The strategic plan for 2010 may be the most important plan ever crafted by the credit union. On the one hand we have a great opportunity on the other hand we face high loan losses and high unemployment in our communities.
I would recommend these items be the focus of the business plan;
1. Get the right people on the bus. Many credit unions are not succeeding because they have weak management, weak supervisory committees and weak Boards. You first need to get the right people and then decide where you want to go.
2. Bulk up. Unless the credit union has strong sponsor support, a niche market or leading market share in a very small market, the credit union should consider a merger. Every key credit union statistic indicates there are real economies of scale. A merger between two $50 million credit unions doesn't make a $100 million dollar credit union — it makes one very large $50 million credit union that needs to develop the management team, processes and culture of a $100-million credit union. Mergers make you big but not better. You get better by using the resources of size and building better management and better processes and better branding.
3. Build a learning culture. Successful credit unions have a learning culture. The credit union has great internal communication, an attitude of doing the right things for the right reason, great project management and the ability to learn from success and from failure. The credit union is constantly engaged in a process of improvement. The credit union has a strong human resource function that hires the right people, trains them well, has good evaluation process and rewards good performance and corrects or removes bad performers.
4. A credit union can focus on three things: low price, great convenience or great service. Most credit unions can only exceed in one of these three areas. I recommend great service. It is far easier for the competition to compete on price and convenience. Financial services is a commodity business with a financial institution on every major corner and very little real differentiation on price or the menu of services. Great service means helping the member with exceptional experiences, best solutions and professional experts to help the members improve their financial well being.
5. The credit union has to be involved in the community. The best form of advertising and the most common way to get new members is word of mouth. Most credit unions don't have the marketing budget to compete with Bank of America, Chase and Wells Fargo, but we can be a very involved local financial institution that knows our community (and is known by the community leaders) better than some bank based in North Carolina.
6. Every credit union should focus on growing market share. The goal is in large and medium sized markets to be in the top ten market share. In our Sacramento market, a medium-sized market, there are over 60 financial institutions. Credit unions have about 25% of the market share as measured by deposits while banks have the rest. The smallest top 10 market share institution has about 3% of the market share while the largest has about 15% of the market share. Market share and branch network size are highly correlated. The top ten in market share all have at least $1 billion in assets.
7. Every member survey and every focus group we have done indicate that credit unions are perceived as less sophisticated and less professional. At SAFE we do everything possible to make SAFE professional and also to look professional. Our staff dresses for business. All men have long-sleeve shirts and ties if they interface with members. Women wear professional dress. All of staff have name tags and name plates with their years of service and they display service awards and training certificates so that members can see they are successful professionals. It is so common for credit union staff and management to dress casually. Staff in many credit unions seems to be attired for a game of golf rather than serving members. Clothes make the man! First impressions count. You have to back up your look with service but don't undermine your professional skills with an unprofessional appearance. That also includes your facilities. The appearance of your facility says a lot about how professional your institution is. There is a reason why banks once looked like Greek temples.
8. Most CUs rely on vendors to provide many key services. You have to manage vendors just like an employee. You have to carefully hire the vendor and make sure the contract has service level agreements that assure the kind of service you expect. Think of service level agreements like a job description for a new employee. Evaluate every major vendor at least annually and in many cases quarterly. Use the service level agreement as the evaluation standard. No credit union can succeed without great vendor management. My experience is that many credit unions have contracts that are not reviewed by legal counsel and do not contain service level agreements. The vendors are not evaluated and not held accountable for good service. That usually means poor member service, poor growth and in many cases wasted money.
SAFE CU, North Highlands, Calif.
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