Each month we are highlighting at least one NACUSO member by interviewing one of their executives. The format is meant to be fun and informative. This month we are excited to share the story of Xtend. Enjoy!
PART ONE: Life Story and Experiences
What’s your current position and can you give me a brief overview of what it is you do in your work?
I am the President of Xtend, a multi-owned CUSO headquartered in Grand Rapids, Michigan. Xtend’s core business is providing shared resources to credit unions and developing relationships with industry partners that are looking to expand their markets in the mid-market space. As the senior executive, my responsibilities are centered on developing and driving our vision, providing mentorship to my staff and ensuring the Board of Directors and Management are in synch tactically and strategically.
What would you say most motivates you to do what you do? What are you most excited or passionate about?
We started our CUSO 14 years ago by tossing $60K into a hat with a goal to build something special that could help credit unions survive, and even thrive in a consolidating market. Now that we are a successful company approaching 75 employees, I am motivated by two things: looking for that next disruptive innovation that we can bring to our mid-market customer-owners, and leading a group of credit union professionals, a significant number being millennials, to work on the business plans of those customer-owners.
It might sound a bit Pollyanna-ish, but having the opportunity to work with credit union professionals on a daily basis, both internally and externally, and wearing a bunch of hats in the process – mentor, peer, business partner and friend – keeps me motivated on the business side. On the personal side, spending time with my family (wife of 29 years and three sons in college) and friends when everyone’s busy lives afford us that opportunity, are moments I cherish. Time spent golfing, fishing, hunting and camping top that list.
I want to hear the story of how you came to work with credit unions. What attracted you to work for Xtend?
My introduction to the industry came when I was working at IBM Corporation back in the 90’s, when I was assigned to work with West Michigan Computer Corporation (WESCO, which is now CU*Answers) as a client. By the time that Randy Karnes came from FiServ to become the new CEO of WESCO, I had left IBM and joined an IBM Business Partner firm. Over time, my relationship with Randy and his senior team grew from business partner to friendship. In late 2002, Randy approached me about a new venture that was being started by WESCO and twelve credit unions. It was called Xtend. The opportunity intrigued me, the industry intrigued me, the cooperative CUSO business model intrigued me, as did the idea of leading an entrepreneurial start-up business. So in March of 2003 I came on board to lead Xtend.
Now if we can go even further back, where did you grow up and what was it like living there? Where did you go to school?
I was born and raised in Grand Rapids, Michigan, in what I would call a very, very modest upbringing. It was a great place to grow up – we had 4 seasons, we were 40 miles from essentially a “fresh water ocean” (Lake Michigan), I walked to school or road a bike when I was finally able to afford one, and I spent most of my free time playing sports or spending time in the outdoors. When I graduated from high school, I was accepted at my dream school, the University of Michigan (at least I thought at the time because I was a huge U of M fan and I even have season football tickets still). I planned to study medicine. But several weeks before school started I had a feeling in my gut that U of M wasn’t the right place for me, so I enrolled at Michigan State University. I felt more comfortable there and it was closer to home. But I lasted just two semesters there (and got a LOT of grief for still being a U of M fan) before transferring to Hope College in Holland, Michigan for my last 3 years. I played on the baseball team, joined a fraternity, met my best friend and best man at my wedding, reconnected with the gal that would become my wife (29 years and counting) and graduated with a BS in Math in 1985. I joined IBM Corporation immediately after graduation and was assigned to their Grand Rapids, Michigan branch office.
Who were your mentors along the way? People who deeply influenced who you are, what you believe in and what you’re committed to in your work and life? Tell me about them.
I have been blessed with two sets of mentors – those in my personal life and those in my business life. In my work life, my biggest mentor is Randy Karnes. Although his style and mine are quite a bit different, his passion for our industry and his tenacious commitment to the success of every credit union regardless of size has been invaluable for me to observe over the past 15+ years. Through Randy, I was able to meet industry giants like Ed Callahan and Chip Filson and I am thankful to have been exposed to their industry passion as well.
In my personal life, I have two special friends, Steve Keizer and Scott Anair, who have been significant forces in my life. I joke with them that they are the brothers I never had. When our busy schedules can accommodate, we golf together, hunt together, fish together, have a cigar together, laugh together, cry together, celebrate together and share a bourbon or two together. Each has been successful in their careers, and each is a tremendous father to three children. Between us we have nine kids and have been married more than 25 years, so helping each other manage the highs and lows, usually just an ear from time to time, has been a god-send for me personally.
Finally can you share something interesting about you that would surprise our readers? It can be anything, a hobby, an adventure, sports, the most embarrassing thing that’s ever happened to you,
I think my music section would surprise even some of my closest friends. It might go back to my days playing French horn in the all-city band in 6th grade, but I really enjoy music of MOST genres. On my play list you will find Reggae, Mozart, 70s and early 80s rock, the American Graffiti soundtrack of 50s rock-n-roll, Pink Floyd, Tchaikovsky, The Bee Gees, The Moody Blues, The Alan Parsons Project, Neil Diamond and Mannheim Steamroller. My dad listened to country and western but I think that gene was the only music one that didn’t get passed along.
PART TWO: The CUSO Business Story
Tell me the story of how your CUSO was created – the early days.
Our CUSO was started literally by 12 CEOs that were willing to toss $5000 each into a vision to build something special that didn’t exist in the mid-market credit union space at the time. The fact that we have never had to recapitalize is something we are very proud of. We hired our first employee when we convinced three credit unions that we could process their daily back office exceptions for them. Once they said yes, we shifted our focus to adding a 4th and a 5th and a 6th, but not by hiring more folks, by working on new processes and on new tools with our partners at CU*Answers. We started low-tech and high touch, and today we have worked with nearly 200 credit union back offices at one time or another, and we have used that same strategy to build our contact center and digital communications business units.
What were the key relationships that mattered most? What were the key sources of support or resistance you encountered?
CU*Answers was and is an avid supporter. Although it was frustrating that prospects, clients and even owners had a hard time remembering that CU*Answers and Xtend were two completely different companies with different owners and Boards, it also helped get Xtend a significant amount of exposure, particularly in the early years. As CU*Answers helped start other CUSOs like CU*Northwest and CU*South, each became a symbiotic partner very early on. Vic Pantea was the CEO of NACUSO back then and, was a strong advocate of the value proposition Xtend could bring to the table and introduced us to some strategic partners in the industry. And our access to Chip Filson and his Callahan Team from our partnership with CU*Answers gave us great industry insight.
What have been the greatest successes in your opinion?
There have been so many. I guess the biggest success is the fact that we started with a napkin drawing and have grown it to be a trusted partner of over 200 credit unions around the US. Some of that is luck and timing – but picking great partners and the sweat equity has been the secret. One of our fundamental value props is disruptive pricing and being successful in the mid-market you have to innovate on price. For example, when we launched basic bookkeeping resources, we started offering it at only $150 a week. You would think that’s a no-brainer but in the credit union’s mind you are taking Sally’s job away. But really we weren’t. Too many times you hire 1/3 of a body to do a specific function and try and find a way to fill up their day into a full time job. We wanted people to avoid job creep and consider a “shared resource”, but not just to build Xtend, to help remove perceived barriers of entry for them to offer new products and services with the team they already had.
Our original “napkin design” was focused on out-tasking general services. Now 2/3 of our business is centered around trying to help credit unions drive more revenue to their balance sheets with loan growth, increased member satisfaction, expanded hours of operations, meeting more members on their terms with remote services.
On the personal side, the fact that we have hired around 125 – 150 employees over the years and for a lot of them it was their first professional job. They were new to the CU industry and had no idea what a CU was. The ability to bring them in and build an awareness of our industry and build a pool of CU professionals is something I’m very proud of. It doesn’t mean anything to our bottom line directly, but we feel it’s been a big contribution to the movement and indirectly increased our value proposition.
PART THREE: Reflections and Lessons
If you could start your CUSO all over again, would you do anything differently? Why and what would you do?
That’s a good question. I’m not sure we would have done anything dramatically different. Obviously the industry has changed in 14 years, maybe we would have been more aggressive marketing outside of our space that we were comfortable in. We were leveraging CU*Answers toolset to do our shared resources. So if we were to do it all again, I might have spent more time convincing other core data processors to work with us at the same level that CU*Answers did. But it was the Board of CU*Answers and Randy who had the vision to start this experiment, so it might’ve been hard to replicate the same level of commitment that it took on the technology side for us to scale the way we did just focusing on one tool set. I would be remiss if I didn’t give kudos to Randy and the early movers for their vision in seeing the need for a company like Xtend.
Finally, when you think of the future, what gives you hope and what makes you concerned?
The concern I have is that there are too many credit unions, from a board or leadership standpoint, that have resigned to the fact that they are giving up and have no choice except merge or close their doors. Whether it’s compliance, competition, a changing demographic or simply a lack of passion, they are tired of fighting the good fight. Financial cooperatives have been passed down to us by prior generations, and I am concerned about losing that alternative in a growing number of communities.
At the same time, what gives me hope is that there are companies like Xtend and other CUSOs that can rally mid-market players to continue to fight for their survival. CUSOs have helped bring a spirit of entrepreneurship to our industry, and when they focus their business model to mirror that of a credit union – ownership and a “charge when you have to, not simply because you can” philosophy, they can truly be game-changers. We have also been involved in providing services to help several start-up charters get off the ground. At least a half-dozen that our cuasterisk.com network has helped to facilitate over the last 5 years that I can think of. And there’s more to come.
