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But do keep them as an option
On the one hand, mergers are a key way for credit unions use to grow so they can serve more members and benefit from economies of scale.
On the other hand, the seventh international cooperative principle is “cooperatives helping cooperatives.” That would seem to suggest that credit unions should look to support one another rather than to take action that eliminates an organization.
In my work as a consultant, I’ve helped develop credit union merger policies, so I understand both arguments. Mergers should be in your tool belt—don't get me wrong—but they should not be your primary means for growth. Think about the why of this from both a business model and a cooperative philosophy standpoint.
If your credit union needs to merge to grow, something is not right with either your strategy or execution. To test this idea, ask yourself how much you're spending each year on marketing to drive membership and loan growth. Next, determine how much of the growth you’re experiencing is organic versus inorganic. Examples of organic growth include having branches or a social media program that produce memberships. Examples of inorganic growth are mergers, loan participations or purchasing share certificates. Now, reflect on whether you’re having to leverage inorganic growth methods because all the methods that you're using to drive organic growth are not working. If that’s the case, you are not getting a return on your investment in marketing and physical infrastructure.
It's just like a restaurant hiring a group of fishermen to supply fish for the dishes the chef prepares. And every day, they go out and they don't come back with any fish. So, the restaurant owner has to buy the fish from some other company. The restaurant owner needs to ask, “What do I need to hire all these fishermen for?”
In addition, mergers are not fully in line with cooperative principles. It goes against cooperative principles to “help” a smaller credit union that’s experiencing challenges by scaring them into merging so you can meet your growth goals. I also coach boards to not jump to a merger before finding out if the problem is just that they are just not the right person to lead their credit union. After all, merging into another credit union gives up a charter that may have been around 40 or even 60 years and a lot of people put a lot of time and energy into this credit union. Moreover, this credit union, although “small,” may uniquely understand and serve a marginalized community.
I work with credit unions of all sizes and believe that they all have a place in today’s environment. In my work, I help small credit unions survive. And I help large credit unions figure out how to drive growth organically primarily and use mergers as a secondary option. In doing so, I hope to ensure the survival of credit unions of all sizes.
Ancin Cooley, CIA, CISA, is principal of Synergy Credit Union Consulting, Chicago. Synergy provides strategic planning and credit review services to small and large credit unions around the country.
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