Three Steps to Implement a Balanced Scorecard

The balanced scorecard is an effective management tool to help credit unions measure progress against plan.


There are three essential steps a credit union can take to develop an effective Balanced Scorecard framework:

Identify Key Metrics

Once the credit union’s vision and strategy are defined, it is important to identify those metrics that will help management measure progress against its strategic plan. Although the original Balanced Scorecard framework developed by Robert Kaplan and David Norton is a good place to start ( click here to view previous article), it is important for each credit union to develop a scorecard that is uniquely tailored to the specific goals of the credit union.

Quantify Metrics

Effective balanced scorecards seek to quantify metrics wherever possible. Although qualitative measures are useful for certain purposes (i.e. customer feedback), they are difficult to use to measure progress. Financial data such as revenue, operating costs, ROA, etc. lend themselves to measuring progress. Process-related metrics (i.e. number of days to approve a loan, average wait time in a teller’s queue) are also easy to quantify and measure.

Other metrics, however, are difficult to quantify yet are vital to track using a balanced scorecard. Customer satisfaction and staff development, for example, are both important metrics to maintain; yet neither is directly quantifiable.

One effective solution to quantify a non-financial metric is to force rank it on a numerical scale. To measure customer satisfaction or member loyalty, for example, a credit union can develop a survey in which customers are asked to rate various aspects of customer service on a scale. For example, Service Credit Union (NH, $987 million in assets, Portsmouth, NH) employs the survey tool, Net-Promoter, which allows them to quantify and measure member satisfaction based on how likely their members are to promote the credit union.

Another solution is to identify a proxy for what the credit union wishes to measure. For example, if a credit union deems staff development to be a metric it wishes to track, it might consider using the number of trainings its employees attend as a proxy for staff development. While proxies are not perfect solutions—i.e. tracking the number of training sessions an employee attends does not say anything about the quality of each session—proxies can serve as a “less than perfect” solution to measure progress.

Communicate to Staff

Once the balanced scorecard metrics have been identified and quantified as appropriate, it is critical to communicate both the strategy and the metrics to the employees. Employees that understand not only the credit union’s strategy but also the indicators that management will measure are more likely to appreciate how their daily activities contribute to achieving the metrics, which in turn, contributes to the overall strategic plan.