Jan 01 2003

Management Practices and Growth at Mid-sized Credit Unions

Report  
Number  
95

The research reported here evaluates the relative importance of growth in members vs. assets per member in the overall growth in credit union assets. It also evaluates how this relationship varies with the size of credit unions.

Jon G. Udell
University of Wisconsin-Madison
Report Number 95

Executive Summary

Mid-sized credit unions often receive less attention and study than either small or large credit unions, yet they face special challenges. For example, they may not be small enough to know all their members personally, yet not large enough to reap the benefits of economies of scale. This can create a need to grow, in order to achieve economies of scale. Growth can result from either external or internal influences. However, external influences are beyond the control of the credit union.

What is the research about?

The purpose of this study is to determine which management practices are associated with growth in mid-sized credit unions. We addressed that purpose by conducting a survey of CEO’s among mid-sized credit unions and comparing the responses to their credit union's growth patterns during a recent eight year period. In this study we focused on mid-sized credit unions with total assets of $50-200 million. We segmented the sample into high, medium, and low growth credit unions. We found that a combination of many modern management practices, rather than one or two, appears to drive growth. These practices are summarized in this report.

What are the credit union implications?

The results have important implications for credit union CEO’s, boards, and those who aspire to become CEO’s. Some CEO’s need to consider incorporating a number of additional elements into their management practices. These include developing a defined philosophy of management that emphasizes leadership, employee development, teamwork, service to members, and member ownership. Other elements include using a formal strategic planning process and formulating a defined strategy for membership and asset growth. CEO’s should consider viewing superior service, better rates and fees, as well as member affinity and trust as key competitive advantages. Finally CEO’s should consider practicing market segmentation, and regularly surveying members to assess their satisfaction with the credit union.