The 80-20 Strategic Scorecard

pie chart 80 20 rule executive
Jeff Rendel, CSP Photo
Rising Above Enterprises

3 minutes

What if your CEO and board identified and focused on the critical metrics that have the greatest impact on strategic success?

All of us are acquainted with the Pareto principle, which says that, for many outcomes, roughly 80% of effects come from 20% of causes. Better said: 80% of results derive from 20% of actions. What if the same principle applied to your credit union’s strategy? Is it possible that a handful of vital measures and projects lay the groundwork for the largest part of strategic success?

Strategic scorecards, and the number of metrics, run the gamut. Decades of strategic advisory service to credit unions reveals most scorecards to have between seven and 15 metrics, with the bulk displaying around 10. But, not all measures and their related projects are created equal. A smaller group are mission critical and deliver results and resources that provide for other measures and projects. However, we often assume that strategic success is not complete unless all measures and projects meet target goals and make a good run at stretch goals.

What if your scorecard was an 80-20 scorecard? What if your CEO and Board determined the few metrics that provided the greatest results toward strategic success and kept strategic conversations and priorities focused on these critical few, knowing that success where influence was greatest would contribute to subsequent progress in the second-level measures of strategy?

For example, many strategic plans and scorecards are focused on growth, profits, and experiences. One credit union lists 12 strategic measures and its 80-20 critical measures are in bold.

1. Net loan growth and production

2. Net membership growth

3. Share growth

4. Member relationship growth (average loan and share balances)

5. Return on assets

6. Net worth ratio

7. Revenue per member

8. Net charge-off ratio

9. Staff engagement survey results

10. Online and mobile technology use

11. Net Promoter Score

12. Staff hours in community service

All these measures are important and meaningful, but this credit union determined that new loans, new sources of revenue and greater use of digital tools would best provide the resources required to further execute on the remaining measures. In a similar fashion, the credit union identified the projects that were most critical in delivering on its key measures and prioritized accordingly. As a result, the board, CEO and executive team were able to focus and concentrate on matters that delivered the highest contribution toward strategic success. Accordingly, the board authorized incentives that were more heavily weighted toward the critical measures.

Try this approach with your credit union’s strategic scorecard. Of the figurative dozen scorecard elements at your credit union, which three (maybe four), when successfully executed, deliver the lion's share of assets, revenue, market share, and capital to continue addressing the other measures? Your focus on the few will help to ensure your business model reliably produces the kind of results that provide for secondary attention to next level measures that continue to refine your business model. 

Jeff Rendel, Certified Speaking Professional and president of Rising Above Enterprises, works with credit unions that want entrepreneurial results in sales, service, and strategy.  Each year, he addresses and facilitates for more than 100 credit unions and their business partners. Reach him at 951.340.3770.

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