During my initial interview, I was asked by our CEO if I thought growth was important–a fundamental question that he insisted he and his CFO be in agreement on. I was confident and had zero hesitation in my answer: a strong and resounding yes. Little did I know that I would continue to wrestle with this question well into my career.
Growth, growth, and more growth
I started in the movement at a small, SEG-based credit union. Membership was declining, loan demand was flat, and breaking even was a win. At the time, it was critical our small credit union grew. Not just as a measure of how the management team performed, but to ensure the membership would be served as they both expected and deserved. My management philosophy really formed during my time there, and that philosophy was quite simple: grow, grow, grow.
We all know the old saying, “If you’re not growing, you’re dying.” While that saying holds true, the reality is credit unions can ride out painfully long and slow deaths, simply delaying the inevitable.
When I moved on to a larger credit union, growth took on a different meaning. Our credit union was experiencing significant organic growth and the challenge now became managing that growth. Quarterly, the Credit Union League of our state would release “Top 10” rankings from Callahan & Associates, and it became very competitive for the management team to compare our growth numbers to our peers. Then one day a board member rightfully asked, “But why? Why are we growing? What is this doing for our membership?”
What purpose does growth serve?
This is the tug-of-war that now presents itself but that has always been under the surface for me. Should we be growing? If we are growing, who is it best serving, the management team or the membership? How much growth is too much growth?
I won’t pretend to have answers to these questions, but it’s important that they are asked and given serious consideration. We are currently on the eve of what many believe to be unprecedented consolidation in the credit union industry. These questions are now more important than ever.
Most can agree that credit unions must grow to survive. Every day new products and delivery channels are demanded by our membership, and every day our regulatory burden grows. If some economies of scale are not reached, offering competitive rates to members becomes increasingly difficult, if not impossible. If we can agree upon this conclusion, we’ve only just scratched the surface of justifying growth.
The real concern lies within the level of growth and the strategies used to achieve it. What is the purpose of community charters, multi-state mergers and aggressive branching strategies? Are management teams building their careers, the larger their asset size, the larger their paychecks? Or are these strategies implemented to better serve members through better rates, lower fees, and improved technology?
One such growth strategy that has caused concern is the trend of mergers. While mergers can make good business sense, some seen in my state lately have left members scratching their heads. How do credit unions maintain local control when merging with a partner in a different time zone? Credit unions rely on being local, trusted financial institutions and with every out of state merger that competitive advantage fades.
Compounding the growth by merger issue are failed merger attempts with communication tactics that assert that consolidation is necessary for survival. After the mergers break down, subsequent communications state that the credit unions, thankfully, were strong enough to remain independent. As a cooperative movement we all suffer when the public trust in credit unions is eroded.
However, there are plenty of mergers that were completed for and with the support of the credit union’s membership. Providing those members with expanded branch networks, better delivery channels and broader product offerings. In some cases, making it possible for poorly performing credit unions to maintain local control and continue to serve their members with little disruption.
Don’t leave your current members behind
If you didn’t see this coming, there is no right answer. The key for our Board of Directors and management team is to simply ask, “how does this benefit our current membership?” We ask this question in everything we do. Merger opportunity? How does it serve our current members? Branching opportunity? How does it serve our current members? New investment opportunity? How does it serve our current members? Insurance CUSO? You get the idea.
As our industry matures and consolidates, it will be easy to forget that simple question. Somewhere in there lies a balance. We can all have successful, rewarding careers while protecting the interests of our members. After all, our members are why we’re all here in the first place.
How does it serve our current members? If we let that phrase drive everything we do, I am confident the movement will be protected well into the future.