be formal while others felt the training was more functional and integrated

into daily activities. All agreed that the person to whom the trainee reports should be ultimately

responsible for the training. However, this does not necessarily mean that same person needs to

perform the training. Most interviewees expressly stated the trainer should be particularly

knowledgeable in the material they are training. One interviewee made the distinction between a

training coordinator and an actual trainer. Although the estimation for time required for initial

training varied quite a bit across interviewees, most agreed that a basic training should be

required for all lending personnel, if nothing else but to acclimate to the culture of the

organization. An adequate follow up plan for training seemed to be an area that leadership felt

was lacking. Lastly, all agreed on accountability for lack of performance but opinions concerning

regular assessments of staff were in conflict. Some felt individual performance negated the need

for standardized periodic assessment while others felt is only reinforced and proved the

capabilities of existing staff.

Recommended Action Plan

The interpretation of the research conducted is in accordance with the initial identified

problem of inconsistent service, specifically in the area of lending. More effective and consistent

training of lending staff is the solution to inconsistent service to AFCU members. However, a

simple one-off training seminar or even a training boot camp will not provide a long term


solution. The actions taken to address this problem must be strategic and durable. A change must

take place. Learning and change are inseparable. The Adult Learner reiterates in discussing

learning theory that “learning involves change. It is concerned with the acquisition of habits,

knowledge, and attitudes. It enables the individual to make both personal and social adjustments.

Since the concept of change is inherent in the concept of learning, any change in behavior

implies that learning is taking place of has taken place” (Knowles, Holton, & Swanson, 2015, p.

12-13). Development and implementation of a standardized training program, Essential Lending

Training (ELT), will address all the issues highlighted in this research and ensure that learning

and inherent change take place. The program will be robust and ongoing, deploying varying

levels of training at appropriate times during the development process of a lending team member.

This program will exist autonomously as its own department but will work integrally with each

subdivision within the lending division.

Intentionally devoting time and resources on a long term basis is paramount to the

eradication of inconsistent service. Many of the members of leadership expressed a need for

ongoing training. The gaps indicated in training by those completing the surveys seem to indicate

a lack of ongoing training as well. Lussier and Hendon (2016) make a distinction between

training and development defining training as the process of teaching employees the skills

needed to perform a job. Development, claim Lussier and Hendon (2016), is an extension of

training executed as ongoing education to improve knowledge and skills for present and future

jobs. The ELT program will focus on both aspects of employee learning. This program will

promote and maintain consistent service by ensuring lending staff is adequately prepared to

perform at a high level before allowing them to work with members independently. Once they

have proved their capabilities, this training program will provide and require periodic refresher


training, skills assessments, and ancillary training throughout the year. The program will not only

engage the frontline staff but equal focus will be given to proper training of support staff. Both

cooperative functions must be able to provide the same level of service. A discrepancy in either

side would derail any efforts of consistent service.

The program would essentially be split into two major sectors: frontline and support staff.

The frontline staff would be initially trained by Direct Consumer Lending as this department

specializes in consumer lending. Ongoing and experiential will take place in the trainee’s branch

with the assistance of a designated branch trainer and under the supervision of the branch

manager. DCL will work closely with the branch trainer and branch manager to ensure

comprehensive and up to date training is administered. The head of ELT will oversee this entire

process, coordinate training, ensure consistent curriculum, and work to remove any obstacles that

might hinder the success of the program. For support staff, the structure would be very similar,

only with the absence of DCL as a layer of training. Each sub-department would designate an

adequate trainer and the head of ELT would perform the same basic functions, ensuring each

new addition receives exceptional initial training and comprehensive ongoing support.

The personnel structure of this department would be non-traditional in the sense that all

contributing parties would not report to the head of ELT. The department head would be

responsible for recruiting competent and passionate trainers within each respective lending sub-

department to develop and deploy training specific to that area of functionality. The head of ELT

would report to the Executive Vice President and Chief Lending Officer. He or she would work

closely with the trainers and department leaders to develop a custom curriculum and ongoing

training program.


Since the individual branches and sub-departments will provide the trainers, other than a

quant office space and workstation for the head of ELT, no other facilities will be needed. Any

equipment needed for this program is already available. Training rooms and equipment,

resources for travel, and varying communication avenues are resources the credit union already

deploys for other areas and would be available for usage by ELT.

The schedule for training would vary depending on the specific trainee. Support

departments are typically more flexible than frontline. Adequate notice would be given for initial

training, expected to last one to two weeks depending on the area being trained and the level of

experience of the trainee. Follow up training schedules once the trainee has joined their area will

adapt to that department or branch. Ongoing onsite training by DCL for frontline staff will take

place Tuesday through Thursday based on availability and need. Mondays and Fridays are the

busiest days in the branches and do not lend well to training. Any refresher and ancillary training

will be scheduled based on availability of staff and facilities.

The main cost of this program will rest in the compensation and salary for the head of

ELT, determined upon submission and grading of job description. Most of the resources needed

are already in place. Only minor expenses would be incurred for training materials and supplies.

A secondary cost could be incurred if trainers received incentives for dedicating time to train

outside of regular daily responsibilities. The feasibility of this program is great as the majority of

the personnel, facilities, and equipment needed is already available. The minor change in

organizational structure would be need to be strategically administered but this would have little

effect on the overall feasibility. I believe this program carries an acute sense of urgency. The

organization is not miraculously becoming more consistent in the service it delivers. To ensure

the future success of the credit union, we must take action and make calculated decisions to


increase consistency and accuracy in turn providing our members with the experience they

deserve. This experience will promote loyalty among the credit union membership and build

upon the already solid reputation. The credit union’s legacy is at stake. Urgency is implicit.

Further research is not required for initial implementation of this plan. However, as with

any robust, effective, and efficient program, growth cannot be stifled after implementation. The

credit union must continue to develop relevant training for the institution account for marking

changes, cultural shifts, and technological advances. Innovation and calculated growth will be

the engine that continues to drive the credit union successfully. Ongoing research into better

methods of training, organizational structure, workflows, and skill retention will be the backbone

of this newly formed department. Never stop learning. Never stop growing. Continual learning

requires change, change for the better.


References

Bankston, K. (2016, December). Culture of compliance. Credit Union Management, 39(12), 30-

32.

Caffarella, R. S. (2002). Devising transfer of learning plans. In Planning programs for adult

learners: A practical guide for educators, trainers, and staff developers (3rd ed., pp. 209-

231). San Francisco, CA: Jossey-Bass.

CUNA Mutual Group reports strong credit union trends. (n.d.). Credit Union Times, 27(39), 13.

A day in the life of a credit union. (n.d.). Credit Union Journal, 20(21), 24.

EBSCO Publishing (Firm). (2017). Barnes reports: U.S. Credit Unions Industry Report (52213).

Knowles, M. S., Holton, E. F., & Swanson, R. A. (2015). Exploring the world of learning theory.

In The adult learner: The definitive classic in adult education and human resource

development (8th ed., pp. 12-13). Houston, TX: Routledge.

Lussier, R. N., & Hendon, J. R. (2016). Training, learning, talent management, and development.

In Human resource management: Functions, applications and skill development (2nd ed.,

p. 237). Los Angeles, CA: Sage Publications, Inc.

Mertz, A. (2016, September). Own the member experience. Credit Union Magazine, 82(9), 20-

24.

Salkind, N. J. (2012). Methods of measuring behavior. In Exploring research (8th ed., p. 148).

Upper Saddle River, NJ: Pearson Education Inc.

Salkind, N. J. (2012). Nonexperimental research: Descriptive and correlational methods. In

Exploring research (8th ed., pp. 197-211). Upper Saddle River, NJ: Pearson Education

Inc.


Strozniak, P. (2015, August 12). Debating the impact of employee turnover. Credit Union Times,

26(29), 8.


Appendix A

Survey Invitation

Welcome to the AFCU Lending Team,

If you are receiving this survey, you have joined the lending team in some capacity in the last 6

months. The purpose of this survey is to better understand the lending training experience from

the trainee perspective and look for ways to improve the process. This survey should take

approximately 10 minutes of your time. We know your time is valuable and appreciate your

contribution to making our training program better for existing and future lending staff. Please

do not hesitate to contact me with any questions you may have. I can be reached at

[email protected] or 501-533-2268.

Sincerely,

Jason Goodwin, AVP Direct Consumer Lending

Essential Lending Training Survey

For employees joining the lending division in the last 6 months

Date: ________________Location_____________________________________________

Length of time on lending staff___________________

Instructions: Please indicate your level of agreement with the statements listed below for the

following topics: 5-Strongly Agree, 4-Agree, 3-Neutral, 2-Disagree, 1-Strongly Disagree

1. The objectives of the lending training you received were clearly defined and relevant

to the following:

o Interviewing and Sales 5 4 3 2 1

o Credit Analysis 5 4 3 2 1

o Follow Up and Loan Closing 5 4 3 2 1

2. Participation and interactions were encouraged and will be useful in my daily

functions.




3. The content of the training was organized and easy to follow.




mailto:[email protected]


4. The trainer was knowledgeable, helpful, and well prepared.




5. The time allotted for the training was sufficient.




6. I will be able to immediately apply the information and skills presented and taught

in this training




7. I left this training feeling more confident and knowledgeable than I entered




8. What part of the training did you find most useful?

9. What aspects of the training could be improved?

10. Additional comments, suggestions, and/or concerns…


Appendix B

Essential Lending Training Leadership Interview

For leadership of employees joining the lending division in the last 6 months

Date: _____________ Location__________________Interviewee__________________

1. Describe the current training program for new additions to lending staff?

2. How much time do you think should be afforded to a new member of lending

staff for training and general acclimation to the department? Why?

3. Would a basic required training be required upon entering the lending division

regardless of past experience? Why or why not?

4. Who should be ultimately responsible for the training? Who should perform the

training? Explain.

5. Describe the current ongoing education and training plan for lending staff?

6. What steps are taken to ensure the trainee has retained and applies the content

learned in training?

7. How often do members of lending staff complete refresher training? Is this

adequate? Why or why not?

8. Should lending staff be periodically evaluated to ensure retention of training

material and ability to apply the content to daily functions? If so, how often?

Briefly describe the content of the evaluation. If not, please explain why.

9. If lending staff fails to meet the requirements of initial or ongoing training, what

should be the consequences, if any?

10. Describe your ideal training program.

essential lending training william jason goodwin arkansas tech university · 2018. 8. 28. ·...

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