Linking Strategy With Desired Financial Performance
The strategic planning season is right around the corner. At the end of their overall strategic planning process, many credit unions believe they have linked strategy with their desired financial performance. Some credit unions decide on targeted financial ratios and believe they are linking strategy with financial performance, but not high-functioning credit unions. They simulate the long-term earnings and risk to earnings of their strategy to understand if it is positioned to produce the credit union’s desired financial performance.
High-functioning credit unions focus on what it will take to keep a business model fine tuned, not allowing it to get stale. They make sure they are more stellar than their competition at one, two or three things. They also make sure they are delivering a unique value proposition for the markets they are targeting. They dig into the data that is at their fingertips because, for example, they know how many approved loan applications were actually funded and they do everything possible to not let approved loan applicants slip away. High-functioning credit unions also know what percentage of transactions happen in branches, the call center and electronically – and they consider those transaction trends in their strategic planning process.
They also focus on creating and maintaining a sustainable ROA, long term. With margins in the 2s for the overall industry, figuring out how to do this is tough work – but critical. For example, high-functioning credit unions are constantly on the lookout for additional sources of non-interest income without taking advantage of members. They make sure their limited resources are being allocated appropriately. In other words, they make sure there is an ROI for every expense.
There are a number of other things high-functioning credit unions habitually do, but what we have included here should help credit unions focus on the right questions to be asking – and answering.
