The Hidden Costs of Poor Organization Design

Organizational structure isn’t something most credit union leaders think about on a daily basis. But structuring your credit union effectively is one of the most important factors to ensure operational effectiveness and readiness for growth. Ineffective organizational structures can prohibit organizational growth, raise expenses, and negatively impact culture, productivity, and talent retention. Let’s explore some of the ways ineffective organizational structures can negatively impact your capability as a credit union and why streamlining your organization can lead to a stronger credit union.

An ineffective organizational structure directly hinders employee performance and weakens organizational culture. Having a clear reporting structure that is functionally aligned is essential to motivating employees and ensuring their engagement.  For example, consider a Compliance Officer that reports to Human Resources or a Marketing Director who reports to a VP of Retail. HR doesn’t have the expertise to manage regulatory compliance and the second structure prioritizes retail while completely excluding lending’s marketing needs. Managers with an in-depth understanding of their teams’ functions are able to define roles clearly, hold employees accountable to high performance standards, and protect efficient use of their time. Employees thrive when they have managers who deeply understand their roles, including both their responsibilities and those that should be delegated elsewhere. This empowers employees to utilize their full potential, fosters a sense of ownership, and ultimately leads to higher engagement and productivity.

A positive organizational culture fosters collaboration, creativity, and a sense of ownership. Engaged employees are more productive, proactive problem-solvers, and go the extra mile to deliver exceptional service to members. This translates to a thriving credit union that attracts and retains top talent, fosters innovation, and ultimately delivers a superior member experience.

Now imagine a team where frustration and disengagement are the norm. Frustrated and disengaged employees create a toxic environment that stifles success. Low morale breeds communication breakdowns, bad decisions, wasted resources, and a lack of innovation.  This hinders your ability to attract top talent and ultimately serve member needs effectively. Trying to function with a broken team, inefficient processes, and outdated infrastructure is simply unsustainable. 

Misalignment in your organizational structure is not only costly from a turnover perspective, but it also leads to inefficient spending and higher costs across the board. If your decision making processes are not integrated across the organization and employees don’t have communication or trust with their peers, you will end up with duplicative processes and systems or major gaps because there is no one to own the process/ system. Consider for example your technology investments. If your loan origination software or CRM are selected in a vacuum, they might not integrate or communicate properly. You might end up duplicating functionality, missing data, creating inefficient work around processes that cause headaches internally and ultimately frustrate employees and negatively impact the member experience. Credit unions need to create clear decision making processes and responsibilities to enable better resource coordination and allocation. Effective organizational design empowers effective decision making so that employees are satisfied, processes are smooth, and costs are controlled. 

Unclear reporting structures, inefficient processes, and outdated talent and systems can stifle growth and member satisfaction. These issues erode your culture, reputation, and ultimately, your ability to serve your members effectively. While ineffective organizational design might feel like a broken record, leaders can break the cycle through reflecting upon and restructuring their credit unions. By building a solid organizational foundation, you can unlock your organization’s full potential translating to: increased responsiveness to changing market trends, scalable operations, top talent acquisition, and a reputation for innovation and being member focused. Now is the time to pause and shore up current operations and infrastructure in order to evolve to the next level.