“Like a bale of hay had landed on me.” This is the natural first reaction when a credit union is forced to consider changing a long-term, often paternal relationship with a sponsor.
The Board and management will probably go through an emotional cycle asking questions like “Why? Who did this to us? Can we renegotiate? Can we sue? and Isn’t it our name?” along with considering “Let’s fight” kinds of responses.
Although not mentioned in the case, an additional burden may be that all of the credit union employees are employees of the sponsor, “leased” to the credit union. This means that their personal futures are uncertain as the credit union assumes the responsibility for assembling a competitive HR package.
The fact that many major credit unions have had to make this transition makes the process no less intimidating. Credit unions such as Eastman, Baxter, Addison Avenue recently, and numerous others before there have made this crossing from their employee benefit origins to an independent financial institution.
So the first challenge is to be aware of the deep “hurt” and concern the leadership team is feeling. Acknowledge this and the uncertainty, but then convert these energies to providing the leadership to frame the upheaval as a positive opportunity.
Look At The Plan
Because the credit union has been so dependent on the sponsor and has followed Circle-W’s economic and employment fortunes, the credit union’s own “strategic plan” probably has shadowed the parent’s priorities. With Board members exclusively from company employees, their competencies undoubtedly center on their contacts in the company. Their ability to facilitate solutions to the credit union’s on-site branching needs, their awareness of planned changes in employment levels, and knowing the company’s internal decision dynamics were key strengths. Now they must refocus on the credit union’s future.
As the plan is addressed, there is the opportunity to reassess and assert the values that have made the credit union so important to its current membership. The credit union is 70 years old. Only a minority of members are current Circle-W employees. The remainder and the family members are dispersed Diaspora-like across the state and country. But they have retained their membership for good reasons.
This legacy base is a strength and can still provide a “high ground” or core group from which to reach into other markets.
Restating the credit union’s vision, mission, values and long-term goals in a concise clear manner is the first step in positive leadership for this transition.
Next Business Steps
Four business priorities are needed around which next steps must be planned.
1. Represent the credit union’s value to the sponsor. Circle-W is not going away. There is real value in the credit union as an employee benefit. Eighteen months is a long time for a transition, and attitudes and corporate perceptions can change quickly. So while the “preferred” position might be eliminated and require a more independent formal agreement, this relationship is still a critical success factor for the credit union.
2. Identify new market opportunities and needs not being met in the current membership.Now may be the time to expand into a more extensive program for real estate loans or even launch small business services.
3. Focus on loans as a key competency.The loan-to-asset ratio is less than 70%. Loans provide the margin that will be necessary in the face of new expenses. Start building this capability and make lending a lead product for new markets or other SEG opportunities.
4. Think partnerships. The relationship with Circle-W was beneficial and needed, especially in the early years. Today different kinds of partnerships in the very crowded space of community financial institutions are even more essential. These may include greater participation in the credit union system of CUSO networks, in-store branch delivery options, new relationships with community organizations such as realtors or schools, and even growth in new community suburbs.
A New Era for Cooperative Creativity
The Circle-W enforced change is an opportunity for redesigning the credit union’s future. The credit union has abundant resources, is in a strong financial position, and has experienced leadership.
In renegotiating the Circle-W relationship, although the first reaction is to see this as a move from a dependent to an independent role, the opportunity is to create a more interdependent relationship where both corporation and credit union clearly see the value of continuing to work together.
The majority of members, even with their historical Circle-W ties, are probably long removed from the Circle-W campus. The current employees will need the credit union now more than ever because there will be uncertainty about their individual jobs. The credit union can provide them the assurance that their organization is with them through any transitions.
In fact, the need for the credit union is probably greater than ever. As the leadership team recovers from the initial shock from forced change, future options should be a source of excitement and a time to rekindle the team’s passion. This change is in fact an event that virtually every credit union has experienced. Welcome, Sam, to the 21st century credit union movement!