Measuring Performance: A Journey to Sucess

First Financial Credit Union adopted a strategy of developing a Success Model consisting of three components: Employee Loyalty, Member Loyalty, and Financial Soundness. How can a credit union use this strategy by implementing a Branch profitability study and a balanced scorecard for employee evaluation?

 
 

This Article appeared in the April 2001 issue of the Callahan Report

First Financial Credit Union (FFCU), a state chartered credit union, was established in 1933 to serve the California Teachers Association (CTA). We have 19 branch locations, mainly in Southern California, serving over 65,000 members with assets exceeding $500 million.

Implementing a Success Model

First Financial Credit Union adopted a strategy of developing a Success Model consisting of three components: Employee Loyalty, Member Loyalty, and Financial Soundness. Realizing that our resources were finite and that it was necessary to become more cost-efficient in order to finance the additional expenses required for our new strategy, we implemented 1) the Branch Profitability Study and 2) the Balanced Scorecard for employee evaluation.

The branch profitability study analyzes the cost-effectiveness of our Retail Delivery Service channels (branches, call center, kiosks, online banking and the like) and was developed approximately 18 months ago. The profitability study is updated monthly and a Delivery Channel Taskforce analyzes the results. The Taskforce then determines if each delivery channel can cover its operations cost and contribute to the financial soundness of the credit union based on potential loan and fee income. The potential loan and fee income depends on several factors, such as local geographic penetration, sponsor group demographics, current department management and alternative delivery channel options.

In looking at branches, we tried to take into consideration all factors, including whether or not they were staffed with the right people. For example, we altered the goals of each branch to better reflect local demographics, changed our target marketing strategy, and adjusted our staffing levels.

After a good deal of study, we concluded that two branches were never going to be profitable. Realistic projections of loan and fee demand for these simply did not measure up.

To better achieve our Success Model we subsequently closed these two branches. We also downsized our business development department in order to reallocate the resources needed for a Northern California expansion, and introduce a greatly enhanced member rewards and loyalty program.

A Scorecard

In addition to the branch profitability study, we started a balanced scorecard system, the point being to better gauge the success of each of our delivery channels on a weekly, monthly and quarterly basis. The balanced scorecard allocates our corporate and financial goals to the Retail Delivery Service channels, based on Full Time Equivalent (FTE) employees. Within each channel, the goals are further differentiated by Sales or Service employee. Sales employees are the Branch Manager, Assistant Manager of Sales, and Member Service Representatives. Service employees are the Assistant Manager of Service, Member Service Supervisors, and Cashier Specialists.

Some scorecards measure branch leadership, which includes branch growth goals and production goals; some scorecards look primarily at individual goals. Weights are assigned to each scorecard area of responsibility based on the corporate focus. For example, we place a 40% weight on Loan Production, 20% on Service Quality, and 15% on Employee Turnover; the remaining 25% measures new membership, share production, fee income, and cross-selling. All of these categories support our Success Model.

Job Performance

We then differentiate the scorecard measures based on job classification. For example, the Sales Employee scorecard consists of Share Growth, Loan Growth, Membership Growth, Service Quality, Fee Income, Expense Control, Cross Sell Ratio, and Turnover Rate. The Service Employee scorecard consists of Branch Share Production, Branch Loan Production, Funded Loan Referrals, Booked Share Referrals, Booked Membership Referrals, and Service Quality Results.

Rewards

By measuring our employees’ success consistently and objectively through the scorecard program, we have been able to enhance our employees’ loyalty through comprehensive incentive and recognition programs. Our incentive program consists of a Team Incentive, an Individual Incentive, and a Quarterly Scorecard Incentive based on various pre-established thresholds. Each quarter, the top two employees in each job classification are invited to a Winners Circle event. This event includes a presentation of a Certificate of Accomplishment, a fun day away from the branch, and a luncheon hosted by the CEO. Some of the outings have included Disneyland, SeaWorld, Catalina, and the scenic train to Santa Barbara.

In addition, we recognize the “best of the best” annually. We honor the top-rated employee in each job classification (based on the annual scorecard rating) and the top branch. They are inducted into the President’s Club and acclaimed as the Employee/Branch of the Year. President’s Club inductees are recognized at a special luncheon hosted by the Senior and Executive Management Team, where the honorees are presented with a trophy, certificate of accomplishment, specialized business cards, and a monetary bonus.
Through the development and implementation of the Profitability Study and Scorecard Program, First Financial has made significant progress in our strategic journey to success by maintaining financial soundness while enhancing employee and member loyalty.

Carlton Musmann is Senior Vice President of First Financial Credit Union in California. Carlton joined FFCU in 1998, and prior to that worked in the banking industry with Home Savings Bank and Great Western Bank. For more information about First Financial or their Success Model, email Carlton Musmann at cmusmann@ffcu.org.