This editorial originally ran on Grow Your Credit Union.

When we asked fifty people from the credit union movement to rank what gets most measured and rewarded in their own organizations today, “asset and member growth” came first and “member financial wellness” was dead last.

When we asked the same people what should get rewarded, growth fell to seventh place and financial wellness jumped to third. Member satisfaction came out on top.

There’s a quote I have always adored, often attributed to the great business theorist W. Edwards Deming: “Every system is perfectly designed to get the result that it does.”

Despite all the discussion of mission and values and the oft repeated buzzwords of community impact and financial wellness, credit union leaders are designing their systems so that the expected result is they behave more like banks. In doing so, they are creating Bank Lites™, banks that are less resourced, less innovative and less convenient.

This is just one data point in a broader trend playing out in the research we are leading. 

This summer, we launched Future of Credit Unions alongside a coalition of partners in the credit union space. Our goal is to co-create a vision of how credit unions can compete in the next 10 years and express it in a narrative-style report that will drive conversations in boardrooms and around watercoolers. Our rallying cry: let’s design the future we want, instead of watching it get decided for us.

The listening phase includes both a survey and live video calls led by professional facilitators with anyone who is active in the credit union ecosystem. If you have not yet taken this survey, please open this in a new tab and take it (as soon as you are done reading, of course!). 

This initiative, and the tough conversations it inspires, are coming from a place of love. We want credit unions to succeed and firmly believe they are not only important, but essential.

A culture that can't move meets a mandate to move fast 

So far in these conversations and responses, the main problem that has stood out to me is misalignment.

When asked to rank credit unions’ top sources of friction, a “change-averse culture” came in first place with 64% ranking it in the top 3.

So we’ve got a culture of risk aversion meeting an aggressive growth priority – that’s a bad recipe. Grow, grow, grow and grow now… but don’t take any swings and don’t risk upsetting our much older members and board members while you do it.

Think about the behaviors that mix is likely to enable: short-term thinking, band-aid style fixes, tepid investments in new technologies without fully embracing transformation, unsustainable sales promotions, and the list goes on.

The problem beneath the problem here is a misalignment between mission (why we say we need to exist), strategy (our theory for creating value for our members and competing in the market), and execution (how the organization’s system is designed).

When the mission is just a program

Forty of the fifty respondents so far used the word “community” when describing what credit unions should be known for in 2036. It was the single most common word in the dataset. It is also the one respondents most wanted made real, because they say it only lives on the periphery today.

Financial wellness, member experience, community impact are treated as programs rather than as the business model, and you can see it in how they're governed. A program has a coordinator, a budget line, and a slide somewhere near the back of the annual report.

Guess what: banks write checks to causes and have their employees volunteer too. And their checks are bigger than yours. Once again, you end up Bank Lite™.

One respondent, a C-suite leader at a credit union between $5 and $10 billion, described it like this: "A board can spend four hours discussing a 5-basis-point margin variance and ten minutes discussing the future of member relationships."

That’s the type of conversation the system is designed to get today.

It’s a threat response, not a strategy

I certainly empathize with credit union leaders. I understand the survival instinct.

Margin compression is real, scale advantages are real, and when an institution is genuinely worried about making it to the next decade, it reaches for the measures it trusts.

One CEO of a credit union under $500 million described the trap well: "We seek efficiency and scale in a race to be 'good enough' for the profitable consumer... we’re stuck on a hamster wheel of needing growth from high profit consumers to serve high profit consumers." 

Threat response is likely to make an organization default to what it already knows how to count.

This becomes exacerbated by the talent pipeline. The industry hires a great deal of its senior leadership out of banking, and it hires them because they are good at the things banks are good at. Ask an executive who has spent a decade being measured on loan growth and efficiency ratio to lead an institution whose purpose is member financial wellness, then hand them the same scoreboard they've always been handed, and you get…say it with me: Bank Lite™.

Nobody defends this model 

Another repeated idea across the entire project, often in nearly identical words, was some version of stop trying to be everything to everyone. 

Nobody in the data defended the strategy of Bank Lite™. Yet it is what most of the sector's organizational machinery is currently optimized to produce.

There is real, unmet demand that banks have no interest in serving, and the institutions that crack that business model own a market nobody is fighting them for. But it requires a different capability stack than Bank Lite™, which is exactly why it's defensible. It requires aligning the mission, the strategy, and the execution. 

What’s causing these misalignments?

Every organization carries an instruction set in the way it operates: what it measures and publishes, what it pays for, where the board spends its agenda minutes, who gets hired into senior seats and out of which industry, who holds the authority to say no, what gets escalated and what gets absorbed, what a branch manager actually does at nine o'clock on a Monday morning, etc.

At BOxD, the consultancy I founded, we call this the Org Genome. A genome is code, and the code copies itself forward onto the people doing the work. Every time you manage, hire, promote, or develop, you are transcribing the existing instruction set into the behaviors of your people including those at the very top.

The charter is not part of the genome. A credit union can hold a member-owned charter and carry the values of a credit union, yet basically run a version of a bank's genome. And it seems like most of this sector currently does. That's why Bank Lite™ keeps happening.

Which is also why the mismatch persists even though the leaders can see it. You can hold a completely accurate diagnosis in your head while your organization faithfully executes the opposite. Nothing about the diagnosis changes until you change the system underneath.

So what do we do about it?

We asked every respondent to rate "most credit unions" on strategy, focus, and distinctiveness. All three scored below the midpoint. Again, the most common sentiment: “stop trying to be everything to everyone.”

So my call to action is to start working on your stop-list. What behaviors are you going to stop doing to avoid the Bank Lite™ trap? What are you saying no to? What pain are you willing to withstand in the short-term to be thriving 10 years from now?

And with that, how is your organizational system – your Org Genome – incentivizing you to keep doing what you know you need to stop? How can we make our mission the top of the list of what we incentivize, measure and align our whole organization around?

The full Future of Credit Unions report comes out at the end of the year and you’ll hear from me again then. In the meantime, we’re still listening. Take our survey, and if you have more to say, answer yes at the final question to join a live visioning session. We’d love to hear from you and include you in the vision of how credit unions can be their best selves and not just less sophisticated banks.