A Way to Win, a Way to Lose

How easy it is not to face facts. How easy it is to pretend that members are now what they were 20 years ago. But of course, that is not true.


How easy it is not to face facts. How easy it is to pretend that members are now what they were 20 years ago. But of course, that is not true. Members may always have a place for insured products but they are increasingly shifting their savings into stocks. They want better things for their retirement and their children and they have learned through a barrage of media and their own eyes that stocks can do very well over the long run. They are far more sophisticated than they were 20 years ago.

If you care to see an example of what they are tuning into, check out www.smartmoney.com on the Internet, provided by The Wall Street Journal. It offers highly sophisticated tools for persons to explore various avenues for their savings and financial strategies. It is an exceptionally sharp service.

Economies of Scale

Hard working, dedicated, altruistic people pulled the credit union movement together in the 1930s, working with the economic and financial realities of their times. We have to grasp their spirit rather than their solutions and apply it to our own times. If we apply old solutions to the present times, our movement will stagnate and wither away.

Let's look at one example -- branches. Brick and mortar branches have formed one kind of convenience, which has always been one of our strong suits. We have to continue to offer the best in convenience. But we can't afford doing it the old way of each credit union building its own brick and mortar branch and stocking it with its own employees. It's just too expensive, draining money that could best be used elsewhere.

We have to use our greatest asset -- the ability to cooperate for a common goal -- to share the branches and thus to take advantage of scale and lower unit cost.

How easy it is not to face facts. We compete against national organizations, ones that take full advantage of national scope and scale. Entities such as national banks, mutual fund companies and E-Trade all have the advantage of a very broad reach. With it they are reducing unit cost and capturing the business of our members. Unfortunately, many people in the credit union movement are convinced they have to stay provincial, isolated and narrowly focused on a limited territory. The wave of technology, cultural change and financial reality will eventually swamp such conviction and their credit unions.

Some would say, "I will not let members from other credit unions into my lobby. If I did I'd lose a portion of my own members to other credit unions." To them I would say, "Continue with that line of thinking and soon enough there will be no one in anyone's lobby."

Short Run or Long Run

There is always a great deal of pressure to look at the short term. Our boards of directors, members and regulators all look at balance sheets and wonder why ratios aren't better. But acting for the benefit of the short term to the detriment of the long term is the first step to oblivion.

Just about the hardest thing a credit union manager can do is to take action that will lose some members, even if it means gaining others later on. But we have to sacrifice current gratification for subsequent success. Everyone has to sacrifice. This is the essence of cooperation, and it should be our great strength.

This is the season of the Fourth of July and a fitting time to recall the propitious words of Benjamin Franklin: "We must all now hang together, for surely if we do not we will hang separately."

These words apply to us today. We cannot ignore the reality of our present financial world. If we do not cooperate and combine many of our assets, then we cannot take advantage of scale. Those who have been taking advantage of scale will by virtue of better service and lower prices attract persons needing financial services.

Only by cooperating, combining assets and helping others (even if it hurts individual credit unions in the short term) are we going to prosper in the long term.

Take the spirit of the 1930s credit union pioneers, not their means. Sacrifice, cooperation and acting for the long-term and not the short has to direct and guide us. Going it alone is not going to work.




Oct. 23, 2000



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