Coop Design’s Two Unmatchable Advantages

Living in a forest sometimes keeps participants from seeing the factors that create its growth.  For the credit union system, there are two areas where they should have the upper hand in the ever-changing world of financial options.

Ownership Matters

We live in a commercial, social and political world in which success is often attained by accentuating differences–through branding, sloganeering or pandering to individual fears.

Cooperatives are built on peoples’ need for community. Instead of fueling division, credit unions rely on shared effort. When people feel included, these efforts build ownership. Ownership is more than “I am a member of.” It is being a part of something bigger than oneself.

Members are choosing a financial option that promotes individual and local opportunity, trust and prosperity.  The inclusive spirit of owning integrates diverse needs and persons in mutual efforts for a better community.

The Power of Relationships

In a brief article on managment strategy author Greg Satell references a McKinsey study that points out the change in the asset composition of leading American firms and why this requires a different approach to leadership:

“In 1983, McKinsey consultant Julien Phillips published a paper in the journal, Human Resource Management, that described an “adoption penalty” for firms that didn’t adapt to changes in the marketplace quickly enough.

. . .research shows that in 1975, during the period Phillips studied, 83% of the average US corporation’s assets were tangible assets, such as plant, machinery and buildings, while by 2015, 84% of corporate assets were intangible, such as licenses, patents and research.”

By NCUA rule, credit unions’ “tangible” assets-buildings, equipment and fixed- are limited to 5% of assets or less.  The structure of loan and investment assets is self-liquidating.  As with other corporations, the most vital cooperative “assets” today are intangible, but not patents or research. It’s about people.

One of these is employee culture especially when credit unions define their competitive advantage as service.  But the most valuable and hardest to quantify is the member-owner relationship.  This is more than the total of product balances, length of membership or volume of transactions. Relationship is members’ ongoing belief that a credit union’s decisions are in their best interest.

When a credit union’s most precious advantages are intangible, effectiveness is directly connected to people — what they believe, how they think and how they act.

This strategic imperative is counter to prevailing themes that coop competitiveness is finding the best technology, skill with data analytics or AI applications, or the dominate theory that size is essential for success.  All may help to some degree, but are not unique coop advantages.

Ownership and relationship are two sides of the same coin.  Without either, the member becomes just a customer, and the credit union one option of many in the financial forest.

The Network Advantage

Satell’s article highlights another credit union system advantage, albeit not unique to coops:

“Yet there is significant evidence that suggests that networks outperform hierarchies.

Wherever we see significant change today, it tends to happen side-to-side in networks rather than top-down in hierarchies. Studies have found similar patterns in the German auto industryamong currency traders and even in Broadway plays

The truth is that today we can’t transform organizations unless we transform the people in them. . .It is no longer enough to simply communicate decisions made at the top. Rather, we need to put people at the center and empower them to succeed.

Later this week I will present the story of a CEO and credit union where these cooperative ideas are the center of every effort.  The results speak for themselves, even if the model appears traditional.



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