How Do Credit Unions Measure Success?

Financial institutions are in the numbers business, but credit unions must also look beyond metrics like growth, share, and loss.

 
 

Financial institutions are in the numbers business. They measure performance and success through metrics like growth, share, and, yes, profit and loss.

Credit unions are no different, but leaders within the century-old movement should also consider whether member-owned cooperatives are measuring the right things. After all, what a credit union measures reflects its priorities as an institution. So, is the credit union tracking metrics that provide a true understanding of what’s happening within not only the organization but also its members and communities?

 

 

Credit unions have a symbiotic relationship with their members and communities. Credit unions are only successful if their community is successful, and it’s difficult for any credit union to succeed if the community it serves is tanking. That’s true regardless of charter, SEG, or community.

Take, for example, mortgages. Credit unions as an industry have increased their share of the mortgage market. But, how many of those loans did credit unions make to low-income households?

For credit unions that prioritize these households — and for credit unions that serve markets and communities that prioritize these households — the answer should be “a lot of them.”

This CDFI can show that every $50,000 it loans allows a small-business borrower to generate 40% to 50% more income and six jobs. That’s how it measures impact.

Housing activity is a fulcrum for economic development and is a problem for many people from the bottom of the income ladder on up. Available housing in some markets is scarce — and becoming scarcer still. Other markets suffer from lack of affordable housing. For many, it’s both.

What is your credit union doing to help its housing market? Are you offering the best terms you can? Are you providing first-time buyer education programs or other financial counseling? Are you looking for ways to lend to more people of modest means? Are you taking advantage of the NCUA’s relaxed attitude toward multiple-occupancy units and the MBL lending cap?

What about transportation? Affordable loans for used cars is a critical resource in many markets. How are you competing with the pay-here lots? There are credit unions moving away from indirect lending and refocusing on direct; however, that’s not every institution’s recipe for success. Indirect lending still represents a path to better member service for many credit unions.

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Every strategy requires credit unions to answer tough questions about impact. About who they are, who they serve, why they exist, and how they can best serve members.

Evolve or go extinct, to put it in biological terms.

Credit unions serve members across multiple delivery channels and markets. As such, they do need to use traditional metrics to frame questions about capital, ROA, loan quality, and more.

Credit unions need to address these metrics on a continual basis. But in today’s market — with its competition and service challenges — the time is right to also consider different measures of success.

There is a community development financial institution in San Antonio, TX, that measures its loans and impact explicitly in economic development terms. This CDFI can show that every $50,000 it loans allows a small-business borrower to generate 40% to 50% more income and six jobs.

That’s how this CDFI measures impact.

Managing day-to-day operations requires a strategic mindset, but making time to talk about strategy is difficult. Callahan & Associates helps leadership teams focus on what’s important. Learn more at Callahan.com/strategylab.

Many credit unions are thinking differently about how they can lift their communities. More importantly, many are responding with strategy and tactics.

Here’s a handful of such success stories we’ve covered on CreditUnions.com:

Credit unions across the country are taking action to support members and communities amid changing financial conditions. They are looking beyond traditional metrics to define success.

What will you answer when your board, members, and community ask: How does the credit union measure success?

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March 5, 2018


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