Coaching boards to boost credit union value

Tips CEOs can use.

by: Jeff Rendel

You’ve read about activist boards in corporate America. These boards strive to do things they believe will raise the value of the corporation. They get deeply involved in strategy and operations with a short-term focus on financial metrics. While their intent is not always to make a quick sale of the corporation, they always desire to increase its financial value.

For credit unions, value is defined a little differently. It is the dollars-and-cents financial value of the relationship a member has with his CU. This could be fees saved, the higher rate paid on deposit, paying a lower rate on a loan, or getting a membership dividend. If a member can receive, say, $1,000 of value in a year, that’s a real return on membership. Members don’t get that from their banks.

So increasing the value of your credit union is an important initiative. What can a credit union CEO do to promote a board committed to increasing the value of the credit union to its members?

Evaluate your credit union like an activist investor. “Does this add and maximize value – and how?” is a question that should accompany every current and prospective strategic objective, goal, and plan. As an executive, this analysis requires meticulous, impartial and peer research. In the end, this evaluation ensures the long-term viability and value of your credit union, a fiduciary duty that all directors seek to achieve. Though a credit union can’t actively look to the equity markets for a real-time valuation, common measures to gauge value include: contribution to net income; increase in member profitability; growth in market share; and return on equity. All are solid indicators of consistent growth and the sustainability of future streams of revenue and profits.

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