Your recent comments (CU Times, March 19, 2008) about the importance of branching to the growth and sustainability of credit unions are right on target. Your facts supporting the benefits of branching match the findings from CEO Advisory Group's 2008 National Growth Study. This study asked credit union CEOs how they plan to drive growth over the next five years, and then overlaid this information with historic national trends gleaned from the 5,300 call reports. The findings produced "Seven Key Drivers to Accelerated Growth." One important factor emerged as a strategy that differentiated fast growing from slow growing credit unions: branching.
We find that some credit unions have a limited vision of what branching means. In the strategic planning phase its should encompass all branching options and link the best options to the credit unions strategic initiatives, markets, culture, products and services while supporting profitability and philanthropic objectives. There is not just one way to grow through branching. Let's take a look at some of the many options a credit union can consider.
- Study your existing market to determine if the branch locations provide current and future market efficiency in terms of target market acquisition and development.
- Determine if the current branch business model is highly productive in terms of member development and service, low operating cost, staff success and promoting a strong and differentiating brand image.
- Should there be more than one branch business model and style to match target markets?
- Study existing and new markets to understand if the size and configuration of your branches are the most productive.
- Are there branches that should be closed and relocated to increase long-term growth and profitability potential?
- Should you sell all your branches and lease back? Is this a wise credit union and real estate decision?
- Is in-store branching a growth strategy that will work for you? Or, will in-store branches cause you to loose brand differentiation and be culturally difficult to operate?
- How can technology support the branch network, raise community awareness and increase member convenience? ATMs and self-service Kiosks?
- Is shared branching a solution for your credit union in the short and long run? Will it help you retain remote members, provide service to family members or increase new member growth? Does shared branching replace your need to add branches?
- What role do ATMs play in branch expansion?
The above are just a few of the more obvious possibilities that board and management teams should consider to develop and operate a highly productive branching network and remain competitive well into the future.
Over the past 20 years we have helped credit unions across North America develop growth and branching strategies. We find that credit unions that do not operate their branches with sufficient branch-productive and market information are more reluctant to see branching as a necessary method of delivery. Every credit union should have the advantage of branch level accounting so they know which branches are financially performing and which are not. This accounting should be rendered down so that branches are not competing with supporting delivery channels. Branch assignment of members should not be based on branch of origination. Rather, assignment should be based on the branch of activity, so a credit union knows where member activities are taking place and align with each branch. Performance evaluations standards should be in place so that branch managers clearly understand their goals and the management team and board have realistic shared expectations.
In 2000, Mark Weber and I presented the future of the branch to 300 attendees at a national credit union conference in Vancouver, B.C. We suggested that branches would not become dinosaurs by 2010 as predicted by Bill Gates, co-founder of Microsoft. Rather, branches would continue to grow at an impressive rate as the need to compete for business on multiple delivery fronts continued to escalate. We were booed by many in the audience who thought we lacked vision. So far, betting on branching has worked out very well for nearly all credit unions.
Creative and savvy strategies combined with well-conceived, branded, placed and operated branches are one of the keys to most credit unions current and future success. The implementation of this belief has built a great deal of mutual success with our credit union clients. Bravo, your opinion column has helped move the cause forward.
Paul Seibert
EHS Design
Vice President of Financial Services
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