Channeling Drucker: What Would Peter Say?

“I told you so.” That’s what Peter Drucker might say to corporate credit union managers in the wake of our recent financial collapse. So says the November 2009 issue of The Harvard Business Review. Drucker-the highly influential management guru-spent a life-time rallying against the mismanagement practices that in large part triggered the crisis, like focusing on short-term results and bottom-line results at the expense of long-term goals and social responsibility. Drucker contended that businesses could avoid these destructive practices by learning from well-run nonprofits. He stressed that, all organizations-profit or nonprofit-need to define their missions as providing value to people and society, not just making money and growing the business. Yet, ironically, the crisis is pressuring CUs-despite their nonprofit status-to act as if profitability and growth are ends in themselves. This is understandable given the immediate demands for earnings and growth and a future in which economies of scale will provide larger CUs with a significant competitive advantage. I celebrated Drucker’s recent centennial (he would have turned 100 this past November) by speculating about what he would say to CU leaders. Keep your eye on the long-term future. Make it absolutely clear that everyone understands that the ultimate purpose of your CU is neither growth nor profitability but to provide value to your members, your community and society at large. Can you clearly articulate what this value is? Do you make enhancing this value the key driver of major CU decisions? Can you measure it? Do you hold yourself and the organization accountable for achieving it? The proper role of profit. It has always been a major CU challenge to strike the right balance among maintaining needed profitability, enhancing member value and building the business. But this challenge has never been as difficult as it is today. Maintaining the right balance as conditions change needs to be the subject of an ongoing conversation that includes both the board and senior management. Ensure an independent board. Many corporations get into trouble because their boards routinely rubber stamp management proposals. Remember that your volunteer board of directors is the agent of your member-owners. Is your board fully exercising its independent responsibility for setting long-term strategic direction, assessing results and holding management accountable? Become a chief marketing officer. Many managers confuse marketing with sales. To the degree that marketing is effective, sales is irrelevant. Marketing is the business seen from the outside in-from the viewpoint of the customer and the marketplace. As such, it cannot be delegated to a single individual. It’s the responsibility of the CEO as well as the entire management team. It is your ultimate responsibility to lead the CU in clearly defining (and continually questioning) who your members are, what they need and how you can provide increasing value to them. Innovate. You think that the financial services world has changed a lot over the past 20 years? You ain’t seen nothing yet. Today, CUs are still doing pretty much the same things as they have in the past. Yes, they are doing things much more efficiently, on a greater scale and using new tools, but they are pretty much doing the same things. The industry is changing, and the pace of change is accelerating. Your role as a CU leader is to create that future, and that’s where innovation comes in. Innovation requires creative destruction, questioning whether today’s products and services will make sense tomorrow. It requires continuously asking, “What will our business be in the future?” and taking concrete actions to make that future happen. Create a compelling work environment. People are motivated by contributing to something bigger than themselves, having meaningful and challenging work, achieving important results and continuously growing and developing. As a member-owned nonprofit, you have a major advantage over banks in creating a compelling work environment focused on serving a larger purpose. It requires establishing high expectations for performance for the CU as a whole and everyone involved-both staff and volunteers. It includes investing in the continuous development of skills and capabilities that will prepare people for success, both today and tomorrow.