Jul 05 2012

Exploring Cooperative Management


Credit unions are cooperatives, of course, but what does that mean in practice?

On the one hand, a credit union looks a lot like any business in that it needs revenue to exceed expenses, members must be well cared for, and employees must be paid. But in very interesting ways, a cooperative is not the kind of business that most of the business world understands. Its equity is dispersed and often inaccessible to its member-owners, creating value is not as simple as maximizing profits, and value itself is often measured (rightly or wrongly) in noneconomic terms.

This brief is a foray into these interesting differences, an attempt to spark conversation among boards and managers about the ways that a credit union should mirror traditional businesses and the ways that it needs to think differently and deeply about the differences. The treatment here is not comprehensive; instead, it is probing in its exploration of the possible themes. Use it as an idea document, and if you’re intrigued, follow the source notes for more.

The report also addresses the challenges that credit unions, as cooperatives, face in a competitive environment: serving stakeholders instead of shareholders, appropriate management incentives, member engagement, limited market opportunities, and, most fundamentally, the ownership of capital. But the report doesn’t just dwell on challenges; it finishes with a handful of interesting cooperative ideas and a section dedicated to the ways a credit union should operate differently from its noncooperative competitors.

Ben Rogers
Managing Director, Research
Report Number 275