A Maddening Idea

EA Sports' Madden '08 was released yesterday. At lunch, I drove over to Best Buy and picked up a copy. Besides the amazingly high $60.00 price, one thing struck me about this transaction. I now own every Madden Football release since 1994. And in nearly every case, I purchased these games the very same day they were released.

Now don't get me wrong, this is a great game! But that's some serious cash I've dropped on mindless entertainment.

How many other people out there do the exact same thing? I'd wager there are quite a few. This got me thinking. Can a credit union build community out of non-financial services? What about a video game library?

Young adults (anyone for that matter) could open a "Video Game Account" (not clever, I know...just came up with this idea) that would allow access to the credit union's video game library. To check out a game, members must have a balance equal to the market price of the game and must make a $5.00 deposit. If the game never gets returned, no sweat...the savings deposit serves as collateral. A la Netflix, keep the game as long as you want as long as you make monthly deposits into your account. The member enjoys a free video game library and is voluntarily becoming a good saver. The credit union attracts young members for a small investment and increases deposits.

Supplement this idea with monthly video game tournaments on location or online for ways to win bonus deposits to members' accounts.

This could work for books, video games, wedding/prom dresses, all sorts of things... There, I said it. Patented thought exhibitionism - what do you all think?

What Credit Unions Can Learn from Costco

Credit Unions could learn a ton from Costco. A 2007 story by Barron’s attributed the company’s success (they are currently the world’s fourth largest retailer) to four things: keeping expenses and prices low, treating employees well, making discount shopping fashionable, and keeping shareholders happy. These are outstanding “big picture” ideas—general in focus, huge in their implications. However, let’s look at two specific details of Costco operations that the credit union movement would be wise to consider for implementation.

Controversial Topic 1: Membership Fees
In credit unions’ quest to gain market share in the financial services market we have sought easier loans via indirect lending, easier ways to join via community charters, and nearly non-existent barriers to joining (membership fees, maintenance fees, etc.). While we have not achieved “open membership,” I would argue that it has never been easier for an American to join a credit union. In many cases, citizens of certain states or municipalities have multiple choices of fine credit unions to join. Some companies even offer their workers membership into multiple credit unions as part of their employee benefits packages. It’s exciting to know that if someone wants to join a credit union, chances are quite good that there is one out there for which he/she is eligible.

In many ways, though, this has cheapened the relationship. It has simultaneously become just as simple to leave a credit union as it has to join one. With some credit union members, there’s a diminished sense of belonging with their financial institution. With others, they have no obvious vested interest in remaining a member of their specific credit union.

Costco charges an annual standard membership fee of $50. For a marginally higher investment, you can get an executive membership that gives you cash back on your annual purchases at Costco stores. What does this fee cause shoppers to do? Shop. Shop A LOT! Costco members realize that to get their $50 out of their membership, they need to make enough annual purchases to offset their annual fee. How cool, huh? Costco gets $50/member/year AND members who want to do as much business with them as possible.

I think there’s a market out there for consumers who want to feel some exclusivity with their financial institution. People who want to feel special. People who want to save money. People who are impressed by a financial institution that is so confident in their services and ability to save members money that they can charge an annual membership fee. Show them your value. Keep track of members’ annual savings, and communicate that with every transaction.

“Thank you for stopping by today, Mrs. Jenkins! You have now saved $455.34 this year by being a member.”

As an added bonus, return 5% of that calculated total to members at the end of the year. With luck, that total will be at least the $50 membership fee required for renewal. The purpose of the fee would not be income, after all, it would be for loyalty. Even more than that, it’s to prove the value of your financial institution. You’re saying “it’s well worth your $50 to be a member at our credit union.”

Controversial Topic 2: Gas
Gas prices are sucking the life out of American families. The purpose of credit unions is to promote thrift among our members. Isn’t there something we can do, within that purpose, to ease the burden of fuel costs?

Costco sold 1.7 billion gallons of gasoline in 2007. Typically saving Costco members three to ten cents per gallon compared to competitor gas stations, the idea to offer discount gas as a membership perk has proven to be a tremendous business decision. Members help justify their membership fee with the cost savings they receive with this discounted gas. Costco in turn is able to become more attractive to potential members.

How about forming “Credit Union Gas Stations”? Credit unions could form a gas cooperative that would require member credit unions to invest .1% of total assets in year one to fund its start (eg. $500 million credit union invests $500,000). Credit Union Gas Stations would be built in high traffic, high visibility locations across the nation to provide this membership perk. Gas would be sold at the per gallon cost plus two pennies to offset operation costs. The effect would be around six cents per gallon savings for participating credit union members. To pump gas at these stations, you must be a credit union member of a member credit union. You will be able to join a credit union at the station’s information center. Credit unions would issue a card to their members that authorizes the pumping of up to 40 gallons/month at these stations, making sure that no member or member credit union gets an unfairly high proportion of the fuel supply.

We’re cooperatives. Let’s take advantage of our collective economies of scale to make something like this happen. Costco has proven that it can be successful.

Story also published at the Filene Research Institute's CU Tomorrow Blog.

An Age-Old Question: How Young/Old is Too Young/Old for a CEO?

A friend of mine in the credit union movement, who will remain nameless, is being considered for a President/CEO level position within the industry. This friend has all of the tools needed to be a success in this new role: a resume full of accomplishments in the credit union space, top notch education, executive management experience, an out-of-this world industry reputation, a magnetic personality, and tireless work ethic. The only problem: this person is 29 years old.

Now, we all know that age is not supposed to be a factor in hiring decisions...but isn't it anyway? I mean, how often is an 80-year old considered for an executive marketing position? How many 22-year olds can qualify for a job that requires "10-15 years experience"? Ageism - right or wrong, overt or covert - simply exists.

I'll be the last person on this planet to argue against the value of work experience, especially as it applies to the position in question. I am a much better credit union employee today than I was when I started 4.5 years ago. I also know that I could do a much better job than many people do in positions that require the aforementioned "10-15 years of experience".

This situation begs the questions: Is there an age that is "too young" for a credit union CEO? Is there an age that is "too old" for a credit union CEO?

I'll answer this in a couple conflicting ways - first, with an obligatory sports analogy. If you were starting a sports franchise, would you rather have LeBron James (24, 3 years of experience) or Michael Jordan (45, 15 years of experience)? Not fair, right? Athleticism is so integral in basketball that your choice would be dramatically skewed in favor of the younger player, James. In making such a choice, you must consider the unique requirements for the position you're trying to fill. In this case, basketball, youth takes precedence.

So, what are the unique requirements of a credit union President/CEO? I think this position needs someone who can passionately inspire members and staff to believe in their credit union and the credit union movement. Someone who has an uncanny ability to analyze complex data and make tough decisions based on said data. Someone with charisma, confidence, and earned respect. Someone whose accomplishments, both in academics and business, demonstrate a proven track record of success and hard work.

Many of these qualities (like charisma, education, and passion) are age independent. I would also argue that what is suitable for one credit union executive position may or may not be suitable for another. A highly educated, energetic President, for example, may or may not be a great fit for a conservative credit union with a blue collar field of membership. The perfect fit, by that criteria, could be any age 25-95.

But what about the other qualifications? Do you have to be 40, 50, 60, or 70 to be able to earn the respect of employees, members, and volunteer directors? Could you be 30? How about 80? How many years of experience do you need to be able to demonstrate strong analytical skill? How long does your track record of success need to be to pique the interest of the people making hiring decisions? 10 years? 20 years? 30 years?

Age has even become a huge issue in the political landscape, with the likely Democrat and Republican nominees being nearly 25 years apart (McCain 71, Obama 46). I have heard arguments that McCain is too old just as often as I've heard complaints that Obama is too young and inexperienced. Fair? Nope. Legitimate concerns? Possibly.

Here's the deal. The average age of credit union members is 47. The average age of credit union CEOs in the $70-99 million asset size range is 50. The average age of credit union CEOs with over $400 million in assets is 55. That's a view from 10,000 feet, though. Some credit unions are happy to serve an aging population. Their members, I'd argue, may very well prefer to do business with a credit union run by one of their contemporaries. Likewise, credit unions with a younger membership base may very well be wise to hire a younger CEO, one who understands their needs, wants, and desires in a way that older leaders may not.

And to me, that's what it's all about. Boards should hire the person who best fits into their vision for the future of the credit union. Often, I'd agree, that's the credit union professional, 40-55 years old, who has 15-25 years of experience within the movement. That said, I have met too many young, extremely qualified credit union employees under 35 who could make significant contributions at the highest levels in their organization. I have also met many CEOs who have worked well into their 60's and 70's whose ability to innovate and lead effectively never wanes. My point is this: don't hire based on age. Hire based on an individual's ability to move your financial institution in the direction the Board desires. And if your Board doesn't have that vision, that direction, your needs run deeper than just a vacant CEO position.

Help Vancity Win a Webby!

Vancity Credit Union's Change Everything blog has been nominated for the extremely prestigious Webby Awards. A site that excites people about making positive changes (big or small) for themselves, their communities, or the world, Change Everything is a truly amazing display of what social media in the credit union space can be. Certainly check the site out if you haven't already.

Vancity's competition is quite fierce, as they are up against Bebo, Facebook, Flock, and Ning - all tremendous sites themselves. So, we need your help! Register to vote in the Webby competition by clicking here. Look for the Social Media category and cast your vote for Change Everything.

Next, if you have your own blog post the following video and Webby instructions so your readers will cast a vote for Change Everything as well.

Thanks, and however the vote turns out we already know that Change Everything is an amazingly great addition to the Web generally, and credit unions specifically.

Supreme Court Says Banks Above State Law...

The U.S. Supreme Court recently ruled that national bank subsidiaries need only obey federal law - not the laws of the state in which the subsidiary lies. TwinCities.com ran the Associated Press' story linked here. Consumer advocate Clark Howard has a simple solution, "it’s time to switch to a credit union or local community bank. You have more protection and are treated better in general if you bank with smaller organizations."

The Credit Union Warrior would like to thank Mr. Howard for his wise advice!