How Are We Doing? Measuring Credit Union Success

Keith Peterson
February 8, 2008 | COMMENTS

Every organization wants to measure its success. The measures a credit union chooses in defining success are both a reflection of its current organizational values and a powerful influence on the direction the credit union will take in the future, as “what gets measured gets done.”

The way an organization defines and measures “success” reveals a lot about the organization's mission, values, and strategy. Is the organization concentrating on one or two overriding goals, or are there multiple objectives? Who benefits the most if the organization hits its targets? Does the organization's strategy depend on offering consumers the best price, or the best product, or the most convenience?

This paper reviews some of the most common ways credit unions define and measure success. Every credit union's business situation is different, and each board and management team will choose a different set of priorities.

Compared to stockholder-owned banks, credit unions tend to put less emphasis on profit-oriented financial measures of success. Many credit unions have adopted the “balanced scorecard” approach to measuring success, by using a relatively short list (typically four to ten) of measures that define success. In order to ensure that all major areas of importance are monitored, the credit union begins by listing broad categories the credit wants to succeed in, such as financial soundness, member satisfaction, growth, and operational efficiency. Within each category, one to three specific measurements are used to quantify how successful the credit union is.

After deciding what to measure, the credit union sets a target for each area. Targets can be set relative to the credit union's historical performance, to peer groups, or to “best practice.”

No two credit unions define “success” exactly the same, and any given credit union will change its definition as its needs and the environment change. Finance and marketing professionals are constantly creating and refining ways to measure progress towards credit union goals. Using a variety of measures, as recommended by advocates of the balance scorecard approach, helps credit unions set priorities and see how emphasizing one goal can affect the ability to achieve some other goal.

Even for credit unions that use the same ratio or statistic in their scorecards, there are good reasons for having differences in how those numbers are used. A credit union that has focused on member service for many years might consider itself successful only when its survey scores hit the “world class” standard; a credit union that's just begun to focus on efficiency might set its first standard as improving from last year, and its second standard as reaching the national peer group average. Boards and management teams that carefully choose what to measure, and put thought into how they define success in those measurements, will gain from the process of making those decisions and have a great tool for communicating priorities throughout the organization.

This executive summary is from a CUNA Marketing and Business Development Council white paper by Keith Peterson entitled “ROI Calculations and Financial Parameters” Read the complete paper in the "White Papers" section of the CUNA CFO Council website.