By John Redding, Dick Kamm and Ralph Catalanello
As strategic planning consultants, we are often struck by how much time and effort credit unions spend looking at what the next guy is doing. This is especially true if the next guy is a high performer with a track record of great performance. The thinking seems to be, “if we’d only do what these guys do, we’d have the same results.”
Yet, high-performing credit unions were not always high performers. "Taking It to the Next Level," a just-published report from our firm, Institute for Strategic Learning, examines 11 credit unions before, during and after they became high performers.
What did they do? How did they step out from the pack and become top-performers? The 11 credit unions (with 2004 asset size) are:
- ELGA CU (MI) - $169 million
- Evangelical Christian CU (CA) - $640 million
- First Technology CU (OR) - $1.453 billion
- Nassau Educators FCU (NY) - $904 million
- NWA/Wings Financial FCU (MN) - $1.487 billion
- PCM Employees CU (WI) - $85 million
- Rockland FCU (MA) - $713 million
- San Francisco FCU (CA) - $529 million
- St. Cloud FCU (MN) - $70 million
- Technology CU (CA) - $1.107 billion
- USC CU (CA) - $209 million
So what did we find out? Simply stated, we found a paradox. To be like these credit unions, you can’t be like these credit unions. You can’t merely copy what they are doing. You need to find your own unique solutions, just as they did.
Jerry Jellison, USC CU board chair, captures it in a nutshell: “Don’t be seduced by what you hear or read in the headlines being done somewhere else. There are enough opportunities around everywhere. Look in your own backyard. Seek local opportunities and let them evolve organically. . . . [Be] willing to experiment and try different things. There is such a need for credit unions, and there are so many people who would benefit from their services.”
Here are four key findings from our study:
Finding #1: Focus on Something You Can Be the Best At
The key to becoming a great performer is to define something your credit union can be the best at and to stick with it over time. Well before the jump in performance, each of the 11 credit unions defined a “central strategic focus”--a unique and specific area of financial services in which they could excel compared to other financial institutions within their markets. No longer did they seek to be all things to all people. No longer did they look like the generic credit union down the block.
The central strategic focus varied from credit union to credit union, and included indirect lending (Rockland FCU), low-cost leadership (San Francisco FCU), mortgage origination (PCM ECU), advanced technology (First Technology CU), risk-based lending (ELGA CU), commercial lending (Evangelical Christian CU), relationship management (NWA/Wings Financial FCU), and student lending (USC CU).
These credit unions also sustained their focus over time. It’s very easy for credit unions to go “chasing rabbits,” pursuing a range of multiple opportunities rather than sticking to a clear strategic direction. Yet, despite all the “rabbits” crossing their paths over the years, these credit unions remained fully committed to their central strategic focus.
Finding #2: No Shortcuts or Quick Fixes
Coming up with a central strategic focus does not occur through a sudden flash of enlightenment. As First Tech CU CEO Tom Sargent puts it, “We don’t think we had any epiphany moment.” For each of the credit unions, the development of a focus area was a process rather than an event. Figuring out what these opportunities were and how to take advantage of them took many years of hard work and sustained effort.
Finding #3: Mine Your Own Backyard
Expanding FOMs, charter changes, large-scale mergers--none of these were seen to be major factors leading to high performance. Instead, these credit unions looked inside--inside their FOMs, inside their markets, and inside themselves--to locate the specific opportunities presented by their business environment and to uncover their own unique paths to superior performance.
Finding #4: Strong Board/Management Leadership
Nothing can happen without strong, future-directed leadership both from the board of directors and the senior management team. As never before, board and management stepped up to the plate, looked to the future, and proactively embraced the need for fundamental change. Although not in crisis, although there were no “burning platforms,” they openly confronted the realities of their situations, explored creative and often controversial strategies and, in a relationship based upon mutual confidence, took risks their peers might not take.
We also noted that over time, the composition of most of their boards became increasingly diverse and professional, taking more active roles in providing high-level strategic direction for the credit union.
John Redding, Dick Kamm and Ralph Catalanello are principals with Institute for Strategic Learning. Visit the firm's Web site to obtain the "Taking It to the Next Level" executive report or more information on ISL’s strategic planning process for credit unions.
