McDonnell Bows Out On Top; Search Is On for New CEO

VIENNA, Va. – Brian McDonnell has decided now is the time to leave what is arguably one of the most prestigious credit union positions. McDonnell, 60, stunned the industry and surprised his board when he announced two weeks ago that he would be stepping down at the end of the year as president/CEO of the $22 billion Navy FCU, the world’s largest CU. He has been with the credit union for 35 years, including eight and a half as CEO. “You know this is one of those situations where you have to honor the individual’s request to move on. We clearly have been very, very fortunate to have someone of Brian’s quality to be part of our credit union for so long and part of the credit union movement for so long. It’s a huge loss for us,” said Vice Admiral John A. Lockard, USN (Ret.), who is now an executive with Boeing and Chairman of Navy FCU. Lockard and McDonnell are longtime friends and Lockard has been McDonnell’s chairman ever since he took over as CEO. “I’m very grateful to him,” said McDonnell. Neither McDonnell nor Lockard would give details on exactly how Navy FCU will find McDonnell’s successor and what the timetable is. Both did say the search will be internal and external and likely span the nation. “We’ll do whatever it takes to get the right person. We really haven’t at this point finalized our plans,” said Lockard. McDonnell said there will likely be a search committee, and there’s a chance he could be on it. There’s no hidden reason or agenda for this move, said McDonnell, the time is just right. In fact right off the bat he wanted to put an end to any speculation that he was maybe interested in pursuing the top job at CUNA Mutual, where he served as a board member for five and a half years before resigning earlier this year. “I’m not at all interested,” he said. McDonnell resigning from the CUNA Mutual board may have portended his resignation from Navy. When that announcement was made back in June he said, “I don’t have enough time to go around,” noting all the changes at Navy that were taking up more of his time. McDonnell is very clear that he is leaving for one very important reason, his family. The husband, father, and grandfather wants to spend more time with his wife Pat, his three sons, and his two grandsons who he describes as “just perfect human beings.” “It’s been a great 35 years. I’ve enjoyed every single moment of it, but it’s time to be fair to my family,” he said. He looks forward to travel with his family and spending more time pursuing personal interests like bicycling. He’s bicycled in Ireland and Tuscany and other far away locales. He also wants to help his wife realize her dream of running a marathon in all 50 states – she’s at about 35 already. As far as his credit union career, he’s pretty sure it’s over. “I may get involved in something else later, but more than likely it will be helping one of my sons on some business. I’m not one of those people who has to work until they’re 85.” McDonnell hails from a middle class upbringing in Northeast Pennsylvania where his father worked as a state trooper. He was one of four kids in what he terms a very normal childhood. After four years as serving as a Navy Lieutenant as a young man, McDonnell was in the nation’s capital working on his master’s degree at George Washington University. He wanted a job to help him stay in the area until he completed his degree. His boss, a Navy Captain, was on the board of Navy and got him in the door where Navy FCU CEO Dick Cobb offered him a few positions. “I took one with the intention of remaining there for a short period of time. I didn’t even know what a credit union was at the time. I did belong to Navy but didn’t understand the difference between a credit union and a bank,” said McDonnell. McDonnell worked under three CEOs at Navy – Cobb, Joe Schoggen and Tom Hughes. He says he took something from each of them. “Cobb was a strict authoritarian who taught me about how systems work. Schoggen was very much a human resources person who loved people and doing things for people. Tom was more or less my mentor for external relationships,” said McDonnell. So what’s his style? “I’m a very caring CEO. I think you have to take good care of your employees. I’ve always made an effort to do that. I consider it one of the things I’m very good at,” he said. He still personally awards superior performance awards to employees going above and beyond, and said he dedicates a lot of time to personnel issues. One of the first things he does each work day is hold a management meeting in the morning for about 20 minutes to keep the pulse of the operation. “We share with ourselves what’s going on in our respective areas. I’ve been lucky to have a great management staff,” he said. McDonnell has a demanding schedule. He has external commitments, such as board duties for the Consumer Federation of America, NAFCU and up until recently CUNA Mutual. He also tries to visit all 105 of Navy’s branches every two years, so the airline miles pile up. One summer he may visit the Far East locations in countries such as Japan, and the next summer he visits European locations. In the months in between he visits different locations in the U.S. A Good Time to Depart? Taking a step back, one could argue that McDonnell is leaving on top. The CU has taken off under his guidance, growing from $8.7 billion the day he took over the corner office, to $22 billion now. But not only that, Navy FCU has been very nimble under McDonnell, expanding into new areas such as trust services, business services, investment and insurance services, tax services, and title and settlement services. McDonnell pushed for Navy to form its first ever CUSO, Navy FCU Financial Group, where many of these services are offered. The credit union also boasts the largest usage of online banking (over one million members) of any CU. McDonnell beams when talking about the CU’s ability to serve military personnel anywhere in the world through Navy’s online services, branch offices and card products. “We have the infrastructure in place to do that even better than large banks. We have a huge computer system here in Vienna that’s available for members 24/7. These kids can now use the Internet at sea. They can do bill pay, take out loans, transfer funds,” he said. Whether in some far off country or in the states, Navy membership will always find their CU open, he said. McDonnell is a strong believer in finding a way to stay with members throughout their lives, even if they’re in one of their unprofitable life stages. He talked about what he calls the CU’s primary lifetime financial services plan. “Our whole strategy is to sign up these kids at 18 and then provide the services they need throughout their lifetime. We don’t make money at it initially on a transaction account from some young sailor, but in the long run we do make money and are able to give back.” Leading the world’s largest CU of course comes with operational pressure, but also political pressure. McDonnell has always been outspoken on industry issues he feels passionately about, but he has to deal with the stigma of being too big to realize what other CUs are struggling with. “It’s always been difficult. I’ve had to be careful to contain myself, of being too frequently in the middle. People like to say `they’re so big they don’t know anything about real credit unions.’ We consider ourselves the largest small credit union. I can’t help the fact that through good service we have grown the way we have,” said McDonnell. So what in the industry concerns McDonnell now? McDonnell believes there are some credit union pretenders out there that really have no interest in being a credit union. “The ones that want to be mutual savings banks, I wish they would just do it already and leave the rest of us alone. They’re hurting us in terms of reputation. An example would be those with wide open field of memberships that aren’t articulated or with some regulator involvement in part of some agency. I think that’s a potential mistake,” said McDonnell, who is not in favor of boards being able to set their own FOM as has been proposed in some states. He worries wide open FOMs and CUs that are too profit-oriented are giving bankers good ammunition in their attacks on CUs. “We have to continually put socially responsible service first and foremost. If we become too profit oriented we become nothing more than a bank. There has been some drifting,” he said. He’s also not crazy about the rush to bring secondary capital to credit unions. “It’s something that credit unions have to be very careful of in terms of protecting the assets of their membership. Obtaining secondary capital from non-members is very dangerous. You have to be careful you’re not putting at risk the funds of your membership,” he said. With all its assets, Navy of course carries a big stick when it comes to trade associations. McDonnell thinks CUNA and NAFCU complement each other well. “The only trades I concern myself with are CUNA and NAFCU. They both do a good job in their own way. NAFCU has a very strong board that has a lot of involvement in what’s done. CUNA has a very strong CEO who is probably the best lobbyist in Washington. Sometimes I wish they would work closer together. I don’t think they should be combined,” he said. McDonnell has served on the 11-person board of Navy FCU since he’s been CEO. His term doesn’t expire until March 2006. “I will remain a Navy board member if they need me. I’m not generally in favor of a CEO staying on the board looking over the shoulder of the new CEO,” said McDonnell. [email protected]