Credit unions must constantly improve their performance if they are going to continue to prosper in today's rapidly changing financial marketplace. This is easy to say, but measuring "performance" and suggesting ways to "improve performance" are difficult tasks. Give credit unions' cooperative structure, many standard business performance criteria, such as profit maximization, are irrelevant. Standard regulatory performance measures, such as the National Credit Union Administration's CAMEL ratings, are important guides to such issues as the safety and soundness of a credit union. However, these measures capture one dimension of the performance of a credit union. In this report, Fried and Lovell explain how their methodology can be used to enhance credit union performance by grouping credit unions into service-oriented peer groups.
What is this research about?
The researchers’ suggested performance-enhancement methodology has four essential components:
- First component is the model of credit union behavior, explained in the report Evaluating the Performance of Credit Unions.
- Second component is the specification of the variables that describe the resources credit unions use and the savings and borrowing opportunities they provide.
- Third component, referred to as the peer group selection procedure.
- Fourth component, the implementation component.
In this report, 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.
What are the credit union implications?
First, credit unions can learn valuable lessons from the best performers and can improve their service positions. Second, the learning process will, of necessity, improve the overall performance and the current and future competitive position of the credit union segment of the economy’s financial services sector.