Jan 01 1994

Credit Union Service-Oriented Peer Groups

In their previous monograph, Evaluating the Performance of Credit Unions, Professors Harold Fried and Knox Lovell developed a performance evaluation measure specifically tailored to the unique features of credit unions. It measured the extent to which each credit union maximizes service provision to its members subject to resource availability in a given operating environment. 

In this monograph, Fried and Lovell explain how their methodology can be used to enhance credit union performance by grouping credit unions into service-oriented peer groups. The researchers’ suggested performance-enhancement methodology has four essential components. The first component is the model of credit union behavior, explained in the first monograph. The second component is the specification of the variables that describe the resources credit unions use and the savings and borrowing opportunities they provide. The list of variables that comprise their service provision model evolved largely as the result of a series of conversations with credit union managers during extensive site visits to 26 credit unions of different asset sizes, regional economic conditions, charter type, and common bond type. The specification of these variables and their modification are discussed in the first and second monograph. The third component, referred to as the peer group selection procedure, and the fourth component, the implementation component, are described in the second monograph. A credit union’s peer group constitute a valuable source of performance-enhancing information for the credit union. The implementation component, is illustrated by way of application to one of the credit unions visited by the researchers. In this section, the researchers present a real-world, hands-on example of how this procedure can be used by managements of individual credit unions to enhance performance.