Strategic Measures of Success for Credit Unions

Strategic planning is such an informative, worthwhile and significant process. It allows a credit union to consider long term objectives, discuss the most pertinent trends, and establish goals and plans to further establish its place in its market. But, how might a credit union measure effective strategic success? What measures matter most and how should credit unions best gauge progress, impact and relevance toward strategy? Consider balancing your standard measures of success with those that are more strategic. This evenhanded approach helps to ensure value in the present and relevance for the future.

Standard Measures of Success

Though the list used by a credit union is typically short (a handful of standard measures), the register of options can be long. Decades of experience with hundreds of credit unions and their planning processes reveals that common and standard measures center around member growth, loan growth, profits, net worth or other contributions to bottom-line results.

“Standard measures of success are not meaningless by any way; but, often, they quantify more of what we’ve done in the past,” a CEO of a $4 billion credit union in the Midwest shared. “We look to these metrics to support our operating success, knowing that they contribute to the resources needed to drive strategic success. In a nutshell, we want to know that business-as-usual sufficiently funds business for our members’ future.”

As an example, this credit union maintains a standard strategic scorecard with metrics such as: New member growth; loans funded (in dollars); spend account (checking) participation; net charge-off ratio; return on assets and net worth ratio. There is nothing unsuitable with these ratios; safety and soundness matter, after all. But, these measures tell an operating story.

Strategic Measures of Success

“Strategy is about where we are going,” according to the CEO and board chair of a $500 million credit union on the West Coast. “Years ago, we grasped that many of our strategic discussions focused on what we did to serve 25,000 members, rather than how we needed to evolve to better serve those same 25,000 members and where we wanted to invest or grow to serve the next 25,000 members. While incremental improvements in our current business model have served us well, our unanswered questions centered on how we would distinguish that we were making real progress toward strategic growth and change.”

To accomplish this two-fold approach to measuring strategy, the CEO and board worked to agree on a set of standard key performance indicators that measured the safety, soundness and sustainability of the credit union. Budgets were presented and goals were set, yearly and stretch, ready for day-to-day implementation over the course of three years. And then, the credit union moved on to new strategic measures of success.

This credit union determined that its greatest areas for strategic growth were a new market, a larger branch footprint and a strong digital experience. While these areas of focus would, eventually, feed into standard measures, strategic measures were needed to assess progress. The CEO and executive team worked to develop a set of gauges that told a longer-term story, measures that – when achieved – would drive the standard measures of success. For this credit union, its strategic measures of success included: Membership growth in the new market; establishing two new branches (in the new market), with a three-year goal for standalone profitability; and growth in loyal members (a self-designed metric), whose transactions with the credit union were overwhelmingly digital (another self-designed metric).

Other strategic measures (and some are project-based) observed around the industry include: Development of a self-supporting business lending division; helping 60% of members earn a member giveback dividend (based on member behavior); and welcoming 10 new community partners to a credit union-originated foundation that raises and invests $1 million for the local community.

Boards often ask, “How do we remain more strategic in our governance function?” One suggestion is to spend the bulk of your metric time and energy around strategic measures of success that indicate progress toward future-focused initiatives that will drive member growth, product utilization, expanded and new streams of revenue, as well as brand recognition and value in the marketplace.

“The traditional or standard KPIs of strategy are, typically, a part of the budget our board reviews and approves for an upcoming year. Unless we deviate too far from budget, we consider those measures operational and part of the consent agenda,” the chair of a $5 billion credit union in the Southwest shared. “Our focus is to help our CEO succeed by giving him the resources he needs to take our members’ credit union to the next level. One of those resources is the board’s attention remaining committed to the long haul and the measurable steps and projects that create financial results to continually grow the value of the credit union.”

As your credit union leadership team discusses and designs its strategic plan, consider redefining strategic success. Odds are good that loans-to-shares, return on assets and net worth ratio (standard measures of success) are byproducts of strategic measures of success. Take the time to define the drivers of your credit union’s path of progress and the steps that mark long-term progress.

Jeff Rendel is a Certified Speaking Professional and Principal of the consulting firm Rising Above Enterprises in Corona, Calif.