Learning from Top-Performing Credit Unions: Strategic Do’s & Don’ts
Published by: Jose Ortiz
January 24, 2022 | CUNA Mutual Group
By: Steve Heusuk, CUNA Mutual Group’s Sr. Manager, Customer Intelligence
In 2008, the bottom fell out of the economy. The Great Recession devastated world financial markets, the banking industry and real estate. During this time of great economic upheaval, CUNA Mutual Group launched what would become a series of informational presentations to raise thought-provoking questions and share strategic insights to help inform Credit Unions’(CU) strategies for surviving the recession and thriving beyond. Some of the topics explored included “Why the Credit Union System is Needed Now More Than Ever” and “Battle for the American Consumer”. As a member of the team that produced and delivered these early thought leadership presentations, I conducted much of the secondary research on these topics and helped create this content.
Fast forward 13-years. The COVID-19 global pandemic ushered in a new worldwide recession. And I now lead CUNA Mutual’s annual thought leadership research effort to help inform CU strategies.
According to research cited in CUNA Mutual Group’s newest study titled, “Making Strategic Choices for Growth,” the CU value proposition is under attack as evidenced by:
- Three in five CUs with total assets of less than $1 billion lost members between 2017 and 2020.
- Credit Union’s share of total Primary Financial Institution relationships declined from 21% in 2018 to 12% in 2020.
- Credit Union’s market share for certain loan classes has declined in recent years. For example, CUs’ share of total new and used vehicle financing declined from 22.7% in Q2 2018 to 18.2% in Q2 2021 according to Experian.
It’s enough to make you feel like the sky is falling! And when you feel like the sky is falling the last thing you want to do is look up. But’s that exactly what you should do. You should look up and learn from those (in this case CUs) that are successful. Fortunately, CUNA Mutual’s research this year explored the strategic choices of these top-performing CUs. Based on top performers’ strategic choices, you may want to consider these three strategic do’s and don’ts.
- DON’T assume member service is a competitive advantage; validate it
Forty-one percent of CU executives with more than $250-million on their balance sheets list member service as one of their top three competitive advantages. However, CUs lagged banks on the courtesy and helpfulness of staff – 84 versus 85 points – according to the 2020 American Customer Satisfaction Index (ACSI). They were also on par with banks in terms of call center satisfaction with both at 79. Credit Unions’ scores for these two service-related metrics have declined in recent years. If CU leaders believe their institution leads competitors on service, the ACSI results suggest that it may be prudent to validate this belief through a survey comparing members’ and competitors’ customers’ ratings of service.
- DO consider what metrics matter to your Credit Union
Through this year’s research, we learned that the strategic choices of loan growth, membership growth and Return on Assets, differed in important ways. Credit Unions seeking to learn from top performing CUs may want to consider which metric matters most. For example, many CUs are de-emphasizing branches and dedicating more resources to expanding their digital offerings like digital auto loans and mortgages. However, if your CU is focused on membership growth, you may not want to move away from branches just yet. Membership growth leaders are more likely to say branches will be a top-three distribution channel in 2022. CUs focused on membership growth still view branches as being mission-critical.
- DO Focus on organizational culture and internal alignment
Our survey found that organizational culture, i.e., a credit union’s core values, norms [e.g., how employees act / behave when no one is looking], accountability systems, talent management, etc., was cited by only one-in-three CUs surveyed as a top-three source of competitive advantage. However, the critical importance of culture is more likely to be recognized by top-performing CUs. A majority of these CUs agree that:
- Their leadership team fosters a positive culture that helps them differentiate in the marketplace.
- Leaders and employees at their credit union are aligned on their strategy and how it will be executed.
As our research has shown, top performers’ answers to the “Playing to Win” questions differ in important ways from other credit unions. However, making the right choices might not be enough. Having a performance culture and ensuring leadership and frontline staff are rowing their proverbial boat in the same direction help ensure a CU’s strategic choices are successful.
These were just some of the insights found in this year’s thought leadership study, “Making Strategic Choices for Growth.” CUNA Mutual provides its annual thought leadership research to help inform credit unions’ strategic discussions and planning to ensure a vital, thriving credit union system for years to come. You can learn more about this year’s findings by visiting our landing page.
Contact Jose Ortiz for questions or assistance.