However, any flaws in the benchmarking process can lead to inaccurate perceptions of your credit union’s performance. That’s why you’ll want to avoid these five common pitfalls that can lead to errors in your analysis.
- Imprecise Peer Groups
Peer groups based solely on asset size or geographic proximity don’t account for the wide range of other factors that can impact performance. Adding measures like field of membership, charter type, and operational metrics as criteria creates more accurate peer groups by narrowing your peers to only those that are most similar to your credit union. - Benchmarking Infrequently
The credit union industry is dynamic. Therefore, annual benchmarking can mask performance lags and prevent your institution from making timely operational changes. Whether it’s pricing strategies, interest rates, or housing market prices, the definition of credit union success is continuously changing, making it imperative to benchmark at least quarterly. - Limiting Potential Peers
If banks are competing in the same market, they should be part of your benchmarking analysis. While differences in the NCUA and FDIC reporting formats are an obstacle, tools like Callahan’s Peer-to-Peer make it possible. Instead of market-to-market comparisons, which may not be useful due to operational and business model differences, consider using bank peers when looking at market share, setting market-based growth goals, and identifying market trends. - Not Excluding Your Institution from Peer Groups
Including your own institution in peer groups can skew your benchmarks, preventing you from getting a true representation of your peers and the competitive landscape. The metrics you are measuring may change directionally without your institution in the mix, depending on economic factors and individual credit union performance. - Assuming Average is Excellent
Using peer averages may give insight as to how the group is performing directionally but should not be used as a measurement of excellence. The average will hide outliers both under and outperforming the peer group. Peer group averages can be used to set a baseline, but generally should not be used as a goal unless using an aspirational peer group consisting of high-performing credit unions.
Callahan can help you avoid these pitfalls.
More than 600 credit unions across the county and asset-sizes rely on Callahan’s data and analytics programs Peer-to-Peer, CUAnalyzer, MortgageAnalyzer, and BranchAnalyzer to accurately measure and track their credit union’s performance versus other credit union peers and banking competitors.
Callahan clients can access their benchmarking tools on their client portal.
Not a client? Learn how to optimize your benchmarking to make better informed strategic decisions.
More Blogs
How Sales Teams Work More Efficiently In Peer Suite
Is your team spending countless hours manually pulling reports and compiling data for your credit union prospects? Are you looking for a more efficient way to collaborate with your team and onboard new members? Callahan’s Peer Suite helps credit union suppliers...
Ultimate Benchmarking Guide For Credit Unions
What Is Benchmarking? Benchmarking is the interpretation and analysis of financial information in order to make direct performance comparisons to other credit unions, banks, and customized peer groups. It enables a credit union to track internal goals, identify...
How Interra Is Advancing Its Purpose Journey
Several years ago, the five-member executive team of Interra Credit Union ($1.7B, Goshen, IN) participated in a virtual learning experience from Callahan & Associates offered in collaboration with Harvard Business School Online.
3 Peer Group Types That Go Beyond Asset Size
While benchmarking your performance against asset-based peer groups has value, relying strictly on asset size for peer group analysis can skew your benchmarks by including credit unions that don’t share much in common with your institution. Just take a look at this...
How To Address Board Concerns On Performance
Navigating Tough Questions: How to Address Board Members' Concerns about Financial Performance As a credit union leader, you understand that one of your most important responsibilities is to articulate your credit union's financial performance to the board of...
CECL: Everything You Need To Know
CECL: Everything You Need To Know In 2016, the Financial Accounting Standards Board announced that they would change the methods financial institutions used to calculate and report charge-offs. This new regulation changed the method from an Allowance for Loan and...
4 Most Commonly Confused Call Report Codes
Callahan's Tips For Correctly Reporting To The NCUA The NCUA’s 1Q22 5300 Call Report contained over 1,000 new, erased, and changed codes, leaving many credit unions in the dark on how to correctly report quarterly. As credit unions familiarize themselves with the...
Peer Suite Access Levels For Suppliers
Callahan & Associates is getting ready to launch four access levels within the Peer Suite for suppliers. Find out which access level is right for you.
Peer Suite Access Levels For Credit Unions
Callahan & Associates is getting ready to launch three access levels within the Peer Suite for credit unions. Find out which access level is right for you.
How BCU’s Purpose-Driven Mindset Drives Growth
Key Results from Sustainable Business Strategy In the first quarter of 2022, a dozen BCU ($5.4B, Vernon Hills, IL) team members participated in Sustainable Business Strategy, a virtual-learning experience offered by Callahan & Associates in collaboration...