Credit Union Financial Sustainability: A Colloquium at Harvard University
This report documents the presentations and discussions of the Credit Union Financial Sustainability Colloquium at Harvard University, which combined insights from academia and business to make a stark assessment of how sustainable the credit union business model appears. With the exception of some individual credit unions, the trends are sobering. But the problems are understandable and, therefore, manageable.
Peter Tufano, a Harvard Business School professor and Filene Research Fellow, introduced a classic Harvard business case to show that growing profits and growing sales do not always a viable business make – especially when capital is constrained.
Building on Tufano’s sustainable growth theme, John Lass, senior vice president at CUNA Mutual Group, led a lengthy discussion of exactly what levers credit unions can pull to keep their own growth sustainable.
Harvard Business School Professor Frances Frei taught that you can fail even though nobody dislikes you. Credit unions have to be particularly careful about trying to be all things to all members, because a drive for across-the-board excellence is likely to lead to mediocre performance in all areas.
Outsized operating expense ratios are the bane of the majority of US credit unions, argues McKinsey & Company partner and Filene Research Fellow Dorian Stone. A straightforward comparison of operating expenses at the smallest US banks and credit unions shows credit unions lagging banks by 20% or more. Moreover, competitors aren’t likely to get less efficient, so it’s time for credit unions to do better.