The merger of four regional farm credit associations in Michigan into one association in January 2000, with the added merger of the Upper Peninsula and Northeast Wisconsin in January 2003, created a dynamic financial institution dedicated to supporting rural communities and agriculture.
GreenStone President and CEO Dave Armstrong reflects on the last 20 years, and the milestone decisions that shaped the company and his vision of success.
When the four farm credit associations in Michigan’s lower peninsula merged in 2000 to become GreenStone Farm Credit Services and the addition of Northeast Wisconsin in 2003 each organization brought a strong culture of service to the new organization and that was to become the foundation of who we are today. When you have people who have a servant’s heart with an affinity for rural communities and agriculture, it becomes a perfect match of cultures to carry out the Farm Credit mission.
The merger allowed us to build on that cultural foundation with a diverse set of business skills. Prior to forming GreenStone, we (staff and directors) had all been talking about the changes happening in the agricultural industry. We were all observing it, but none of us had the scope, scale and ability to really tailor our products and services to the different niches within the general portfolio. The merger gave us that ability, and allowed us to segment our expertise and delivery services to provide better customer service.
For example, we didn’t just create a country living customer category, we actually developed specialized financial services officer positions to focus on these customers and become experts at the unique solutions they need. We developed a different set of country living loan standards, and we aligned new interest rates and programs specifically for country living customers. Before that, we had to push country living customers’ needs into our general farmer framework which didn’t fit their individual needs like our segmented program does today. On the heels of doing this country living segmentation, our larger agricultural customers were evolving and had specialized needs that required us to customize underwriting as compared to smaller loans. These customers and their agri-businesses required more sophisticated financial management, which once we had in place, opened the door to new capital markets customers.
Our venture into capital markets and the employee expertise it has attracted continues to be a very rewarding decision for both the cooperative and our members. Capital markets is currently experiencing a high rate of growth, which has helped to balance GreenStone’s overall growth and portfolio management, particularly in recent years when the agricultural economy has experienced greater challenges. Because of GreenStone’s segmentation, with a focused delivery structure is spread across traditional agriculture, country living and capital markets, it has helped diversify the company’s income stream and portfolio risk.
The merger made us the fourth largest Farm Credit institution in the System at the time, which gave us the scale to tackle this whole broad customer segmentation project all at once. It was the right thing to do, because we continue to see that the unique needs of all these different customers only continue to grow -- and we have continued to grow the staff and the programs right along with them.
Facing change as a team
The merger forced all the predecessor organizations to change compensation systems, workflows, products, training and reporting lines. There were teams we had to tear apart and reconfigure, and there were some competitive dynamics involved. While everyone understood that the merger was the right thing to do, all of the human issues that go along with any big change were also real concerns for quite a while.
As a company leader, I tried to really listen. Several of my direct reports had been in senior level positions at their predecessor associations, with a great deal of experience and success in their own right. I did my best to defer to their expertise, use as many of their good ideas as possible, and ask for their support and buy-in for what we needed to accomplish as a team. I really tried to make it a collegial effort; I did my best to make it about the team. That is still the model I encourage all new GreenStone leaders to continue to use today.
The future of farming
GreenStone has been working very hard to help develop and support our young, beginning and small farmers (YBSF). As part of the Farm Credit System, we have regulatory requirements to meet the needs of this customer group, but with or without a regulation, we would be focusing on what we can do for YBSF because it is our future. It’s just the right thing to do to help educate them and get them started – not just for GreenStone, but for the sake of the industry.
The diversity of farmers is continuing to expand. The age is increasing and we just need more of them! The production practices vary and consumers are eager for choices, and plants and animals know no difference in ethnicity nor gender – GreenStone is growing and developing new ways to support them all!
The right direction
GreenStone has improved over the last 20 years. Over time, we’ve upped our game, grown market share, and have been recognized as a leader in the industry. The transition has raised the bar in terms of the people who now want to serve on the Greenstone board of directors to help lead us toward the next 20 years, which is reflected in a very talented slate of director candidates, year in and year out.
As part of the direction they provide to GreenStone’s leadership team, the board of directors is responsible for approving annual patronage payments to our cooperative members. In 2005, we started to consider ways to provide more value to customers, while retaining enough financial latitude in case the company ran into some tough financial years. We set the program up, almost identical to the way it’s done today, with initial patronage targets at a conservative 15% to 20% of our net earnings. We have been blessed to be able to bump that up over time due to strong financial performance, to where we now return up to 50% of our net earnings to our members! We still believe that is a sustainable model. Interest rates have dropped, and growth continues, even during the current pandemic; we are on track to return strong patronage payments to our members once again next spring. I can’t think of a more direct way to show our members the benefit of the merger just 20 years ago.
Technology takes us forward
GreenStone was one of the very first in the Farm Credit System to have our own technology shop. We realized we couldn’t find the software and systems necessary to effectively serve our delivery needs, so we made the decision to hire technology developers and said, “look, we can’t find the platforms that will serve our process delivery needs, so we need you to create a proprietary product for us”. There was a lot of blood, sweat and tears for a while, but GreenStone is where it is today because of the decision to not let technology be the roadblock holding us back.
We have been able to develop customizable programs, products and processes, which has allowed us to do business the way our customers want to be served, instead of the way someone else’s system dictates. In addition, we soon got the attention of other associations and took another step to form collaborations to supply technology solutions to them.
Many of the basic things we do today are the same as when I started my career 40 years ago. We always look for opportunities to gain efficiencies that will help solidify our value proposition to our customers as a competitively priced, dependable lender, in good times and bad. But the technology-fueled efficiencies, like what our members can produce on an acre of ground today compared to 40 years ago, is unbelievable, just like the amount of loan volume each employee can service – with the same customer-focused relationship - is really unbelievable.
Of course, GreenStone’s growth over the last 20 years is not strictly about technological innovation or portfolio diversification. These are just a few examples to emphasize what is ultimately behind our triumphs. Our success is due to our ability to adapt, seize upon, and use proven technologies without compromising what got us to the dance in the first place: our people, our culture and our four core company values:
•Customer First •Deliver Quality •Get Involved •Do the Right Thing
Dave Armstrong: What I learned 20 years ago holds true today…
1) Farmers are the same wherever you go. They are adaptable, and they persevere. Farmers are smart, not afraid of hard work, and tremendously resilient, which I feel is key to our success and the success of the industry.
2) Change is hard. It was very difficult during the merger and it is something we still experience when going through change, today. Human nature has not changed much over time, however the pace of change has certainly increased.
3) Do what you say you’re going to do, when you say you’re going to do it. If your plans change, call the person you were meeting, and make a new agreement. I’m a list-maker, very task-oriented. You know what needs to be done today to move the ball down the field for tomorrow, and you just keep moving. You keep blocking and tackling. You keep doing the little stuff, and you keep your word.
4) You don’t have to be big to be good. Even if you’re a smaller organization, you choose to run your operation a certain way to achieve necessary efficiencies. The bottom line is the value that you produce, and there’s more than one way to do that. GreenStone is now the seventh largest Farm Credit association, yet we are one of the leading associations across the nation, ahead of some much larger associations, in terms of our efficiency metrics. I feel good about that because it tells me our business model does a good job of paying attention to our cost of delivery, while providing service to our customers and fairly compensating employees.
5) Technology is our future. If we think it through, and we leverage it in a thoughtful way, technology can be a game changer – which our farmers are learning every single day (and probably faster than we are). I want to continue to implement the use of technology to get more efficient and to provide much better service to our customers.
6) The most important thing in this business is our relationships with our customers. As important as technology is, I don’t ever want to lose the human touch that we’ve brought to this marketplace. I don’t want us to become just another app on your phone. I want people to still be able to call and talk to a human being. The money that we lend, the profit that we earn and the patronage that we pay is just how we keep score. It’s the people that matter.
To view the article in the online 2020 Summer Partners Magazine, click here.