Nov 30 2012

Improving Peer Group Analysis for Credit Unions

Report  
Number  
287

The objective of this research brief is to help develop a framework for benchmarking with a focus on strategic objectives and long term credit union sustainability.

Mike Higgins
Mike Higgins
Managing Partner
Mike Higgins & Associates
Report Number 287

Executive Summary

This brief articulates a well-thought-out and systematic framework for designing, implementing, and acting on benchmarking information in a way that is tailored to generate unique insights for credit union leaders. It is honest about the challenges inherent in any benchmarking exercise—ranging from the designation of peer groups to the choice and interpretation of multiple measures of performance—and provides practical advice for addressing them effectively.

What is the research about?

Benchmarking is not as simple as it seems. Who should you compare yourself to? What should you compare, and how? What are some of the pitfalls of benchmarking? 

Author Mike Higgins answers these questions and others in an engaging and approachable style, always using clear and easy-to-follow examples to illustrate his point. Along the way, he provides useful and succinct templates that can help credit unions start their own benchmarking process or, if they’re already engaged in the process, think about ways they can improve their benchmarking practices.

What are the credit union implications?

Benchmarking, when conducted appropriately, yields several benefits for credit unions. It can help credit unions identify best practices, monitor a changing landscape, test a hypothesis, define a course of action, or simply see who is very good at something so they can be contacted to find out why they are successful.

While these benchmarking benefits are universal, credit unions have to approach benchmarking differently than for-profit institutions where the bottom line is “the bottom line.” For credit unions, the endgame is sustainability—generating profits so that the institution can continue to provide benefits to its members and jobs to its employees. Sustainability would be easy to achieve in an unchanging world, but of course that’s not where we live—as Higgins notes, every year, day-to-day operating expenses increase and credit losses are incurred.

This report is sponsored by Credit Union Central of Canada.