Nice and Lean

The best way to achieve efficiency is to understand what it is and how to identify its absence.


The recession forced cooperatives to make difficult decisions in the best interest of members and the bottom line. Now, the economy is wobbling toward a new normal, and it might seem like the importance of efficiency has lessened. In fact, the opposite is true. The lessons learned during the tough times can guide credit unions toward sustained success. Act poor even when you are rich.

The efficiency ratio measures how effective a credit union is at generating one dollar of revenue. The lower the efficiency ratio, the more efficient the credit union is. For a breakdown of the components of the ratio, take a look at this excellent description of the metric.

Understanding efficiency is important, and so is seeing how credit unions have achieved it in its many forms. One credit union offers an excellent example of how to make your resources work for you and members. Minnesota-based Wings Financial Credit Union ($3.1B, Apple Valley, MN) was having problems with turnover at its call center and decided to attack the problem head on. By implementing performance metrics and benchmarking supported by training, the credit union reduced the turnover by 25%. Rather than panicking and hiring without addressing the problem, Wings just made the employees they had better. In the end, they got more out of what they had.

What can you do at your credit union to maximize efficiency? A thorough examination of your products and their profitability might help. If one loan or deposit product is weighing down performance and taking time from staff, it might be worth reconfiguring or discontinuing it.

Use as much operational data as possible to understand performance. Here’s a great example of three statistics (including the efficiency ratio) that can help you make informed decisions.

Bottom line: There is always room for improvement at your credit union. Whether in your product line, call center or resource allocation, maximum efficiency should be the goal. The knowledge that inefficiency is a constant issue is a good place to start.  




May 2, 2011


  • Bill,

    You're exactly right. Efficiency is a case-by-case situation. I just wanted to offer some tips in the article that might be helpful. We're putting on a webinar later this month about efficiency that you might find useful. Here's the link.
    Thomas Cullen
  • efficiency for one credit union may be different for another. We are a CDCU and Low Income credit union. We have a lower score field of membership and we are determined to serve them well, but they take another kind of efficiency. We have more staff in lending and collections than others our size, and are able to maintain far below average delinquency and loan losses. Without our 'inefficient' style of operations, losses would overcome our net income rather quickly. Efficiency has to be defined based on your business model and strategic plan. It's not a 'one size fits all.'
    Bill Wade