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Connexus : Issue 36
Regardless of whether a mutual opts to stay small or to grow, the successful players point to the same three requirements: clear vision, strong strategic planning and regular reviews. "Along with the usual strategy considerations, mutuals have an obligation to consider their sustainability, to look at the implications of current strategy for future members -- the children of today's members," says Phil Khoury, joint managing director of governance advisory consultancy Cameron Ralph. "Choosing to operate as a niche player or to compete with the banks head-on can both be perfectly legitimate strategies, but either approach requires a clear-eyed understanding of what you want to achieve and what the risks will be," says Khoury. As the representatives of members, boards need to engage with executive teams in thinking about where any strategy will lead, not just in one year but in 10 or 20 years, he says. It's not enough to act in hope. Regular reviews are needed to judge if a strategy is resulting in desired and predicted outcomes over time. "The best boards and management teams constantly measure their day- to-day decisions against where they expect the organisation to be over the long term." Sector giant CUA is comprised of 160 former mutuals and aims to double in size in the next five years. "But we're certainly not just pursuing growth for its own sake," says Andrew Hadley, group general manager for strategy and marketing. "We want to maintain a conser vative business model and strong financial position." CUA's growth strategy is one of driving efficiencies to benefit members in the form of cheaper loans, fewer fees and additional access points. "Ten years ago the big banks were running cost-to -income ratios of around 60 per cent, and that's now trending dow n below 40 per cent," says Hadley. "During the same time, the credit union industry has gone from the high to low 70s. The banks have become far more streamlined, making it more difficult for us to compete." He emphasises that cost-cutting without damaging the relationship with members requires clear vision and defined strategic objectives. "You can't Finding the right size Even for mutuals with a strong vision of their long-term future, bigger isn't always better. By Carolyn Rance just be driven by numbers. You can't lose your focus on people." Deliberate limits It's a view shared at Quay Credit Union (until recently, AMP Credit Union), which has opted for a controlled, low- cost growth strategy. Quay achieves a strong return on capital by deliberately limiting growth, even to the point of sometimes placing would-be members on a waiting list. connexus www.abacus.org.au 14 NEWS "You can't just be driven by numbers. You can't lose your focus on people."