The Decision Maker

5 Steps to Form an Analytics Strategy

Posted by Nate Wentzlaff on Oct 23, 2014 12:35:00 PM

Analytics software within the credit union is like a dusty tool sitting in the shed if there is no value-creation strategy for its implementation.

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Many credit unions are beginning to jump on board the Big Data and Analytics bandwagon.  Although the movement toward data-driven decisions is essential in this booming information economy, the tools themselves are worthless without credit union leaders communicating a strategic vision to users.  Even the most skilled user is powerless without a strategy, which includes quantifiable goals, to accomplish the short and long-term mission of the credit union.  In order to develop a strategy and accomplish its underlying goals, credit union leaders should follow these five steps to integrate analytics software into their strategic vision:

Step 1: Develop the Strategy Map

The first step in developing a strategy is building a strategy map.  A strategy map is a tool to construct the framework of the vision casted by credit union leadership for a specific period of time (e.g. 2015).  A strategy map is constructed by synchronizing the four most important perspectives of the credit union (e.g.- Financial, Member, Learning and Growth, Community, etc.).  Each one will identify key objectives that will be necessary to fulfill the strategic vision.  Including different perspectives within the credit union is important to achieving an all-inclusive and comprehensive set of objectives.  As objective are developed, the strategy map begins to populate with tangible goals.  A strategic vision with multiple perspectives produces creative dialogue and a completed strategy map.

Step 2: Determine KPI’s and Metrics

After the strategy map is finalized, Key Performance Indicators (KPIs) and the metrics used to build them must be determined.  This is the most difficult step in developing an execution plan for the strategy. Developing KPIs involves analyzing how each metric supports the underlying objective to support the strategy.  Credit union leadership should dedicate most of their time and effort to this step.  Measurement allows managers to determine the condition of the strategic goals.  When measurements show the desired KPIs levels are not being met, managers must use corrective actions to steer the tactical objectives back into alignment with strategy. 

Step 3: Identify Data Sources and Solutions

After the strategy map has been built and the KPI and metrics have been determined, the analytics solution and data sources used to build it must be chosen.  In order to obtain timely and actionable data to monitor the strategy, credit union leaders should commission data experts to build an analytics solution that will assist the organization in monitoring strategic metrics and KPI’s.   Analytics gives credit union managers the ability to monitor all the objectives laid out in the strategy map.  As actions are taken (or stopped) throughout the credit union, the analytics will reflect the effects they have on the strategy.  Analytics solutions give managers clear feedback on actions they have recently taken and to make adjustments if necessary.

Step 4: Create a Balanced Scorecard

Synthesizing the strategy into one Balanced Scorecard (BSC) will allow the entire credit union to be united in accomplishing the strategic objectives laid out in the strategy map.  Building a scorecard for each perspective will allow management to place a score on each KPI in relation to the strategic objectives they have set.  Synchronizing all of the individual scorecards together creates a BSC for the credit union leaders and managers to monitor.  A BSC will alert managers when various KPIs are currently not performing as expected.  Data visualization within the BSC will help managers identify problems (with the goal of preventing actions that do not align with the strategy).  The BSC can use a simple red, yellow, or green indicator for each KPI (or groups of KPIs) to monitor their performance in relation to the strategic goals.  When a manager sees an area under their responsibility turn from green to yellow, they can identify the specific KPI that is not currently performing in accordance with the strategy.  Therefore, they are able take corrective action that is focused on the identified problem. Managers usually do not have time to scrutinize the data and analyze every decision.  This is where the data visualization of scorecards (rolled up into a BSC) will provide tremendous value.  Alerts sent to e-mail or mobile phones are also another powerful way managers can stay engaged with the strategy.

Step 5: Execute with Performance Management

Through an analytics solution and a clearly defined strategy, credit unions can begin establishing performance management initiatives for all employees.  Without a clearly communicated strategy, employees will continue their daily tasks in the same way.  Getting into a rhythm is important, but if that rhythm does not support the strategy, it is the managers’ responsibility to inform employees of how to correct employees’ actions to align with the strategic vision.  Incentives and other rewards programs can be used to motivate actions that are in alignment with strategy.

Strategy will always be an important aspect of credit union management.  It helps to put the vision and mission of the credit union into action.  With a well-defined strategy, and a clearly communicated vision, credit unions will be able to make decisions that will benefit their members and the communities they serve through a unity of purpose.  Analytics will give credit unions the tool to monitor and drive these strategies to create value.  With the amount of data growing exponentially, analytics will help credit unions propel their vision into action.

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