The Role Of Member Value In Credit Union Success

When Sharonview FCU sets its annual goals, it includes a member benefit component.


Sharonview FCU
Data as of 12.31.16

HQ: Fort Mill, SC
MEMBERS: 69,977
12-MO LOAN GROWTH: 15.0%
ROA: 0.30%

Credit unions are growing in popularity. Membership topped 4 million in 2016, and credit unions set records in loan and share balances as well as net worth. What’s more, the growth in average member relationships across the industry underscores the faith members are putting in their financial cooperative.

This data is something to tout, but as financial cooperatives, credit unions need a way to look beyond financial results in gauging their success at serving members. Callahan’s Return of the Member metric, or ROM, does this by weighing loan and savings rates as well as member service usage and ranking credit unions among their asset-based peers.

Many credit unions see the value in ROM for setting goals and rewarding performance. Sharonview Federal Credit Union ($1.4B, Fort Mill, SC) has been examining its ROM score for the past decade.

Measuring Member Value

Callahan’s Return Of The Member (ROM) score provides a comprehensive scoring system of member value that looks beyond the traditional safety and soundness issues covered by NCUA’s CAMEL scoring.

ROM is a major part of what the credit union looks at in terms of peer comparisons, says CEO Bill Partin. It’s one of our strategic measures.

The credit union was tracking the metric prior to Partin’s arrival three-and-a-half years ago, but to ensure his board had a solid understanding of what the index means, the new CEO invested time and resources in ROM education. On the credit union’s board portal, he also added a link to a primer on the history of ROM and each of its core components.

We typically report the overall numbers, so having a guide is helpful if any of the board members would like to delve a bit deeper or need a refresher on what makes up ROM, Partin says.

What is ROM? Learn about the metric’s origins as well as what components constitute Return of the Member.

The Member Perspective

Instead of simply looking at key financial ratios, Sharonview’s management team wants to ensure the credit union is consistently looking at performance from the member perspective.

Bill Partin, CEO, Sharonview FCU

It gives the board comfort to know we’re approaching the business in this way, Partin says. If non-interest income is up, for example, what does that mean for our members?

Sharonview serves three distinct markets via its branch network, and its leaders consider how its ROM score stacks up against other credit unions in those markets as well as against a narrower asset-based peer group.

Every quarter we review the rankings for all credit unions in North Carolina, South Carolina, and New Jersey, Partin says. We’ve also created a smaller comparison group of what we refer to as the Big 6′ these are the credit unions that are similar or a bit bigger than Sharonview. They are the King Kongs of our markets, and the board is very interested in how we stack up against them, specifically in terms of member value.

Beyond Financials

Sharonview wants to do more than simply keep tabs on where it ranks, though. The credit union’s current ROM goal is to be in the 95th percentile or higher when compared against all of the credit unions within the three markets it serves. The board has also challenged the management team to achieve a No. 1 ranking against its Big 6 competition.

This goal doesn’t tie into the management team’s bonus structure, but it has become a visible measurement that Sharonview reports on and highlights every quarter.

ROM provides that member lens to help us stay focused on what is good for our members, not just the financial results included in the 5300 report, Partin says.

After working for a credit union that prioritized high financial performance alone, Partin says it is a refreshing change to incorporate a measure that promotes value creation for the credit union’s members.

ROM provides that member lens to help us stay focused on what is good for our members, not just the financial results included in the 5300 report.

Bill Partin, CEO, Sharonview FCU

As a CEO, you can drive up fee income per member, which might look great on the financials, but what impact does that have on net promoter score or member satisfaction? Partin says. We don’t want to inadvertently drive the wrong behaviors with staff or the senior team, and the member perspective that ROM offers helps prevent that.

This lens into the member’s point of view has also helped Sharonview pinpoint areas where it can improve. For example, its ROM score as of December 31, 2016, revealed Sharonview’s share draft penetration was lower than its Big 6 peer group.

We can slice and dice this data and it tells a story, Partin says. We know we have to do a better job creating checking account moments. We also changed our branching strategy to help us attract more share balances because we needed to make headway on our members’ average share balance.

Of course, Sharonview also considers a number of other metrics including key financials, employee engagement, and Net Promoter Score but Partin describes ROM as one of three legs of the stool.

ROM is part of a good, balanced scorecard, the CEO says. We need to operate profitably and soundly as well as recognize that we are a member-owned cooperative.

The credit union embraces a data-driven approach to making strategic decisions, and seeing how the organization is lining up in terms of member value creation is critical. That’s where the power of ROM comes into play.

The board members want to see the good, the bad, and the ugly of how we stack up, Partin says. They know that, bottom line, we need to measure member return and not just earnings. When the board owns that, it’s a powerful tool.

March 29, 2017

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