Community First Guam Federal Credit Union.(Instructor's Note)

Taylor, James J. ; Perez, Kimberly J. M.

CASE DESCRIPTION

The Community First Guam Federal Credit Union (Community First) case study illustrates how a company's business policy informs and directs its future. The case also demonstrates how a company needs to periodically evaluate changes in its business environment to determine how that may affect existing company policy. A significant discrepancy between the business environment and the objectives stated in a company's policy should lead to a reevaluation and reformulation of policy. In addition a major change in policy also requires changes in strategy and tactics. The Community First case shows a real world example of this kind of change. The case study is designed for students in an upper division course that includes learning about business policy, strategy, and tactics. The case requires two to three hours of outside preparation that would include reading the case and learning about basic credit union and banking practices. The case should take about one class period to cover.

CASE SYNOPSIS

Community First Guam Federal Credit Union opened for business in 1962--the first credit union on Guam. Initially Community First was called the NavMar Federal Credit Union (NavMar). NavMar specialized in service on Guam to its select employee group--members of the US Military and the Federal Civil Service. During the 1990s, NavMar's future was threatened by changes in the role of the military on Guam, a reduction in the federal bureaucracy, and the arrival on Guam of other more broadly based military credit unions. In 1997 in a successful policy initiative, Community First switchedfrom a charter based on its select employee group to a community charter that included all of Guam. This created a major change in its customer base. This represented a policy change that required significant changes in the institution's strategy and tactics. This case reviews these changes and how they were successfully carried out.

INSTRUCTORS' NOTES

This case describes how Community First successfully carried out a series of major business changes over a period of several years. Changes in policy, strategy, and tactics were required. Textbooks often have simple definitions of these terms. The Community First case provides an opportunity to develop an understanding of these concepts in a real business setting.

Discussion Questions and Recommended Answers

1. What happened that made Community First decide it needed to make major business changes?

Because of increased competition and because of changes in the military on Guam and a reduction in the federal presence on Guam, Community First risked losing its customer base. Community First had to either learn how to more effectively serve its existing customer base or instead adopt a broader customer base. Given the competition from other bigger, more broadly based military credit unions, Community First decided to give up its existing narrow customer base to seek customers across all of Guam.

2. What resources did Community First have that supported the change process?

Community First had a senior management team with over 50 years of credit union and banking experience. Further, there was a willingness to plan for and carry out needed change.

3. What operational changes did Community First need to execute its proposed policy change(s)?

The operations on the Naval Base had to be shifted to locations that were accessible to the entire population of Guam.

4. Based on the elements of this case, define and differentiate the following business terms: policy, strategy, and tactics. Relate the definitions to this case. Note students are expected to use definitions from a variety of sources. Indeed it may be useful for the instructor to provide a list of three to five definitions for each term. The discussion of a variety of definitions is intended to be one of the ways of learning from the case. In this case study policy represents the long term determination of the direction of an organization. Strategy represents the focusing of organizational resources toward the accomplishment of policy. Tactics are the specific means chosen to carry out the strategy. As a result of studying this case students should be able to better identify policy, strategy, and tactics found in subsequent cases.

Business Policy: A set of principles and guidelines drawn up by the governing board, identifying a company's basic product, its customer base, and its pricing strategy. Business policy provides for the long term direction of the organization. However policy has an indefinite time horizon that is subject to the interaction between policy and an evolving business environment. The fundamental policy element in this case was the change happening to NavMar's original customer base.

Business Strategy: the identification of an organization's resources and the focusing of those resources on carrying out the organization's business policy. Business strategy is the purview of senior management working together with the board of directors. Strategy has a time horizon of three to ten years. Community First changed the location of its operations and the ways its employees interacted with its client base in order to carry out the new policy.

Business Tactics: The choice of specific means by which strategy is to be executed. Business tactics are typically the purview of senior management working together with middle management. Tactics have a time horizon of one to three years.

5. If you had been employed by Community First in the mid 1990's, would you have argued for choosing to more actively compete with the new military credit unions? Why or Why not?

Community First decided that the ability of the competing military credit unions to provide service on military bases around the world created for them a competitive advantage that Community First would not be able to overcome. Students may take their own position on this matter provided they rationalize their position.

6. How often should a company review its business environment? What ways would you suggest to ensure that such a review was being conducted?

The ongoing review of the business environment is the responsibility of a company's board of directors and the senior management. Challenges to the company's business environment can come at any time from any direction and the company must be ready to quickly identify and respond to such changes. To ensure such a review, the company board needs to periodically discuss the business environment with senior management.

7. One of Community First's objectives was to be a high touch organization. Was this choice a policy choice, a strategic choice, or a tactical choice?

This choice illustrates aspects of all three elements. Being "high touch" was a policy objective because, as a cooperative membership organization, Community First depended on the strong support of its customers for success. At the same time being a high touch organization was a way Community First strategically differentiated itself from the competition. Finally, being a high touch organization was a tactic used to attract potential customers from the new membership base. The question helps illustrate the interrelationship among policy, strategy, and tactics.

8. If you had been at the center of the Community First change effort, would you have done anything differently?

Community First successfully implemented major changes and it is difficult to argue with success. A large part of that success was based on the fact that the board and senior management proactively identified ongoing developments in the customer base and focused on the changes necessary to deal with that reality. Community First could perhaps have carried out the process more expeditiously but given the extent of change required, and the physical and economic developments on Guam during the period of change, as well as the level of resources available to support the change effort, the timing is acceptable. That may have been different if the GovGuam Federal Credit Union had aggressively adopted a community charter at the same time as Community First. Students may take their own position on this question provided they rationalize their statements. Discussion of why an island community may have difficulty in expeditiously carrying out organizational change will help clarify what may be possible.

Concepts Used in the Case

Students should be sure they can understand and define these terms. Students should especially work to understand and define the last three terms (policy, strategy, and tactics). It will be a useful learning experience if they seek out and compare definitions from several sources, applying those definitions to this case study.

Cooperative Membership Organization: a voluntary, self-help organization whose

membership is made up of people with similar interests and concerns. Credit unions are cooperative membership organizations.

Select Employee Group: a set of employees with similar interests and concerns from which the customers of a credit union can be drawn.

Community Charter: a credit union charter that allows all the residents of a specific locale to become members of the credit union. In this case, the similar interest and concern is a common place of residence.

Customer Base: The set of people from which an organization's customers can be drawn.

Net Interest Income: at a credit union or bank, the difference between the interest received on loans and the interest paid out on deposits.

High Touch Organization: an organization that depends for much of its success on extensive, positive interactions with its customers.

Taxation and Credit Unions: Credit unions are nonprofit organizations and as such are not taxed.

Taxation and Banks: As profit seeking organizations, banks may be taxed by territories, states, and the federal government. The different tax treatment of banks and credit unions is a source of dispute between the two types of organization.

Business Policy: A set of principles and guidelines drawn up by the governing board, identifying a company's basic product, its customer base, and its pricing strategy.

Business policy provides for the long term direction of the organization. However policy has an indefinite time horizon that is subject to the interaction between policy and an evolving business environment.

Business Strategy: the identification of an organization's resources and the focusing of those resources on implementing the organization's business policy. Business strategy is typically the purview of senior management working together with the board. Strategy has a time horizon of three to ten years.

Business Tactics: The choice of specific means by which strategy is to be implemented. Business tactics are typically the purview of senior management working together with middle management. Tactics have a time horizon of one to three years.

James J. Taylor, University of Guam

Kimberly J. M. Perez, University of Guam