Recession, Rethinking, Renewing
There's nothing like a deep recession to scrape the glitter off "corporate social responsibility." Already, charities are cutting back on programs and staff because of a sharp drop in company donations. Firms are dumping plans that match employee giving with their own. It seems that when sales are in the tank, contributing to social betterment is a PR luxury many for-profits can no longer afford.
And we can also say good-bye to notions of a kinder, gentler corporate workplace. Recent reports quote leading HR specialists as predicting the end of worker-friendly employers. EQ and participatory management will be shelved for gentler times as companies squeeze more out of fewer people, while eliminating subsidized cappuccino and retiree health care. With unemployment high, it seems that workers must settle for what they can get.
So does that mean we, too, should take a break from "credit union philosophy" until good times return?
The answer to that question is "no," of course, if we truly understand what our so-called philosophy really is. It is not, in fact, some PR ploy, nor is it wooly, do-gooder thinking. Instead, it's our basic business model, and it has worked astoundingly well in both good times and bad.
Be Upfrtont About CUs' Purpose
Actually, I've come to believe we should drop the term "credit union philosophy" from our rhetoric because it does sound, in our present, cynical times, like so much feel-good mush. To outsiders those words suggest the sort of advertising gimmick that other companies say but don't really mean. They cause listeners to tune us out before they can hear who we really are.
Instead, we should be upfront in making it clear that, like all corporations, credit unions exist for one purpose and one purpose only: to maximize economic returns to our owners. But the truly unique thing about credit unions is that our owners are our customers/members. The two groups are exactly, precisely the same, and there is no conflict between them.
That difference is what will make us very attractive to consumers in a frightening 2009, as long as we stop keeping it a secret.
Whatever they say about "social responsibility," commercial banks, finance companies and the like will exploit consumers whenever it's profitable and they can get away with it. Their customers are not their owners; they don't elect the board that hires the management. So who cares if the consumer is screwed as long as it's done legally and the bank makes a buck? Bank owners reap returns from stock dividends and capital gains - not from feeling good about helping folks.
No Leap of Faith Required
The credit union advantage does not require consumers to take some leap of faith and believe we're nicer people. Their confidence in us rightly comes from the fact that our business purpose is solely and simply to give them an economic gain because they own us. Because we're owned by the people who buy our services, we can return a profit to them in multiple ways: through higher rates on savings, lower rates on loans, lower fees, better service, and so on. This is a powerful business model, and it is not just nice words.
Actually, it always comes down to a matter of economic incentives. With theirs based on short-term gain, masters of the universe on Wall Street showed themselves to be incredibly inept at building long-term wealth for other people. The biggest and supposedly brightest of commercial banks have required billions in taxpayer bailouts.
Credit unions, by contrast, avoided the idiocy of subprime mortgages, did not invest in exotic derivatives, and don't pay obscene bonuses to executives. That was not happenstance or good luck. It is a function of who we really are. We just go on day after day serving ordinary people very well.
It was during the 1930s that credit unions enjoyed their first big surge of growth. As banks failed around them, CUs established themselves as a safe haven for ordinary Americans. Credit unions have a similar, once in a generation opportunity to excel in these hard times as well.
This is an ideal occasion to remind the public that credit unions are truly different and exactly why that is so. Consumers are anxious and justifiably angry. They feel betrayed by a for-profit financial sector that has forfeited their confidence. They are eager to find the safe harbor that credit unions can provide. We need to let them know we're here and why they can trust us.
This is also an ideal time to engage our existing members, to talk with them and especially to listen to them. We'll do fine if we devote ourselves to helping them rebuild their financial security.
It all comes down to figuring out how that credit union "philosophy" of making money for our owner/customers plays out today. Some thoughts on that next time.
Ralph Swoboda is a principal in The ProCon Group, LLC, which specializes in helping credit unions uncover strategic opportunities, build more effective board governance and strengthen their leadership teams. For info: www.theprocongroup.com.