A Diatribe Against Credit Union Mediocrity

A recent credit union league press release trumpeted membership growth at credit unions in a particular state. Here is a specific quote from that release: Membership at the state’s 101 credit unions has increased 3.4%, five times the national average of 0.65%.

I thought I would do some digging into the root cause of this stellar performance, both to satisfy my own curiosity and to share with GCLLC strategy consulting clients perhaps a few game-changing success stories. I turned to the database that runs our Credit Union Industry HealthScore for background on the underlying data and what I found was….kind of pathetic.

In this particular state, 48 out of the 101 credit unions actually saw membership declines in the 3rd quarter of 2011. Nationally, 3,895 credit unions out of 7,324 saw declines. The reality of the credit union experience is far from the reality suggested by the press release. The “real reality” is that that some credit unions are growing, very well, and compensating for the horrible member growth numbers of their peers.

Now I know that some reading this post will comment (or at least think) that membership growth is not necessarily an indicator of a healthy credit union. That some credit unions choose to shrink membership as a strategic measure. That calling out credit unions on membership growth is ill-informed.

These are all valid points, but know that my rage is not against the membership growth numbers, per se. It is against the practice of taking mediocre performance, and spinning it into a rosy picture of excellence. Credit union associations do it, leagues do it, and individual credit unions do it. Average, or in many cases below average, performance is not a winning proposition no matter how you spin it.

I suppose it wouldn’t bother me as much if I believed that most credit unions were doing their best to do their best. The way I see it, however, is that some credit unions are doing their best to do the least.

Before you pile on criticisms of this post based on a belief that life is hard for credit unions, especially the small ones, let me share that there are PLENTY of small credit unions doing exceptionally well. Size and operating complexity are not valid excuses for poor performance, and at some point “the economy” isn’t either.

Why don’t we dispense with the press release pleasantries and get down to brass tacks. For nearly half our industry, metrics reflecting loan growth, deposit growth, member growth, earnings growth and the like are embarrassingly bad. Let’s acknowledge this fact, and then work to do something about it.

There are many means to driving across-the board performance improvements and elevated industry health. Real cooperation on expensive back-office functions, accelerated merger activity, tough love (vs false praise) for floundering credit unions are but a few, not to mention better strategic planning at individual credit unions (shameless plug).

On the note of better planing, it is critical that the boards of poorly-performing credit unions re-establish their rightful role of holding management accountable to credit union performance. Planning, an exercise in which both board and management should participate, is where expectations are set and accountability defined. And it is this set of expectations/accountabilities, the internal definition of success, that the board should compare its ongoing performance to – not what some industry pollyanna promotes in a press release.

And lest I leave you with the despair that often accompanies vitriolic criticism, consider the “other half” of the credit union community. There are thousands of credit unions of all sizes and complexities that regularly outperform both credit union and bank peers. These are the success stories we must seek out and extoll. These are the credit unions that we must separate from the pack of statistical data and hold up as a collective exemplar of intelligent leadership and sound strategy.

To do otherwise is to leave ourselves mired in the mediocrity of the average.

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