It is important to realize that the credit union is approaching this situation from a position of strength. There is strong equity; sufficient size providing resources to evolve; a diverse membership base (only 20% are Circle-W employees); a competitive market place; and most of all a full 18 months to effect the marketing changes needed. Of course there are several significant problems to overcome – changes to the core operations, i.e. human resources and marketing – but all are manageable. It is also important to note that they are not the first credit union to experience this kind of change and many models exist to provide a road map to success.
1. As presented, what are the key issues the Board needs to be considering at their planning retreat?
The Board should begin by building a comprehensive situational analysis. This should include a description of the aspects that will support a change of direction and of aspects that will be roadblocks to that change. The analysis should include both internal and external factors.
Using this analysis as a foundation, the Board must then consider how it will position the credit union in its particular market place. The key strategic issues are:
Field of membership. Based on the information presented it is clear that a change in the FOM will be necessary.
Use of equity. The credit union’s financial structure will change, initially as operating expenses increase and then from necessary infrastructure additions.
Credit union’s brand. The separation from the parent company will necessitate a discussion about the credit union’s brand.
2. Given the state of the industry today, what options (strategic and tactical) should Sam be presenting to her Board for consideration?
Using the key issues outlined above, Sam will want to present the following options to the Board;
FOM. The current FOM will not support the credit union. Based on provided information, the clear option is a community charter. Sam should provide the Board with information about the process for changing the charter, the market implications, financial considerations, and the impact on operations.
Use of equity. The current financial condition of the credit union is strong. A change here will have an impact on all aspects of the credit union’s financial operations. Positive issues include an improved ability to grow assets and additional sources of non-interest income. Negative issues include additional balance sheet risk (loan portfolio quality, potential for fewer core deposits) and an increase in operating expenses. Sam should present several financial forecasts outlining different positive and negative projections and begin to discuss how much equity the Board is willing to invest in the change. Included in the discussion will be the beginning of a new facilities plan.
Credit union brand. The credit union’s brand is the classic credit union brand built around the organization’s sponsor. This change concerning the brands will be the most significant, resource-intense, challenging, and emotional effort the credit union will face. Sam will need to lead the board through the process of determining what the best branding strategy should be and how the credit union will move from its current brand to the new brand.
3. What process should the Executive Team and Board use to evaluate options?
They should use a comprehensive strategic planning process that includes: a situational analysis (external and internal), a definition of the credit union’s goals and objectives, tactical plans that support the goals and objectives, and a measurement system the Board can use to track the plan’s progress. The Executive Team will need to use the strategic plan to develop an annual business plan for Board approval. Communication will be an essential component for the success of the plan. The Board should set aside time at regular intervals to discuss the progress of the plan.
4. Is there any additional information that would be essential before making a decision about the credit union’s future course?
The planning process, done correctly, should provide an outline for the additional research needed to support the necessary action steps for successful plan completion.
5. Given the facts as presented, what direction would you would recommend for the credit union?
Given the facts as presented, the credit union should focus on the following action steps:
FOM. Convert to a community charter.
Branding. Begin the process of identifying the current credit union brand and outline a process to broaden the brand to encompass the community charter while building on the brand’s strengths.
Organizational analysis. The credit union will need an organizational analysis intended to identify human resource strengths and weaknesses as they relate to the revised organization. The outcome of the analysis will be a 1-to-3-year organization structure plan with a supporting human resource development plan designed to address current weaknesses.
Facilities. The credit union requires a branching plan that is affordable and supports the credit union brand.