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Seeing Members as Investors
Tuesday, January 31, 2017 6:45 AM

Jeff Rendel, Certified Speaking Professional

It’s always good to read about credit unions announcing special, regular, or increased patronage dividends to their members, a nod to the cooperative business model that places excess capital back into the hands of member-owners. In the purest sense, being a member-owner of a credit union can match being an owner of a dividend-paying stock. One holds on to those classes of financial assets.

See Jeff Rendel live on stage at Cornerstone's 2017 Annual Meeting

Generating that type of investor-like loyalty could be further developed by communicating the basics of your credit union’s strategies with your members. After all, they are the investors in your credit union, and current research shows that CEOs can allay investors' fears by talking about their strategic plans for the company.

In December 2015, the Harvard Business Review published the article “Wall Street Rewards CEOs Who Talk about Their Strategies.” The basis of the article stemmed from the notion that investors dislike uncertainty. If we think back to our courses in finance, we recall the Efficient Market Hypothesis, which stated that asset prices fully reflect all available information. Inherently, a company’s stock price would be a reflection of the known and expected present value of earnings.

Analyzing the effects on stock prices of more than 900 public presentations on strategy by the CEOs of leading American companies, researchers discovered that the average stock value rise on the same day as those strategy presentations was just over 2 percent. The positive bounce continued for several days, reaching about 5 percent four days after the initial presentation day.

In short, the more investors knew, the more accurate the companies’ values were reflected in their stock prices. Investors considered the presentations earnestly, and the flow of capital followed. Of additional interest, the article discussed Twitter’s CEO Jack Dorsey, admitting to investors that he didn’t yet have a strategy, and $4 billion of his company’s stock fell in value over a couple of days. The pendulum swings both ways.

This idea of CEOs being more public about their strategies is an appealing complement to the cooperative ownership mindset we want from our member-owners. The more member-owner-investors appreciate the direction of their credit union, the greater the potential increase in their credit union’s financial value. When members understand more of where their credit union is going, instead of just where it’s gone, the greater the extent their loyalty is reflected in more continuous and even new business. Their actions, based on expected cash flow directed into their lives, drive anticipated revenues and profits—both generators of financial value.

Sharing strategy with member-owners could easily be a few paragraphs in the annual report. It could be a part of your annual meeting’s formal statements (it might even increase attendance). It could be a part of your password-protected online and mobile platforms (it might even increase use of those channels). And it doesn’t need to reveal the devilish details that your competition might find of interest.

One close-to-$1-billion credit union describes its strategy on the “About Us” page on its website. Its CEO describes: commitment to aggressive pricing; major investments in member-facing and behind-the-scenes technology; a new look for much smaller branches; and a commitment to profits better than peers. He even describes a goal of 80 basis points of profit and how the profits will flow back to member-owner-investors.  

Each year, we design and refine strategy, gaining buy-in from board members for executives to implement. We discuss strategy with staff members, gaining buy-in for the day-to-day actions producing results. Why not take your communications strategy one more level to member-owner-investors, gaining buy-in from the ultimate providers of the capital we seek to make best use of in daily operations? Their buy-in—reflected in new, repeat, and referred business—is the ultimate proof of continued reinvestment back into the business they own.

Jeff Rendel, Certified Speaking Professional and President of Rising Above Enterprises, works with credit unions that want entrepreneurial results in leadership, sales, and strategy.  Each year, he addresses and facilitates for more than 100 credit unions and their business partners. Contact: jeff@jeffrendel.com; www.jeffrendel.com; 951-340-3770

To learn about a culture of service excellence or to see Jeff Rendel live on stage, be sure you join us at the Cornerstone Credit Union League Annual Meeting in Fort Worth, April 11-13. To register for the conference, please visit events.cornerstoneleague.coop/am.