Combining Corporate Strengths Offers Better Services, Product
‘Seamless’ Merger Starts With Right Ingredients
BY MICHAEL STERNS
Special to the Business Journal
Businesses that are finding themselves struggling financially or that want to grow and expand their market share sometimes consider a merger as a way to remain viable.
The merger option can allow them to cut costs by consolidating operations, to become more efficient and competitive technologically, and to offer their customers improved products and services.
In the increasingly competitive financial services industry, the decision to locate a reliable and productive partner and enter into a merger is often the result of strategic positioning in the marketplace. Increasing expectations of consumer members for a wide array of delivery channels and the pressure of new technology demands has, in the past few years, led many financial institutions to seek out a partner to help them withstand the challenges of their competitors.
But partners must be receptive and open-minded about consolidating technologies with the ultimate goal of improving membership service through the economies of scale a merger would produce.
A merger between two cooperative financial institutions, each with something valuable to bring to the table, can certainly improve benefits and services to their customer base. Recent credit union merger experience has clearly demonstrated that the whole becomes greater than the sum of the parts.
It is critical that the merging institutions effectively evaluate the similarities, as well as the differences, between them, particularly as they relate to capital, balance sheet and income statements, and a fee structure that clearly demonstrates a shared philosophy of providing value to customers.
Aside from achieving financial stability, the intent is to create a stronger and more efficient organization that delivers new technologies in a cost-effective manner. Economies of scale in employees, telecommunication, network systems, and marketing costs can result in rewards to member owners in the form of lower fees. In addition, combined management and technological skills can provide expertise in critical operational areas.
– Combining Strengths Helps Lead to Consumer Satisfaction
Individual institutional technologies can be significantly enhanced as a result of either consolidation, duplication, or a combination of the two. As the two organizations transition through staff and systems conversions, customers may see greater operational efficiencies, improved customer service, and new product offerings, due in large part to greater technological proficiency.
Members now have more options available to them than ever before. With more than 25 million U.S. households using personal computers for banking applications, it is imperative that financial institutions offers these services to their customers to retain members and remain competitive.
The same technological proficiencies that open the door to more and more modern-day banking conveniences for members can also enable the merging institutions to more effectively accomplish their corporate missions, expand the breadth and depth of their strategic planning, and expedite the timelines they formerly established to meet their operational and financial goals.
The institution’s expanded technologies can also allow the organization to do more with less, to be more responsive to customers’ demands, to cut operating costs, which in turn permits them to more easily afford costly hardware and software upgrades, and offer improved levels of member service.
With mergers producing more powerful mainframe capabilities, faster processing equipment, upgraded optical imaging systems, and greater information storage capacity, merged institutions can save both time and money in processing, printing and mailing monthly member statements, for example. Through duplication or consolidation, cutting costs in data storage and monthly statement processing, including printing, postage and labor, can practically pay for an optical imaging system alone.
Customers are demanding bigger, better and faster delivery systems for financial products and services, which a merger can produce. But they also want to know their local branch is still there for them if, and when, they need it.
– Experienced Staff Helps Smooth Out Transition Period
New technologies brought about by a merger can help educate customers in the use of remote banking and online services so that customer service in the branches can be reserved for more complicated transactions that require personal assistance. The use of the institution’s branches, while still a vital source for a variety of transactions and information, is at the same time being redefined by some of the latest technological advances and tools.
The cumulative experience and practical knowledge of the merging staffs can be yet another valuable merger by-product that facilitates not only the transition and overall system conversion, but also upgrades in customer service and satisfaction.
Communications within the organization itself and with its customers can be far more effective and greatly enhanced as a result of new technologies brought about by a merger. These technologies can be used to educate employees and members in the use of time and energy saving banking techniques, making everyone’s lives easier and ultimately, more financially rewarding and personally fulfilling.
Finding a different name and creating a new identity for the financial institution can be challenging yet rewarding, and can involve a broad spectrum of input, including employees, marketing department staff, members of executive management and outside consultants.
With all of the myriad details involved in merging two distinct financial institutions, it is indeed a formidable task, which at times can seem overwhelming. What helps the process immeasurably is having two good raw products to begin with, as well as like-minded business philosophies, mission statements and strategic plans. Add to that a well-devised strategy for implementation, a forward thinking transition team, and roll-up-your-sleeves hard work, and all the right ingredients are in place and the table is set for the “seamless” merger.
Sterns is vice president of marketing and quality service for First Future Credit Union of San Diego.