These days it is hard to avoid trade articles or hear watercooler conversations about mergers and the shrinking pool of smaller credit unions. There is a growing consensus that small credit unions just can’t survive the competitive road ahead.
When I hear or read about these conversations, I’m reminded of credit unions past, that could not adapt for whatever reason, and are now gone. I’m sad about these because I think of missed opportunities and impact. Then I’m reminded of the many small credit unions that I know today that are thriving. They are growing, profitable and preparing for the future. Their future looks bright.
There are many differences that can be drawn between the failed and the thriving small credit union. I believe that the leadership mindset is the number one difference.
5 deadly mindsets
For those credit unions that have left and those that may be on their way out the door. Those that haven’t figured out their niche and are struggling with narrow margins and negative member/loan growth. There are common phrases that I have consistently heard from this cohort:
- We can’t do it with a small staff
- We can’t afford it
- Our board will never support it
- Our examiners will never support it
- We’ve never done it that way before
Hearing any of these phrases sets off alarm bells. They are expressions from a mindset (board/CEO or both) that may not be willing to make difficult decisions and implement changes that are needed to adapt and thrive.
I can hear the rebuttals now… “But we really do have a low net income, if we invest in marketing, we could have negative earnings”. My response is that if having a marketing budget puts a credit union into negative ROA territory, they probably have a lending problem. They probably need marketing to help fix the lending problem. We have all heard the phrase, “you need to spend money to make money.” I don’t know any credit unions that have expense cut their way to growth and prosperity.
Or, “we have tried to pitch new ideas to our board, and they hate change”. So… what do you do, give up? No, credit union leaders have a responsibility to make changes as needed to remain relevant and viable. I hear this excuse too frequently. If you’re a board member reading this, cut it out and open your mind to new things and realize that if you fail to change, and that comes with risk taking, you may be signing your credit unions future death warrant (or merger, same thing). If you’re the CEO and reading this, buck up and tackle the situation. The board must adapt. If they won’t, you have two choices, stay and go down with the ship or leave and find an environment that has good long-term prospects. Your choice could make the difference in the future existence of your charter.
I could go on and on. But you get the idea.
Why it matters
As much as you may dislike the merger conversations surrounding small credit unions these days… If your credit union does not have a trend of new member or loan growth and has weak earnings, now is the time to engage before it becomes too late. 90% of the time, I’m anti-merger. But I have a hard time arguing against it when a credit union hasn’t done all it can do, in spite of real challenges, to adapt to ensure they can remain relevant. Working with a long list of successful small credit unions, I can honestly say it comes down to having the right mindset at the board and CEO level.