In my thirty years of forming credit union collaborations, I have come to see common lessons, especially in multiply owned CUSOs providing one or more back office operational services. I examine twelve of those lessons in these types of CUSOs.
- Collaborations are usually born out of fear. Creating and maintaining collaborations is hard work and it takes a significant motivator to undertake the effort. Sometimes the motivation is opportunity but it is often fear. The fear of becoming obsolete in a world full of low cost and efficient competitors is real. Collaborations are created by those with the vision to see the challenges that lie ahead and understand the urgency to make changes while there is still time to act.
- Collaborations must overcome cultural and instinctive biases. Sharing resources and working together in a collaboration for the mutual benefit of the partners is a foreign concept in the for-profit business world. The success of a collaboration is not dependent upon the legal terms in a contract, rather it is the power of the owner/user model. All users of the collaboration own the collaboration. If there is a problem for a user, the owner fixes it. You would think credit union folks get this concept and many do but not all. It is an especially hard concept for examiners and lawyers.
- A collaboration is a relationship not a transaction. A collaboration will succeed if the partners view the relationship with the lens of the long term benefits and understand that all services are not “home runs” all the time. Constantly “hitting singles” will win you the game. Just as in a marriage, the key is to make adjustments to nurture the relationship between the partners and consider the effect of one’s actions on the other partners.
- Trust is the key to all collaborations. This is a trust that the partners share a belief of the importance of the collaboration, trust to meet the commitments made, trust to be truthful, trust to “have the back” of your partners; and trust to communicate to keep the partners aligned. Trust begins with the credit union CEO’s and, if successful, moves to the senior staff, the board and the rest of the staff. Many successful collaborations have begun when two or three credit union CEO’s decide that it is essential to obtain scale. They say to each other, “We have to do this and while all the details are not clear yet, we are committed and will find a way.” The collaboration will start off with a plan but the plan is constantly changing as the collaboration faces unforeseen issues to overcome. At some point, a collaboration requires a leap of faith grounded on trust. After it is formed a collaboration requires constant vigilance to protect it from adverse internal and external forces.
- A champion may create a collaboration but the institution must sustain it. Credit union CEO’s and boards change. The enduring collaborations will develop new champions within the credit unions to ensure its continued successful ongoing operation and benefits. Credit union boards will hire new CEO’s who fully support the collaboration.
- Scale by itself is not enough. Inserting a CUSO into a credit union’s operations actually adds costs unless the credit union adapts its internal business model. Credit unions must agree to use the same policies, documents, procedures and related vendors. It is only through standardization of the back office functions that scale enables the credit unions to achieve the efficiencies they seek. Doing more with less people is also key to saving money. Usually the CUSO employees will have higher levels of expertise that are now affordable given there are less employees with a more efficient process. The strategic thinking has to be elevated. A $250 million credit union in a collaboration with three other equal sized credit unions must think in terms of how a credit union with the scale of $1 billion operates. Significant benefits from collaborations require significant changes.
- Quantify the benefits of the collaboration so you will know how to maximize the benefits. You will be able to determine what services will have the “biggest bang for the buck” and what metrics will determine success. You will also know how many partners is an ideal number before the complications of running the collaboration make it counterproductive.
- For operational services, peer sized credit union partners each with an equal vote works best. Peer sized credit unions face similar problems that require common solutions.
- Developing a collaborative mindset is key. Determine what services are off-limits to collaboration (e.g., member facing services) and be open to collaborating on all other services with credit unions of like mind-set. When new services are considered, think of how new services might be enhanced if done through the collaboration and how that might help both your credit union and your partner credit unions.
- If the CUSO is providing a key service hire a person with CEO level capabilities to run the CUSO. If the CUSO is run by a person who has to be micro-managed daily by the credit union partners, the CUSO will be mired in mud. The CUSO CEO is accountable to the credit unions but he or she needs the ability to work effectively without constant supervision.
- Educate and communicate with the credit union boards and staff on the reasons for the collaboration and how the collaboration will affect their roles. The more education and communication there is, the more likely the changes will be accepted internally.
- Provide a means to unwind a collaboration. Nothing is permanent. If a partner wants out, the CUSO’s operating agreement should provide a means for the partner to disassociate in a manner that does not harm the collaboration and is fair to the disassociating partner.
Guy A. Messick, a/k/a The CUSO Guru, is an attorney with Messick Lauer & Smith in Media, PA and General Counsel to NACUSO.
