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Filene offers report on credit union financial sustainability

A new white paper from the Filene Research Institute explores the sustainability of the credit union model, and offers credit unions ideas for maintaining sustainably "excellent" organizations.

"Credit Union Financial Sustainability: A Colloquium at Harvard University," is based on a series of presentations made at Harvard University earlier this year.

The report identifies four traits for sustainably excellent organizations. They include:

  • Have the stomach to be bad. The No. 1 obstacle to service excellence is actually an emotional obstacle. The paper cites a financial institution that became the fastest growing banking institution in the U.S. on deposits by bucking conventional wisdom. Conventional wisdom holds that the most attractive rates will attract members and customers. The bank offered the worst rates in every local market, but it differentiated itself by offering the best hours and offering the best customer interactions.
  • Avoid gratuitous service. Simply put, gratuitous service is giving members stuff for free. Unfortunately, service excellence is unsustainable if a financial institution offers too much gratuitous service. The paper advises credit unions to design reliable funding mechanisms into the service offerings. One example is offered by the financial institution with extended hours. But if members are asked to pay for services, it must be palatable. For example, charging for a teller is not palatable.
  • Design systems so the typical employee can be excellent. Most organizations try to set their best employees up for success-but they are the most difficult to retain. But sustained excellence comes from aiming at the middle of the pack, not at the top. Credit unions shouldn't optimize for their best employees because they can never have enough of them.
  • Teach customers to behave differently. When members are blocking a credit union's path to sustainability, they must be convinced to behave differently for the credit union to thrive. It's pretty easy to get members to behave differently and have them dislike you for it. But great organizations can get members to behave differently while simultaneously boosting satisfaction. Starbucks did it by training customers to order drinks "the cool way," which is also the way baristas prepare drinks most efficiently.