Credit unions are dealing with a very complicated competitivelandscape these days. From legislative and regulatory pressures, tochanging consumer dynamics to fending off hoards of traditional andnon-traditional competitors, it's not easy being the good guy. Withall we have to deal with I must say that this is not the time tomake thing unnecessarily complicated.

What am I referring to? None other than the ever-expandingvariety of organizational charts credit unions are creating to tryto deal with the complexity. The number of titles beginning with“C” is becoming a bit hard to keep up with. CCO, COO, CMO, CFO,CIO, CXO, CAO…we've almost run out of letters in the alphabet. Ihave come to believe in my credit union career that, no matter howbig the credit union gets, there is only one “C” that reallymatters…the CEO.

To explain why I believe this, it is important to revisit thecredit union business model. The basic credit union business modelis to obtain capital, usually in the form of member deposits, andmake money to pay for that capital by loaning it out tomembers.

While other services have been introduced to increase revenueopportunities, the basic flow…deposits in–loans out—revenuein—interest out…is what the largest share of our business isdevoted to. Even taking into consideration the complicationsthat modern credit union offerings create, the basic credit unionbusiness model still looks like the following:

Basic Credit Union Business Model

If you accept this basic format, the CEOhas two areas of focus. One is the supply of goods and material(funds for loans, delivery systems for services, etc) atcompetitive prices. The second area is the marketing, sales andservicing of its goods and services to create the largest stream ofrevenue possible. While each area has a large number of processes,tasks and outcomes it is responsible for, the CEO has just sixareas she or he needs to monitor to assess the effectiveness oftheir operation.

On the Supply side, the provision for loan loss, operatingexpense, non-operating income and asset turnover are the financialmeasures that can be affected by the management of finance, riskmanagement, compliance, IT, lending, collections, facilities andHR.

On the Demand side, asset turnover and revenue— in the form ofinterest income, fees and operating income – are the main financialmeasures that can be affected by the management of marketing,retail sales, business development, call center, Internet andtraining.

So on one side of the house you are managing your assets tominimize risk and expenses to keep the cost of funds as low aspossible, while the other side of the house is trying to developmarkets, sell products and service existing products as efficientlyand at a large a volume as possible to maximize net revenue. A simple equation on the face of it, but the desire to serve adiverse range of financial needs has created a complicatedoperational calculus for most modern credit unions.

Still, I propose that no matter how many branches are created onthe organizational chart, nothing replaces the importance of a CEOfocused on creating a balance between supply and demand and theholding the appropriate areas accountable for measurable resultsthat have real impact on the financial health of the organization.A simple approach for some very complicated times.

I hope I have caught your interest. I'd love to start a goodconversation on this subject. Please comment and I will be sure torespond.

Jim Craig is vice president ofmarketing at the $537 million 1^stAdvantage Federal Credit Union in Yorktown, Va.