Around the time the Major League Baseball season was supposed to start, Lakeland Credit Union (LCU) welcomed a free-agent signing of its own.
Kelly McGiffin started work as LCU’s new Chief Executive Officer (CEO) in April. He has been involved with credit unions since 1976, and has spent almost 25 years as a CEO with four different operations.
He is also passionate about baseball. He was an associate scout for the San Diego Padres for nine years; and he coached the Canadian National Men’s Fast Pitch softball team for seven years, winning a gold medal at the Pan Am games in 2003 as well as several world championships. “I think I have seven or eight rings now,” he said.
He played oldtimers’ baseball until last year, and continues to work as a hitting instructor.
McGiffin, originally from BC, had retired from the business world after a high-profile 10-year stint as CEO of First Ontario Credit Union in Hamilton. During that time he took the institution from a $1 billion company to $5 billion.
“You go into a large area like that, and it’s sort of the home of the banks in Ontario,” he said. “It’s a tougher marketing approach because people don’t know what credit unions are. They grew up with banks. Once they understand what a credit union is, which is an owner-operated, democratically-operated entity, it changes your approach.”
When McGiffin started at First Ontario, the organization was coming off of a long and bitter labour dispute. His first order of business was to rebuild the company’s culture and restore trust between management and employees.
“They were looking for somebody to fix the cultural side, not even thinking they had a chance to really grow much more. I looked at it and felt the cultural side will be easy—that’s a matter of treating people with respect, putting the past behind you, and focusing on what you can be, not what you have been,” he said. “We were able to turn the culture around very quickly.”
But that was in 2008, and the financial industry’s major crisis was just beginning. McGiffin’s strategic plan for the credit union’s growth began to look risky as the facts and forecasts it was based on looked less certain.
“But we held strong to our strategic plan,” he said. “I convinced the board we could still do this and actually make giant strides forward as everybody else was pulling back.”
“We grew more in that first year than we had the last several years.” he said.
After 10 years with First Ontario Credit Union, and now in his early sixties, McGiffin thought it was a good time to retire. But the sudden stop after ten years at full speed was too hard to manage, so he’s happy to take on one more CEO position.
He is happy to be at the helm of a medium-sized operation with an 80-year history in the community.
A credit union’s profits go to two places, he says: one is into reserves to make sure the institution is strong and safe; and the other is to the community.
“When you come into a credit union like Lakeland Credit Union that’s been around for 80 years and has a tremendous record of financial success and good financial decisions and real participation in the community,
you can tell statistically that they’ve already made a name for themselves,” McGiffin said.
“People understand what a credit union is here. And I think we have a penetration of about 50 per cent of the general population, which is a really high percentage for any business to have.
“It’s pretty rewarding to see the success that’s happened in Lakeland, and the way that the community has really gravitated towards those cooperative values and principles.”
McGiffin said LCU is in a strong financial position—one of the strongest capital positions among credit unions in the country—thanks to the board’s decisions over the years to maintain strong reserves.
“They’ve taken those heydays of oil and gas and put money away
for a rainy day. And as I said to them, well, it’s not just raining, it’s pouring,” he said. “It’s a really strong financial organization that I think can weather the storm over the next couple of years.”
He intends to spend that time fleshing out the “very strong” LCU team to meet the community’s needs and the industry’s challenges.
One of the challenges is dealing with shrinking margins. There was a time when a financial institution’s margins—the difference between what they pay for money and what they pay out—were in the double digits. A credit union these days works with margins of about 2.6 per cent.
“We’re starting to see that margin business collapse, and there’s a couple of reasons for it,” McGiffin said. “Number one is consumer education. People are becoming financially literate and they no longer expect to get nothing on their deposits and pay large interest on their loans and mortgages. You’re also seeing an escalation of competition with digital access. People can move their money around much more effectively, which has created much greater competition. So as a result you’re seeing better rates on the deposit side and better rates on the mortgage side, which is compressing margins across the board.”
Credit unions have to look beyond margin for their profitability, which means improving revenue through volume.
One advantage to the credit union model, McGiffin says, is that while the institution needs to be profitable,
it doesn’t have to maximize its profit. As long as it is strong and stable enough to serve its members and its community, it can fulfill its mandate.
“God love [the banks], they provide great services for many clients, but their motive is profit. At the end of the day, they are a private organization that is there primarily for their shareholders. And a maximum return is what they are all about,” McGiffin said.
“Nobody buys a $25 or $5 share in a credit union and expects to get rich off of it. It is really a cooperative approach, and so it can’t help but change the way you deal with people. They’re not just customers, they really are member-owners of your organization.”
McGiffin says his return to business wasn’t because he was bored with retirement, but because he still had some fire burning in him. He sees LCU as an opportunity where he can offer a bridge between the credit union’s history and its future.
“This is not necessarily a long-term role for me, but I think it fits in trying to help them to make their next path,” he said.
“I know the business extremely well. So looking at the challenges ahead—both margin decline, which all the financial institutions are facing, but also the economic challenges that Canada faces, that oil and gas face—those are the challenges that I gravitate to. When you’re in a leadership role, it’s not about putting your feet up and coasting—those are the jobs that become extremely boring. You want to get in and help to find solutions. And with 44 years in the business, almost 25 as a CEO of varying size credit unions, I felt I could offer some real assistance in these communities.
“And then secondly, full retirement. Get it out of my system,” he said.
His wife and family are holding the retirement fort on Vancouver Island while McGiffin commutes. Professionally, he feels very much at home in the Lakeland and with LCU.
“It’s nice to be back in a mid-sized credit union that still operates like a small credit union. And having a board that feels exactly that same way is refreshing for me. And then to work with a team that is likewise in terms of their sincerity in their approach. I think it’s got the makings of another extremely successful 80 years,” he said.