OVERLAND PARK, Kans. - Credit unions have a secret weapon that banks generally don’t have when it comes to growth: collaboration.
The cooperative spirit of credit unions fosters that secret weapon, and it can be an effective strategy to fight shrinking margins. But as credit unions seek to drive economies of scale by working together, the cooperation doesn’t always have to take the form of a CUSO.
Simple working arrangements– sometimes without a legal agreement–can do the job, says Dan Kampen, a former CEO of U.S. Central and now a partner with the Rochdale Group. Kampen’s company has been providing guidance to more than 250 credit unions over the last five years on how to effectively partner to leverage efficiencies.
“There’s no legal term for the alliances. We just call them collaboratives,” said Kampen, who adds that too many credit unions get bogged down with “form over function,” worrying about legal agreements and the steps necessary to form a CUSO, rather than just getting together to discuss how to help each other and then “get something done.”
“We think a big killer (of credit union cooperation) is that most focus on form–How do I put together a CUSO? What’s the agreement going to look like? Some of our most successful collaboratives don’t have a legal agreement in place,” he suggested, noting that sometimes the format doesn’t have to be the top priority.
Kampen says credit unions should keep an open mind about how they’ll work together, and often forming a CUSO is the right approach. Kampen will speak about the benefits of collaboration at the Credit Union Journal’s Grow Show, April 27-29 in Orlando.
“We’ll talk about why credit unions should collaborate, and how to actually make something happen,” he said. “We are going to address the various collaboration models out there and the pitfalls that can prevent collaboration from working.”
Obstacles are often credit union executives who struggle with giving up total control, lack of “flexibility,” and difficulty making tough decisions.
What can be the biggest roadblock, Kampen says, is an absence of trust–often a result of credit unions with competing fields of membership working together.
“What we’ve seen, more often than not, is that the collaborative model works if you have the right chemistry. Trust is all about chemistry,” Kampen suggested. “Are you going to be able to be dependent on another party for key business functions? Are you going to share competitive data? Are you going to trust another credit union to directly access your members, especially with a credit union that’s right in the middle of your field of membership?”
Kampen said he’s a big believer in collaboration helping credit unions remain competitive and grow, which is why his session is going to focus on the many different kinds of ways credit unions can work together–from formal, legal agreements and CUSOs to informal brain storming sessions and just looking at ways to help each other get things done.
Many of the credit unions the Overland Park, Kans.-based Rochdale Group works with, Kampen says, see savings of 50% to 75% from programs driven by partnership.
But sometimes the approach isn’t right, adds Kampen, stressing the importance of looking at potential savings before pulling the trigger on any alliance.
“We cost it out,” Kampen said. “You want to make sure you are not collaborating because everyone says it’s a good thing. We look at what it would it cost for a credit union to handle the service individually, and then as a group. In general, we find significant savings, but not always.”
