Is your credit union successful?
As successful as it should be? As successful as it can be?
Sure, the balance sheet will tell you when things clearly aren’t going well. Similarly, you don’t need to be a CFO to figure out when you’re on a roll.
But unless you regularly benchmark your credit union’s performance against industry averages and peer organizations, you can’t answer those questions with a great degree of credibility. Consider the student who takes a test graded on a curve, and is overjoyed at his ability to answer 16 of 20 questions properly—only to find out a majority of his classmates nailed at least 17.
Benchmarking provides organizations in all industries a clear idea of their strengths and weaknesses, allowing them to determine what adjustments they could make to become more competitive.
That said, benchmarking inaccurately can be more dangerous than not benchmarking at all. So when assessing or establishing your practices, you must be aware of two potential land mines:
Data integrity. The accuracy and timeliness of the data you employ to make comparisons is paramount.
Rely only on information you trust inherently, including that published by governmental bodies which compel reporting (such as the National Credit Union Association), as well as trade associations such as the Credit Union National Association or industry vendors such as Visible Equity. These groups have comprehensive research teams that apply science-based statistical analysis when gathering the data and compiling reports.
Also, be sure to use data sets collected and released in the same time frame, using the same standards. The changing marketplace requires you to perform benchmarking analysis more often than in the past, so you can remain nimble. But you can’t take shortcuts by comparing a fresh set of data against one that lags, or sets collected through varied methodology. Too much can change in too short a time period for that comparison to be assuredly reliable.
Meaningful comparables. You must be careful to measure apples vs. apples—or at least consciously choose to measure your apples against someone else’s oranges.
In evaluating the variables that determine your organization’s most germane peers, people naturally gravitate toward geography—the credit unions and banks in your own backyard. There’s a lot of merit in that philosophy, especially in an industry like financial services where in most cases you’re competing for a set of customers who highly value proximity in choosing their primary financial institution.
But in many cases, the most productive comparisons can be made against organizations thousands of miles away. That’s because variables such as asset size, staff size, capital ratio—and perhaps most importantly, mission—can radically affect not just your credit union’s current balance sheet but also the mileposts in your strategic goal-setting.
In sum: If you’re intentionally playing an entirely different game than your next-door “rival,” what good will it do to know the score?
Casting a wider net also allows you to keep your finger on the pulse of industry innovation elsewhere. As such, your peer group should include similar organizations both near and far.
Once you’ve established your peer group, it’s important to perform both a macro and micro analysis, drilling down to compare performance in specific areas of your operation among specific demographic groups.
From there, the last task is to prioritize areas where your credit union can expand its advantage, or needs to shore up its deficiencies. Remember that all advantages and deficiencies aren’t created equally. Determine which steps will yield the greatest payback with the least effort in the least amount of time.
Because of the constantly changing landscape, continually re-evaluate your peer group, and track your credit union’s progress over time against both industry averages and these peers.