Using Balanced Scorecards in the Credit Union Financial Management Process

Dennis Graham
January 14, 2005

The principle of balanced scorecards has garnered considerable attention over the last few years as a way to focus the organization, from top to bottom, on the fundamental goals of the organization. Also getting attention has been the concept of a “sales culture.” This paper looks at both aspects as they apply to credit unions.

A method of applying a balanced scorecard in a credit union will be outlined, with an emphasis on both the operation and financial sides of the organization. The scorecards are developed considering four perspectives: financial, member, operations, and employee. The components necessary to have an effective organization are examined first, followed by a look at how a balanced scorecard can be developed around those components. The first task is to agree on the main measurement of success at the credit union level; from there, scorecards can be developed for subordinate work units and their employees. Potential scorecards for three theoretical credit unions in different markets and financial situations are also examined. One of those credit unions is then taken and scorecards are developed for the COO, a branch manager, and an MSR, along with the CFO and an accounting clerk. Using scorecards effectively assures that employees understand the link between the tasks they perform on a daily basis and the overall success of the credit union. Developing a scorecard for your credit union doesn’t need to be a daunting task. In fact, it’s recommended that you start simple and then increase the complexity of your scorecard as you gain more experience. Building a scorecard and cascading it down through the organization with 90-day action plans is an everlasting process, and it’s likely that several variations will be necessary before a satisfactory goal setting process is achieved.

The payoff for implementing a balanced scorecard is that everyone is playing by the same rules, is measured empirically for their contribution to the overall goals of the credit union, and has set priorities for the next 90 days. That’s worth a little work.

This executive summary is from the January 2005 white paper by Dennis Graham entitled “Using Balanced Scorecards in the Credit Union Financial Management Process.” To read the entire article, go to http://www.cunacfocouncil.org/research.html.