Rethinking Culture as a Major Factor in Credit Union Partnerships

Partnerships are complex. They require both parties to compromise and navigate often unfamiliar relationships while willingly relinquishing some level of control. However, in the face of rising costs and inflation, businesses must find ways to become more efficient. No one can operate in this new cost structure at the same size or efficiency as five years ago and still expect to deliver the same value; today’s world moves too fast. Partnerships allow credit unions to leverage combined resources to increase efficiency while taking advantage of scaling opportunities they couldn’t otherwise take on alone.

Finding compatible partners requires looking beyond the typical factors credit unions consider, namely geography and culture match. In my opinion, playing these two cards is often a polite way to quickly avoid a real conversation about true concerns over a partnership’s potential rather than confront and resolve them.

To play the long game, we must rethink the factors we consider when coming to the table to form a partnership.

Culture Clash or Competition?

There are many reasons why a CU partnership may not make sense. However, I submit that the alignment of cultures is not where the rubber hits the road for a successful match. Company culture will always be different on the other side of a new partnership and should never be the deciding factor in whether or not to form one. I have seen CUs with major size differentials citing cultural alignment because their original fields of membership (FOMs) are similar; even though they moved away from serving those FOMs exclusively decades ago. Logically, I would also argue that the industry of employment for your original membership has little to do with the internal corporate culture of any credit union.

Most credit unions engaging in partnerships are community-based and have inherent cultural similarities: member-first values, people helping people, fair and competitive pricing, and serving segments in communities the big banks would rather not. Shared ideologies of financial education and philanthropy often earn credit unions a reputation as dedicated community servants.

It is not uncommon for CUs serving members in the same geographical markets to claim that their organizational cultures were too different for a partnership when, in reality, the idea of merging with the competition has become unpalatable. However, when two credit unions serving the same membership in the same market combine resources and, subsequently, right-size operations, the long-term economic benefits to the members are unquestionable.

Strategic Reasons to Partner

Credit unions should evaluate potential partners with a more nuanced and practical approach focused on economic and strategic compatibility. Successful partnerships happen in banking because those institutions concern themselves with compatible balance sheets and business models that actually increase shareholder value. For credit unions with the trifecta — compatible cultures, balance sheets, and operating models — choosing to partner should be a no-brainer. But this unicorn is a rare horse.

The most strategic decision a CU can make is to partner with a CU that is not currently in its geographic market and does not share FOM, as this move expands the growth potential. For example, CUs across the state of WA have a community charter that provides access to members across the state, meaning that we can build branches and compete with each other at the back door of hometown headquarters — and we do. Given this level of access to members across the state, wouldn’t it be more beneficial to the long-term strategic viability of your CU to partner outside of the state?

Making the New Culture Intentional

Deciding on the operating model of the new credit union is the most evident and easy part of the pre-partnership work. From my experience, I found that when two organizations come together in intentional partnership, the resulting new organization emerges like a mythical Phoenix. Before finalizing the technical pieces of the merger of equals, we revised our core values, mission, vision, and strategic objectives while creating an entirely new name and brand personality.

Within three years post-merger, we were eliciting the help of marketing consultants to revisit our external brand reputation in our market and our internal organization culture with our board and staff. That is because nothing is ever done in a vacuum, and cultures are living, breathing, and forever changing.

In 2013, when two CUs partnered to form Advia Credit Union, one was experiencing growth and recognition in new markets under its former name. Instead of letting that hinder their partnership, they took the opportunity to rebrand in a more unique position within the market and better aligned with their mission. Since then, Advia has nearly tripled its asset size and grown its membership to nearly 190,000 strong.

True cultural alignment between CU partners comes when CEOs and boards are capable of healthy discussion and open to deep self-reflection around strengths and weaknesses. When both parties communicate concerns instead of using excuses like culture or geography, they might find ways to resolve them. Leaders can intentionally guide culture to a better state than either organization had before.

We have used John Kotter’s model in the past, and there are various change management models partnering CUs can follow, but all parties should focus on building communication campaigns and strong, adept management. Ultimately, leaders should allow culture to develop and start to emerge on its own.

The Future of Credit Union Partnerships Goes Beyond Culture

Forming partnerships based on a new paradigm that prioritizes strategic alignment and member benefits rather than underlying cultural fit can allow credit unions to continue to thrive and keep up with members’ needs in the long term. We may have opinions and judgments about another credit union, but this does not mean their approach is entirely ineffective, and foremost, culture and geography should not be used as a scapegoat to derail potential partnerships. By finding ways to come together, credit union partnerships can provide sustained value for our communities and our members.