May 09 2012

Balancing Member Service with Organizational Efficiency

The credit union business model may not be as simple as others. But the profitability principle is the same: Cut your own costs, or gently charge more.

This is the second in a four-part series that identifies and quantifies cost items at credit unions. The series does more than just identify the costs, however; it suggests measured approaches for minimizing costs by making informed decisions. The other briefs include treatment of item processing efficiency, branch staffing, and optimizing delivery channels. These reports provide specific cost metrics based on analysis from real credit unions and offer suggestions for how to better align the costs you do incur with your organization’s strategy.

The author questions the rarely questioned commitment of credit unions to provide cost-effective products along with the highest level of friendly, professional, and courteous service. Joseph Prunty does not endorse rudeness as an efficiency plan, but he does question how well the ideal of cost-effectiveness can operate alongside repeated, expensive investments in ever-more face-to-face service.

Far from arguing that credit unions should turn members away, jack up fees, or otherwise abandon member value, this report takes for granted that, “as cooperatives, credit unions should constantly strive to minimize operating expenses in order to return more economic value to member shareholders.”

In practical terms, that means measuring account maintenance costs, including core system costs, transaction costs, and even the costs of staff downtime. Tracking is the first step on the road to improving.

Report Number 267