The Credit Union's Approval Bottleneck
Riverview Credit Union operates six branches and employs 95 people. The vice president of branch operations directly supervises 14 people: six branch managers, four loan officers, three support specialists, and a marketing coordinator. Consumer loan applications under $25,000 must be approved by a three-person committee at headquarters that meets twice weekly. Average approval time is nine business days; a new competitor advertises 24-hour decisions. Branch managers say they cannot resolve customer problems without escalating, and loan officers often bypass the VP to call committee members directly. One branch reports a delinquency rate of 4.1% against a 2.2% system average; its manager supervises 11 employees. In the annual survey, the item 'I know what is expected of me at work' fell 18 points. The CEO wants faster decisions without increasing credit risk, and the board has flagged rising operating expenses. A consultant has proposed adding two regional managers and delegating small loans to branch managers.
1. Diagnose the structural problems using span of control, centralization, and departmentalization.
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The VP's span of 14 is too wide for the variety of work supervised: six branch managers, four loan officers, three support specialists, and a marketing coordinator perform different tasks in different locations, so the VP cannot provide the coaching and coordination each needs. The branch manager with 11 direct reports and no loan authority faces a similar problem. Centralization is also mismatched to the market: headquarters approval of every loan under $25,000 is appropriate for consistency and credit risk, but a nine-day cycle against a 24-hour competitor is a serious responsiveness failure. The bypassing of the VP is a symptom of unclear decision rights, not employee disobedience. Departmentalization is functional at headquarters but geographic at the branch level, and the two are not linked by clear service levels. The survey drop on 'I know what is expected' fits role ambiguity and weak chain of command. The structure is not simply too tall or too flat; it has too many decisions pushed upward and too few explicit boundaries.
2. Evaluate the consultant's proposal to add two regional managers and delegate small loans. What decision rights and controls should accompany it?
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The consultant's proposal is directionally sound but incomplete. Adding two regional managers-each supervising three branches-reduces the VP's span to about five or six and creates a layer close enough to coach branch managers. Delegating small loans can cut approval time, but it must come with decision rights: for example, branch managers may approve unsecured consumer loans up to $10,000 for applicants above a specified credit score and debt-to-income limit; anything outside those criteria goes to the committee. The 4.1% delinquency branch argues for a phased pilot, not a blanket rollout. Controls should include a sampled post-approval audit, monthly exception reports by branch, a system-enforced credit-score cutoff, and training with certification before authority is granted. The committee should shift from approving routine loans to setting policy and reviewing exceptions. Without these controls, decentralization would trade slow decisions for inconsistent credit risk; with them, the credit union can measure whether faster decisions actually improve service without raising delinquency.
3. What coordination mechanism would you add to prevent loan officers from bypassing the chain of command?
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Bypassing persists when the formal route is slower or unclear. A decision-rights matrix would specify who decides, who must be consulted, and who is informed for each loan size and exception type, so loan officers and committee members can stop using informal calls. A service-level agreement between branches and the credit committee-for example, decisions within 48 hours for complete files-gives the formal channel a credible speed advantage. The committee can also designate one rotating liaison to handle urgent questions, creating a legitimate fast lane. Escalation should require documentation in the loan system, which makes bypass costly and visible. Finally, the VP should review bypass incidents not as discipline problems but as data: if a branch repeatedly circumvents the process, either the process is too slow or the branch lacks capability. Coordination improves when the formal structure is both clear and usable.