CU Times recently reported the NCUA approved 54 mergers across 30 states during the first quarter of 2016, a significant increase over the 41 mergers approved during the same period in 2015.
While most industry experts expect the number of credit union mergers to stay within the range of 200 to 250 in 2016, as they have since 2011, insiders like Glenn Christensen, president of the CEO Advisors Group, believe that despite a shrinking pool of available credit unions, more institutions will pursue mergers and acquisitions as a preferred strategy to ensure their own continued growth in the future.
Because all credit unions, at their core, have a similar philosophy with respect to the way in which they treat members and return profits to them, credit union mergers and acquisitions typically tend to be relatively smooth affairs. Still, acquirers will have to overcome many of the same barriers to successful mergers that exist in other industries, all of which have the potential to disrupt operations, fuel vendor unrest and spur member defections.
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Partnerships that fail to deliver on the planned benefits or generate anticipated financial returns can still occur, even in the credit union space. Such failures also have ramifications for staff of the merging credit unions. Poorly communicated changes can lead to internal frustrations and a perceived lack of direction. And poorly managed integration of different teams can cause stress for staff and create a culture of fear, anxiety and resistance that can last for months, if not permanently.
Members too can lose out. A mismanaged merger can cause disruptions to basic processes and a decline in service levels that can lead to frustration and, if not quickly corrected, defections to other financial institutions.
One of the important and often overlooked areas that can significantly improve the chances for a successful merger is process management. Effectively capturing and managing the critical process know-how of both credit unions is a key step to ensuring the end result of a merger or acquisition is a new organization that is stronger, more nimble and better positioned to perform and grow.
To help credit unions capture, retain and leverage critical corporate know-how when a merger or acquisition occurs, early planning and preparation is essential. For this reason, work should begin as soon as a merger or acquisition has been confirmed. Teams should be tasked with examining the existing processes at both credit unions and identifying preliminary ways in which they might be brought together. They should also select a suitable process management tool to help with the transition. Gathering post-merger processes into a central place sets a solid platform for teams to understand new processes and contribute to any changes necessary.
Teams should aim to find common ground and agreement on how the task of process management should be approached, determining whether existing approaches need to be reworked or if a brand new approach is required.
It is essential to make sure the teams involved in the process review are comprised of staff from both credit unions. This not only encourages positive collaboration and teamwork, but also helps in securing early buy-in from key staff members who, in turn, are positioned to influence others around them.
Like any major business change, a merger can be extremely disruptive. Staff members are often understandably anxious about how the new credit union will operate and about their place within it. Enabling as many staff members as possible to contribute to the process mapping, review and recommendations for improvement can change this into a positive, giving them a greater feeling of ownership over the transition.
As a result, senior management should avoid making unilateral decisions whenever possible. Instead, team members should be encouraged to express their ideas for improvement as a way of helping to build the new organization. It's also important for team members to understand that all of their ideas and suggestions do not need to be implemented immediately. In fact, it may be preferable to postpone some decisions and continue operating as two separate organizations in the short-term. Doing so can be less disruptive for both staff and members, who will then have the opportunity to ease into changes as they get used to the idea of a merged company.
Gathering all existing processes and the ways in which they are linked into a single location should be the first step in this effort. Once everyone has a clearer picture of the processes that already exist, what is working (and what isn't), and all of the recommendations for improvement, the impact of planned changes can be better understood.
The next step is to prioritize process changes. Again, it is preferable to use cross-organizational and project teams to drive this effort, with a focus on whether the agreed-upon processes will add real value to the new credit union and ensuring they will actually be used, rather than simply becoming merger documents that are consigned to a file cabinet. The team will also need to identify a mechanism that can provide staff with immediate access to processes and a means to provide feedback in order to successfully incorporate new processes and resolve any issues that result.
Once these initial changes have been made and the new credit union is up and running as a single structure, the focus should shift to maintaining the new processes and incorporating a best practice improvement culture into the new organization. New process owners should be named at this point to monitor processes and encourage ongoing collaboration, feedback, and re-evaluation and revision where needed. This approach will serve to develop a platform of process know-how and will help to establish an ongoing culture of process improvement.
Credit union mergers and acquisitions are likely to continue to be employed strategically as a means for generating greater economies of scale and helping the new institution to thrive in an increasingly competitive financial environment. To make the merger or acquisition process easier to implement, though, it is clear that process management could and should play a major role. Done effectively, process management can enable staff from both organizations to manage the impacts of change and express their ideas for the future, while simultaneously managing the critical process knowledge of both institutions.
Ivan Seslj is CEO of Promapp. He can be reached at 415-549-9430 or [email protected].
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