Christmas Message: Avoid Being a Credit Union in Name Only
Christmas is quickly approaching and to mark the occasion, thousands upon thousands of Christians will be flocking to church to celebrate the birth of the Christ Child. Many will do so because of their allegiance to a community and worshiping together as the body of Christ. Others will do so merely out of obligation.
Still, for many others, Christmas will be one of only a few days during the year – outside of Easter and the occasional funeral – that you’ll ever find them physically in a church. Yet, when this particular group is asked about their faith, they will quickly and readily identify themselves in the same way as those having an allegiance or practicing only out of obligation. They’ll respond, Catholic, Anglican, Lutheran, Methodist, and so forth. Sad but true, they’re missing the mark.
Simply giving oneself a label isn’t an immediate qualification as the “Real McCoy.” Such labels must be earned by embracing a creed of beliefs and espousing a certain behavior as defined by the group or its leaders. Just like in any club or organization, it’s one’s adherence to the totality of rules, guidelines and practices that defines membership. A cafeteria approach – selecting what you personally what to observe or not – is no substitute for the real thing.
And isn’t that the same when we consider our credit union and its cooperative heritage? While we like to think our credit union is a cooperative and boast of it being so, does our credit union actually live up to all the established criteria defining a cooperative business model or is it a cooperative in name only?
Let’s face it, not all credit unions are the same, nor do they all function in a consistent and similar manner. I’ve had CEOs tell me time and time again that many of their volunteers don’t even know what a cooperative is. If so, how can one set and influence the strategic vision of the organization without knowing the criteria defining its identity and guiding its very business?
Intentions might be of the highest caliber, but if one’s board or staff have no understanding and appreciation for what makes their shop distinct in the financial services marketplace – that which is its core value proposition; that which is the fundamental reason why all credit union people do what they do – then the words “Credit Union” in its name may be a misnomer.
The Litmus Test
Back in the U.K. in 1844, in an effort to identify what makes an organization a cooperative, attendees at the Rochdale conference developed a list of principles defining a cooperative business model. Simply put, the resulting seven "fundamentals of a cooperative" have become the standard practice of any organization labeling itself a cooperative.
The Seven Credit Union Cooperative Principles are:
- Voluntary Membership
- Democratic Member Control
- Members' Economic Participation
- Autonomy and Independence
- Education, Training & Information
- Cooperation among Cooperatives
- Concern for Community
How Do You Measure Up?
I’ve tapped the website of my friends at BECU for a concise description of each cooperative principle. Let’s review them while you evaluate how well your shop measures up to the standard.
1) Credit unions are voluntary, cooperative organizations, offering services to people willing to accept the responsibilities and benefits of membership, without gender, social, racial, political or religious discrimination.
Seems to me it would be rather difficult for a credit union to not live up to this principle.
2) Cooperatives are democratic organizations owned and controlled by their members, one member one vote, with equal opportunity for participation in setting policies and making decisions.
Democratic; owned and operated by their members . . . really?
3) Members are the owners of the credit union and contribute to, and democratically control, the capital of the cooperative. For credit unions, which typically offer better rates, fees and service than for-profit financial institutions, members recognize benefits in proportion to the extent of their financial transactions and general usage.
Simple enough; the more one uses the products and services, the more one benefits from the credit union.
4) Cooperatives are autonomous self-help organizations controlled by their members. If the cooperative enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by the member and maintains the cooperative autonomy.
So, if democratic control and cooperative autonomy are essential, then how does one make sense of the role of the regulator and its ability to place a credit union into conservatorship? In such cases, has the democratic control by the owners been surrendered?
Naturally, given insurance funds and the laws and regulations for financial institutions in the United States, this principle may be a bit murky. However, does this mean that a credit union is not truly autonomous, democratic and independent?
5) Cooperatives provide education and training for members, elected representatives, managers and employees so they can contribute effectively to the development of the cooperative.
A no-brainer; the more one understands the credit union and knows how to effectively tap its services, the more successful they will become. Providing training and education is an investment the credit union makes in its own future and potential success.
6) Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, state, regional, national and international structures.
From membership in the local league and the national association to collaboration with cooperatives in other sectors, the credit union business model requires participation, not isolation. However, can the concept of co-opetition, instigated by overlapping fields of membership, be viewed as a friendly excuse for not practicing real cooperation?
7) While focusing on member needs, cooperatives work for the sustainable development of communities, including people of modest means, through policies developed and accepted by the members.
For-profit financial institutions are required by the Community Reinvestment Act to participate in the local community. For credit unions, it’s in our DNA. The more credit unions can help the local community to experience growth and success, and the more a credit union can help raise the level of financial literacy and the quality of life, the more the credit union model stands to benefit and grow.
Walk the Talk
No one ever said being a successful credit union is an easy venture. It’s particularly difficult today given all the regulations, financial challenges and hurdles constantly thrown at the movement by for-profit competitors. Each and every one of us should be particularly proud of our “Credit Union” name and what it embodies in today’s financial services marketplace. It’s a name reflecting a cooperative style of business defined by seven very important principles.
How well does your credit union measure up to those principles and walk the talk? Are you taking a cafeteria approach in the way you contribute to shaping your credit union and its business culture, or are your actions based on a passionate allegiance to the cooperative principles and values?
Don’t fret if you find yourself falling short! Now is a good time to make a New Year’s resolution that can help ensure your credit union remains the Real McCoy!