Are you fulfilling your mission to create value for members? Are you doing so in a financially sustainable manner? If so, then you have Cooperative Clout.
Making claims about fulfilling mission and sustainability are easy, but how do you really know if you have Cooperative Clout? How do you quantify it? Fortunately, there is a way to measure it with precision.
Cooperative Clout evaluates two aspects of credit union performance: Member Value Added and Operating Muscle. Performance is benchmarked against peer and plotted on a four-quadrant matrix. Credit unions performing in the top-right quadrant, above average Member Value Added and above average Operating Muscle, have the greatest Cooperative Clout.
Member Value Added Axis
The vertical axis on the Cooperative Clout Matrix is Member Value Added. It looks at credit union performance through the eyes of the member by monetizing seven aspects of performance to determine how effectively the management team is deploying entrusted resources and how member-friendly loans and shares are priced.
Instead of benchmarking credit unions based upon asset size, a peer group is developed based upon annual operating expense. This places credit unions on equal footing in terms of resources at their disposal. Because so much of contemporary financial services is “off balance sheet” it eliminates misleading readings that asset-based peers allow.
Credit unions that deploy their resources the most effectively and efficiently deliver value to members in the form of greater productivity. They are realizing operating leverage that leads to economy of scale (not just scale, but economy of scale).
The most productive credit unions have a competitive advantage – they are able to price loans and shares more attractively than other financial institutions. The productivity-pricing advantage creates a virtuous cycle that allows them to capture market share.
Operating Muscle Axis
The horizontal axis on the Cooperative Clout Matrix is Operating Muscle. It measures six quantifiable aspects of performance to determine financial strength against peer.
The financial sustainability aspect of Cooperative Clout is important because traditional “Return/Value” measures of credit union performance fail to address it. It’s possible to score well in return to members, but because productivity, asset quality, and capital adequacy are ignored, its financial sustainability might be in question. By adding Operating Muscle to the analysis, the credit union now has a check and balance system in place.
Benefits of Cooperative Clout
Defining what success looks like in the cooperative business model is difficult. On one hand, you exist to create value for your members, but on the other hand, you have to do it in a financially sustainable manner. Cooperative Clout provides the following benefits:
· It aligns the board and management team upon a common vision of cooperative success; a “true north” to work toward.
· It applies objectivity to a traditionally subjective topic.
· It validates high performing credit unions.
· It can be used to create a roadmap for high performance.
· It is updated on a quarterly basis using NCUA 5300 data.
Cooperative Clout is a service being offered by the HNG Group LLC. HNG is a consulting group led by three partners: Mike Higgins, Jerry Nelson and John Gregoire. HNG focuses on performance management, financial sustainability, and performance-based compensation. John, Jerry, and Mike have significant backgrounds working in the credit union space.
Call us if you are interested in your Cooperative Clout Score. If you invest 30 minutes of your time with us, we will show you your specific score, identify the components and introduce you to our tool to provide you a roadmap to further success in enhancing your Cooperative Clout.