The Art & Science of Credit Union Relevance

As financial services organizations seek to build a competitive advantage through environmental, social and corporate governance (ESG), credit unions have added pressure to prove their value to their members and communities through the well-known cooperative principles. This is both an art and a science. The art is found in both how board and enterprise culture is fostered and the intuition of the participants who develop strategy, while the science is found in the efficacy of the deployment of data and how data shapes strategic choices.

The Art: Board and Credit Union Culture

The credit union system is in a marketplace filled with competitors – from big banks to neobanks to fintechs to the concept of the metaverse, the list is endless. Identifying, selecting and developing financially sustainable winning strategies amidst enormous, well-capitalized and incredibly nimble competitors while consumer behavior is constantly changing is not easy. This landscape can feel very difficult for board and leadership teams to navigate strategically.

The ability to start identifying winning strategies is fostered through a supportive culture that encourages sound strategic thinking and thoughtful consideration of business strategy in the regular activities of the board and leadership teams. This does not naturally occur. It takes time, effort and a focus on fostering important Board norms and expectations, and deliberately cultivating strategic culture.

Culture can be described as a stabilizing influence between a board’s individual members and the board’s dynamics. The group shapes individual behavior, and the individual shapes the group. On a credit union board, consciously or not, individuals start to adopt the rules (written or unwritten) of the board over time. This means the culture at the credit union can shift to become more strategic over time. To deliberately influence culture, board chairs must be attentive to the following: Individual competency, board dynamics and systematic processes.

1. Individual Competency 

Each individual needs to become a competent strategic thinker to further the strategic culture at their credit union. This implies they have a vast array of knowledge and expertise related to the organization they are governing or managing. Individuals must understand the internal workings of the business, including strengths, weaknesses, key risk areas and external factors that influence the credit union’s success.

2. Board Dynamics 

Boards can foster strategic culture through their common commitment to strategic thinking. This can be captured formally through the director’s Terms of Reference, which are ideally reviewed once a year with the entire board and are part of the onboarding process for new directors. Directors and leaders need to be able to share bold/contrarian views, and thus, boards need to be very cognizant of groupthink. Groupthink is typically encouraged by subtle behaviors/gestures at the board table – the eye roll or arms crossing when directors discuss something contrary to the group’s way of thinking. It is also fostered by more obvious actions like cutting off someone from speaking or laughing at a raised point. It is crucial that all directors’ voices are given an equal platform to speak and that differing points of view are encouraged.

3. Systematic Processes

Embedding systematic processes at the board table formalizes the commitment to strategic thinking. Systematic processes include board norms, which are reviewed each year and reinforced by the board chair; a facilitator for strategic-level discussions who can push your board to think differently; a board agenda that promotes strategic discussion (including embedding questions for deliberation connected with strategy); a template used for presenting information to the board for a decision (i.e., a business case); minimum annual director education requirements and routine evaluations of board dynamics/meeting efficacy.

The Science: Strategy

The purpose of developing, executing and evaluating strategy is to remain relevant to your members, employees, communities and other key stakeholders that your credit union serves. To develop strategy, directors and executives need to hone strategic thinking.

An easily digestible framework for strategic thinking is the three C’s: Contemplate, Connect and Committee.

Contemplate: To collect information from a wide variety of sources. Consider where you obtain your information – colleagues, social media, news outlets, podcasts, research institutes, experts in the industry, data presented from management, etc.

Connect: To take the insight(s) you have uncovered and connect it with the credit union, as well as being able to clearly articulate your thoughts with others around the board table. Consider how important it is for you to not only generate ideas but to be able to explain the ideas to your colleagues.

Commit: To make decisions on resource allocation when it comes time to set strategy.

Data Strategy

One newly discovered tool in the credit union strategic toolbox is data. On average, credit unions have between 60 to 100 data sources. The challenge is harnessing this data to achieve enterprise strategic goals. This is where a solid data strategy can be a game-changer. The primary function of a credit union data strategy is alignment and support of the organization’s strategy. The data strategy supports the data vision. Critical elements of a data strategy are data vision, use case, maturity, consumption and workplace adoption.

Data Vision: What’s Your Data, and Why?

Creating an enterprise data vision statement is similar to creating a credit union mission statement. Data vision and ideation both circle around in exploration of a future world. Start with the end in mind. Envision the credit union after data has been connected and insights have been generated. Consider how data is transforming members’ lives. What is the state of the credit union/member relationship?

Data Use Case: Member Friction

Once the vision has been scoped, the data use case is the next component to create in the data strategy. A use case is the business problem (member- or employee-related) that a credit union uses data to solve.

Data Maturity

Many credit unions assume that once they have established their use case, they have their data strategy set. That is a fallacy. As credit unions are establishing a data capability, they are also developing a data-mature organization. Data maturity is the extent to which an organization utilizes the data it produces. One of the most overlooked areas in data is enterprise maturity. Many organizations think that data maturity will organically occur. This is not true. Data is an incredibly robust asset and requires focus and attention.

Data Consumption

Data consumption is reliant on the credit union’s “data culture,” and requires leadership, training and buy-in from all levels of the business. Effective data culture is one in which everyone in the organization is leveraging data in their decision-making processes. Employees use it, understand that data has potential and limits, and see data and data analytics as a positive experience rather than an obstacle.

Workplace Adoption

Workplace adoption is quite possibly the ultimate destination for data transformation. When an organization has the vision, strategy and resources to achieve its data transformation goals, then by default of transformation, it creates new capabilities and, quite ideally, a new culture. Workplace adoption is not an organic development. Successful organizations practice diligently to propel new capabilities and culture, continuing the trajectory the data transformation plan ignited.

A credit union has achieved workplace adoption when data fosters greater strategic capabilities. As with any new capability, conjoining the member and data must be practiced repetitively in a continuous cycle. The member is the beneficiary of a workplace where data is leveraged, as data will help the member better anticipate and understand their needs and their relationship with their credit union.

Mastering the art and science of credit union relevance is difficult, but not insurmountable. To thrive and survive in the digital age, credit unions need to focus their efforts to develop a strategic culture around the board and leadership team. This, coupled with a powerful data strategy, will give credit unions a competitive advantage.

Anne Legg is the Founder of THRIVE Strategic Services, a San Diego, Calif.-based company that assists credit unions with data transformation, and author of “Big Data/Big Climb,” a credit union playbook for data transformation.

Miranda Flury is the President of Hawkeye Strategies Inc., a Fort St. John, British Columbia, Canada-based consulting firm serving cooperative boards and executives. She is also a public speaker on governance and strategy and board director for Federated Cooperatives Limited in Saskatoon, Saskatchewan, Canada.