Benchmarking Methods

When done correctly, benchmarking is an extremely valuable tool that provides important insight into various areas of a credit union’s operating model. However, any errors committed during the benchmarking process can give you a faulty picture of your credit union’s performance. The following are three areas where errors are most likely to occur.

When selecting a comparison group to benchmark against, it’s important to think beyond just geographic proximity and asset size. Including other factors in your benchmarking efforts, such as charter type, field of membership, and type of vendors used provides a more accurate comparison for your institution. When it comes to benchmarking, you want to be as accurate as possible to ensure you’re correctly gauging performance. It can also be beneficial to look at slightly different peer groups from time to time. Benchmark against credit unions with a slightly larger asset size or look at market leaders in certain key areas. You may be able to pinpoint factors that have allowed that institution to reach its current level of proficiency.

Your benchmarking comparisons shouldn’t be limited to other credit unions since banks are likely also competing to be the financial service provider of members in your market. While differences between NCUA and FDIC reporting formats made it difficult to make credit union to bank comparisons, Peer+  allows you to make apples-to-apples comparisons. While you should not make general market-to-market comparisons for metrics such as loan rates and fees, consider using bank peers in certain circumstances, such as when looking at market share, setting market-based growth goals, and identifying market trends.