Only Thing Certain Is Uncertainty: What Your Credit Union Can Do

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Since the days of Operation Grassroots in the early 90s, increasing numbers of credit unions are making political advocacy part of their strategic plans. No longer limited to one-issue campaigns, these credit unions' political involvement begins at the local and state levels and extends to national issues via involvement by both executives and board members.

Two good examples of credit unions working to impact their own destiny in this way are $1.2-billion Coastal Federal Credit Union, Raleigh, N.C., and $33-million Hershey Federal Credit Union, Hershey, Pa.

As Coastal FCU CEO Larry Wilson noted during audience participation at CUES' CEO Network last November, "I think we have to get started making friends in politics when they're local...When (politicians are) elected (to higher offices, they're) going to remember that we supported (them) all along.

Hershey FCU CEO Diana L. Roberts, who has been politically active for two decades, agrees with asWilson that it all starts locally. Roberts and several directors have also visited Capitol Hill. "That's the best way ever-to go up on the Hill," she believes. The credit union is so serious about political involvement that part of the official role of Hershey FCU's chairman is to serve as the credit union's political liaison.

Wilson's and Roberts' actions reflect a well-known quote from former Speaker of the House Tip O'Neill who declared, "All politics is local." O'Neill truly understood politics, as credit unions must learn to understand what shapes the public policy that so significantly affects our lives and businesses.

In the public policy forum, there is no greater challenge facing credit unions today than the test in Utah. If bankers are successful in legislating credit union taxation there, every state can expect a similar tactic.

What the state's bankers are attempting is what the authors of Winning the Influence Game would call "changing the game." Businesses can attempt to change the game in five ways: imitation, combination, shut out, entry and hold up, notes the book, a standard text for CUES' Public Policy and the Future of Finance, held this week at the Brookings Institution.

Facing the Unknown

While it's vital to work proactively for legislation and regulations that will benefit credit unions, it's just as important to effectively manage the inevitable uncertainty that exists in running a credit union-or any other business for that matter.

Dealing with uncertainty can tend to freeze our decision-making, leading us to put off making important decisions until we have "enough" information to act.

One of the biggest unknowns right now is the economy. And who didn't identify at least a little with the Charles Schwab Super Bowl ad, where a business man is seen jumping over fences and cutting through backyards, all to avoid receiving what turns out to be his brokerage statement!

Facing investment decisions at work can be just as hard, noted Jack Brick of Brick & Associates in a recent Credit Union Management article. "What has happened is that paralysis has set in. You face these tough decisions, so the result is no decisions. People don't want to tie up their money for two, three or four years, so they sit tight and leave it in overnights, which is even worse."

Learning to manage the unknown-rather than avoid it-begins with reframing our attitude toward uncertainty, according to Paul J.H. Schoemaker, Ph.D., founder, chairman and CEO of Decision Strategies International, West Conshohocken, Penn. "Rather than seeing uncertainty as an enemy," he wrote in Managing Uncertainty: A Guide for Credit Unions, "why not view it as a friend-something you can manage effectively to help your credit union be more successful." He goes on to point out that "uncertainty creates opportunities to serve your members, staff and community better, provided you frame it in the right way."

An important part of accepting uncertainty is understanding your own biases. "After all, it is very hard to solve a problem when you don't recognize it exists in the first place," Schoemaker wrote.

Sometimes our biases, or frames of reference, do effectively act as blinders, allowing us to overlook issues we should be acting on. Consider, as a simple example, people's individual tolerances for clutter. A new CEO who doesn't mind a crowded desktop, as long as he can find things, might not have a clue that the scientists who serve as his directors look at his office and fear him to be highly unorganized.

Here is one of five exercises DSI has designed to help you understand your own biases and approaches to uncertainty.

To help determine your risk preference, decide which option you would prefer:

1) Receive $1,000 for sure.

2) Flip a fair coin for $0 or $2,000.

According to Schoemaker, "If you chose to receive the $1,000 for sure, you are risk averse. The options are actuarially equivalent, but most of us prefer A. Those who choose B are risk seeking and in the minority.

"If you chose A, now let's assume option A offers only $990 vs. B, the same coin flip for $0 or $2,000. Would you still choose A? If you answer yes here, then you are effectively willing to pay money to avoid risk. While this may seem comfortable," he wrote, "it may be economically unwise. It's important to have a clear understanding of your risk tolerance-and what price you're willing to pay (if any) to avoid risk."

Just as greater numbers of credit unions have learned to play the political game, so can you learn to welcome and manage uncertainty. And what better time to do so than in this current economic downturn, which may or may not be extended by an impending war in the Gulf. As others struggle to make decisions or wait for better data, your credit union can be making plans that will serve you well no matter what turn the economy may take and what your competitors decide to do.

Fred Johnson is president/CEO of the Credit Union Executives Society, Madison, Wis. Mr. Johnson can be reached at www.cues.org.

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