Unlocking the Value
Recently a group of credit union managers and consultants discussed the concept
of productivity and its measurement in credit unions. What did the term mean?
How could it be managed? What are strategies for implementing productivity gains?
While some aspects of productivity are fuzzy, there was consensus that a productive
credit union was key to unlocking member value in the form of better savings
rates, lower loans, and an equitable fee structure. Several participants were
even more emphatic. They asserted that members as owners had the right to a
productive credit union. If a credit union's management and board were not committed
to using resources in the most effective manner, then they were failing their
obligation to their members.
Why Productivity is Urgent
The recent slowdown in credit union trends is fairly clear. ROA is declining,
margins are compressing, expenses are taking a larger share of revenue and both
loan and share growth are more difficult to achieve than in the 2001-2003 years.
One indicator that not all credit unions are meeting the market's challenge
is the fact that 4,693 reported loosing members in 2003. These credit unions
managed 23% of the industry's assets. Their members are voting with their feet-the
credit union are not providing sufficient value to retain their business.
Some might reply that those losing members are primarily smaller credit unions.
However, one participant countered that with the 12,000+ decline in credit unions
over the past 15 years, all the small credit unions are gone. "What is
a small credit union today is us." Even if the decline is predominately
in smaller organizations, that does not mean the need for member value is any
less valid. These "smaller" credit unions may just be the canaries
in the coalmine for the whole industry.
What Moves Credit Unions to Action?
At this symposium, a process was developed to think about and identify opportunities
for productivity improvements. The core concept is that productivity is about
managing throughput. Finding and measuring activities such as member served
per hour by tellers, loans processed per day, ATM volume, calls handled by operator
per session, and so forth are crucial for managing change.
The model below was proposed as a way to identify potential opportunities that
exist for improvements.