KEY BISCAYNE, Fla. -
"Credit unions have given up their tax advantage to cost inefficiencies," CUNA Mutual Group CEO Jeff Post said, explaining why he counts the battle for operating efficiencies among the top challenges for credit unions.
The three biggest competitive issues credit unions face are not charter conversions or hostile takeovers or even the potential loss of the federal tax exemption. Rather, Post argues, if the "real" challenges of credit unions aren't successfully dealt with, those "other," better-known issues could end up taking down the CU movement.
"Everyone has different issues depending on who they are, but all credit unions face the same three primary challenges," Post said. "The first one is how are you going to win the cost game going forward. The second relates to governance-is your governance set up such that it allows you to compete? And the third is what's your value to the member, your differentiator?"
Answer those three questions properly, and you ensure the future of your credit union, Posts said. Answer incorrectly-or fail to address them-at your own peril, he cautioned.
Not even the big dogs of the credit union movement are winning the cost game, Post told Credit Union Journal just before speaking at CUES CEO Network here. "Even if you look at the billion-dollar credit unions only, they are losing the expense game," he said. "Banks are winning this game, and it's a game we can't afford to lose."
Ironically enough, the only way credit unions can win it is to fall back on the thing they have always done best-cooperate-but Post says when he suggests ways to do just that, credit unions are often reluctant to jump on board.
"I was talking with the CEO of a large credit union, and I was suggesting that what the movement needs-and it doesn't have to be CUNA Mutual that does it-is one cooperative back-office to provide statements, for example," he related. "His immediate response was 'I can do statements better than you.' 'I'm sure you can, but do your members want to pay for that?' The expense game is crucial, and right now, expenses are eating up the credit union tax advantage."
It's a subject that is near to Post's heart. Two years into CUNA Mutual Group's three-year transformation plan, Post is proud of the $100-milllion in efficiency gains the company has eked out.
Despite those gains, changing the culture of the 72-year-old firm is proving to be CUNA Mutual's greater challenge.
"The harder part is making people hungry, making them want to go that extra mile and willing to take risk," Post said. "You can feel that energy at our new facility in Fort Worth, but that's still a work in progress in Madison."
The second challenge, governance, is one that treads on what is often considered to be a primary differentiator for credit unions: volunteer boards.
"Boards have to challenge CEOs to do the right thing, to create a succession plan, to ask the tough questions," he stated. "With what's going on at Norlarco, credit unions have been caught with their pants down, and we're just lucky that the banks are having too many problems of their own to make hay out of this. The problem here is governance failed. It's hard to tell people how to govern themselves, but they need to be looking at governance best practices, like term limits, competency-based selection. Directors need to be chosen because of what they bring to the table, not because someone is Jimmy's buddy. And maybe you have to pay them."
As for the third challenge-identifying the value differentiator-Post has one simple question for every credit union out there: "If you didn't exist right now, would your members form you today?"
