Memo to Alan Ferling, American Flag CU

If the Board is willing to unite behind a mission dedicated to members, then you can pull out of difficulties.


To: Mr. Alan Ferling, Chairman of the Board
American Flag Credit Union

Alan, thanks for the call, and well...okay, so American Flag CU finds itself sitting on a pile of worrisome issues.

Believe it or not, there’s little difference in your situation and what I see elsewhere in our national credit union community. Even with all the problems, your credit union is still in a good position to go forward and do good things.

Our industry is at a critical point. The troubles reach beyond the immediate financial struggles everyone is having (most will weather the storm). The real problem comes in two parts:

One — It is increasingly difficult for credit unions to hang on in terms of operational costs. Most CUs are small and have none of the economy-of-scale advantage the competition enjoys. That’s what’s killing so many! We’ve all got to confront this reality head on!

Two — Growth is all but nil. I can show you the numbers (though nobody likes to see them). We’ve all got to reorder market perspectives, realize the true possibilities, and restructure strategic intentions accordingly! Market relevance is the issue here. What business are we really in?

To Your Specific Questions

First Step for the Board: Get everyone together for a special (day-long?) session to wrestle the broad question— “Why do we, as a group, hope to keep this credit union going given the industry picture and the significant challenges facing us?” Ask everyone to walk in the door with a pre-written statement of purpose addressing this question: "What are we trying to accomplish by operating this credit union?” And I’ll just say, if the comments and discussion don’t convey a solid commitment to be useful to members, then that’s the more serious problem.

Sadly, the friction among your volunteers is not unusual. There are ways of dealing with this, but you might not have that luxury. You’ll have to decide if you have the political weight to go forward with things even in the face of some obstinate or contrary players.

The Leadership Gap: This is not the problem it might appear to be. Whatever you do now, it is only a temporary step. There are qualified people around to help you hold the program together while you gear up for a more robust long-term turnaround. Check with your League and any of the top consultants. You should be able to find the right temporary help.

The Merger Issue: I’d be surprised if you haven’t been working this for the past year or two. Mergers have become a prime reality of our industry! Certainly, you know your local situation— potential mergees and local leaders (and whether any among them might be future possibilities for you). I don’t encourage you to use this route as a way of resolving the present situation. Let’s get back to this later. (I can give you a good view of how credit unions are doing in your area.)

External Resources: The League and the top industry consultants should be on your “friends” list. But your right-now need is someone who can help you facilitate that soul-searching First Step for the Board discussion outlined above. You really want two kinds of expertise. One, someone that can talk knowledgeably about the industry situation and raise the difficult questions attached. Two, someone that is skilled at negotiating and mixing opposing views within a group, someone with expertise in conflict resolution. If you hope to move forward to a strong, winning future, the Board MUST become collectively committed to a single, shared vision of that future! (Again, See Step Number One!)

Final Suggestion: Now, here’s my curve ball. Go forward with this thought: Things are going to be different for credit unions in the days ahead. Very different! My message to clients (especially those in your circumstances) is this: Go virtual. That’s right. Begin to think of shifting from the traditional routines of your present branch-based operations to a new operating posture in which you deliver services to your members— all of them— essentially via the Internet and through other automated means. This is the future for consumer banking. It’s only a matter of time, and it’s coming fast. You’re going to have to be entrepreneurial. The shift to the future will be full of excitement and challenge. It will require considerable adjustment. But it offers huge opportunities for credit unions that want to stay, and play, the game!

Final Note: I’d very much enjoy working with you folks given the challenge presented. But you’ll detect from my comments that I come in the door with very particular perspectives. My focus is— very specifically— the market and all of its attending dynamics and competitive considerations. I push the theme that YOUR MARKET is your membership, and you (volunteers) have a very direct obligation to them. These days, too many credit unions are looking in other directions for survival and future success. If this is how your team is thinking, I’m afraid I wouldn’t be much help. On the other hand, if your people represent a true commitment to doing good things for members, then I think we can do some good work together!

All the best, Alan.

Tony Ward-Smith

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