Cooperative Design’s Two Unmatchable Advantages



Living in a forest sometimes keeps participants from seeing the factors that create its growth. For the credit union system, there are two areas where they should have the upper hand in the ever-changing world of financial options.

Ownership matters

We live in a commercial, social, and political world in which success is often attained by accentuating differences–through branding, sloganeering, or pandering to individual fears.

Cooperatives are built on peoples’ need for community. Instead of fueling division, credit unions rely on shared effort. When people feel included, these efforts build ownership. Ownership is more than “I am a member of.” It is being a part of something bigger than oneself.

Members are choosing a financial option that promotes individual and local opportunity, trust, and prosperity. The inclusive spirit of owning integrates diverse needs and persons in mutual efforts for a better community.

The power of relationships

In a brief article on management strategy, author Greg Satell references a McKinsey study that points out the change in the asset composition of leading American firms and why this requires a different approach to leadership:

“In 1983, McKinsey consultant Julien Phillips published a paper in the journal, Human Resource Management, that described an “adoption penalty” for firms that didn’t adapt to changes in the marketplace quickly enough.

“. . .research shows [that] in 1975, during the period Phillips studied, 83% of the average US corporation’s assets were tangible assets, such as plant, machinery, and buildings, while by 2015, 84% of corporate assets were intangible, such as licenses, patents, and research.”

By NCUA rule, credit unions’ “tangible” assets (buildings, equipment, fixed assets, etc.) are limited to 5% of assets or less. The structure of loan and investment assets is self-liquidating. As with other corporations, the most vital cooperative “assets” today are intangible, but not patents or research. It’s about people.

One of these is employee culture especially when credit unions define their competitive advantage as service. But the most valuable and hardest to quantify is the member-owner relationship. This is more than the total of product balances, length of membership, or volume of transactions. A relationship is members’ ongoing belief that a credit union’s decisions are in their best interest.

When a credit union’s most precious advantages are intangible, effectiveness is directly connected to people—what they believe, how they think, and how they act.

This strategic imperative is counter to prevailing themes that cooperative competitiveness is finding the best technology, skill with data analytics or AI applications, or the dominant theory that size is essential for success. All may help to some degree but are not unique co-op advantages.

Ownership and relationship are two sides of the same coin. Without either, the member becomes just a customer and the credit union is one option of many in the financial forest.

The network advantage

Satell’s article highlights another credit union system advantage, albeit not unique to co-ops:

“Yet there is significant evidence that suggests that networks outperform hierarchies. . .

“Studies have found similar patterns in the German auto industryamong currency traders, and even in Broadway plays. Wherever we see significant change today, it tends to happen side-to-side in networks rather than top-down in hierarchies. . .

“The truth is that today we can’t transform organizations unless we transform the people in them. . .It is no longer enough to simply communicate decisions made at the top. Rather, we need to put people at the center and empower them to succeed.”

The results speak for themselves, even if the model appears traditional.


  • Chip Filson

    A nationally recognized leader in the credit union industry, Filson is an astute author, frequent speaker, and consultant for the credit union movement. He has more than 40 years of experience in government, financial institutions, and business. Chip co-founded Callahan and Associates. Filson has held concurrent positions at the NCUA as president of the Central Liquidity Facility and Director of the Office of Programs, which includes the NCUSIF and the examination process. He holds a magna cum laude undergraduate degree in government from Harvard University. After being awarded a Rhodes Scholarship, he earned a master’s degree in politics, philosophy, and economics from Oxford University in England. He also holds an MBA in management from Northwestern University’s Kellogg School in Chicago.

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