Beginner's Guide to Analysis
A credit union’s current and historical performance help shape the direction its leadership takes the cooperative in the future, making any miscalculations potentially harmful down the line.
The most powerful way to ensure you’re getting an accurate read of where your credit union stands in key areas is by benchmarking performance against relevant peers. Although it sounds simple enough, it takes a bit of know-how to realize the full benefits of benchmarking.
This guide will help grow your understanding of credit union performance benchmarking by exploring the concept in-depth, showcasing the metrics executives in each key department should be looking for, and supplying best practices. With accurate benchmarking, you’ll be able to make stronger strategic decisions that help your institution achieve its goals, whatever those may be.
What is Benchmarking?
Benchmarking is the interpretation and analysis of financial information in order to make direct performance comparisons to other credit unions, banks, and customized groups of peers. It enables a credit union to track internal goals, identify opportunities, reinforce strengths, and reveal weaknesses.
Why Should I Benchmark?
Without accurate and detailed knowledge of your credit union’s competition it’s impossible to properly gauge performance in key areas. Benchmarking shows where you need to make changes and the areas you can build upon. Basically, it provides the numbers to back up (or disprove) your assumptions.
At a more granular level, benchmarking also helps you:
• Gain a better understanding of your market
• Monitor progress towards specific goals
• Identify potential performance pitfalls
• Understand and spot patterns
• Provide actionable and meaningful information to your team
• Reduce the likelihood of decisions being made for intuitive or emotional reasons
• Review operations at a high-level
If done regularly, benchmarking can have a direct impact on the bottom line. Unfortunately, it used to be an involved process reserved only for those with the most advanced financial knowledge. For instance, benchmarking against a local bank involved rectifying differences between the NCUA and FDIC call reports. Thankfully, there are now tools available that do this sort of work for you and make all the necessary data easily accessible. It’s now possible for credit union professionals across all departments to use benchmarking for conducting data-backed performance analysis. The key is knowing what metrics to look for.