Introducing a balanced performance scorecard for electric cooperatives: a tool for measuring and improving results.

• Author: Sullivan, Tim

Introduction

"We deliver safe, reliable, affordable energy for the benefit of our members." Thus reads a typical mission statement for most electric cooperatives. It's the essence of what we do.

Yet how do we really know if we are accomplishing our mission? What measures do we use to determine success or failure? How do we interpret results and identify improvement strategies?

Currently, many electric cooperatives have difficulty systematically measuring their performance in the "mission critical" areas of reliability, safety, cost control and member satisfaction. In part, this is because benchmark data--particularly for safety and reliability--has been difficult to come by. Yet, survey research and field experience show that many best-in-class cooperatives already measure their results in these critical areas, often using some form of a Balanced Performance Scorecard.

Consequently, Touchstone Energy Cooperatives has teamed up with NRECA and CFC to develop a new Balanced Performance Scorecard for all electric cooperatives. Using the new scorecard, electric cooperatives will, for the first time, be able to benchmark performance in all four mission-critical areas against their goals, peers, and best-in-class performers. The information has been compiled and presented on Cooperative.com. (1) What will you find?

* A standardized set of 10 metrics to measure reliability, safety, cost control, and member satisfaction for electric cooperatives

* An on-line database where reliability, safety, cost control and member satisfaction information can be easily accessed and obtained

* A Balanced Performance Dashboard, which can be used to help your co-op set goals and evaluate performance

Using the new Balanced Scorecard and related website, you can compare your performance against others by quartile rank, by region, by size, and by density. And you'll be able to download your own draft Scorecard Dashboard to begin to invest your Board, staff, and employees in the effort to systematically measure and report strategic performance.

Here's an example of what you will find:

Background

Why develop a Balanced Performance Scorecard at all?

To quote the old saw, leaders and employees pay attention to what is measured. Conversely, we typically do not manage well what is not measured. This limits the ability to gauge the impact of our operating decisions on actual outcomes. To truly understand how well we are serving our members, we must first know where we stand, and we do that through measuring key aspects of the service we provide. Then we can improve.

Consider:

* The challenges of measuring whether plant investments actually pay off in increased reliability.

* The challenges of measuring whether the rising cost of power significantly impacts member satisfaction.

* The challenge of knowing whether investments in safety education pay off in better safety performance, particularly when compared to other cooperatives.

* The need to understand the relationship between the critical performance areas--how they impact each other--and their overall impact on the cooperative's ability to achieve its mission.

The following diagram (Figure 2) outlines the four recommended performance areas and associated measures necessary to successfully achieve the electric cooperative mission.

Each performance area has a direct influence on the others. Together, they present a balanced view of success. Improved reliability pays off in higher member satisfaction. Controlling costs also lessens the impact of rate increases, which in turn helps member satisfaction. There is also a direct correlation between high safety performance and overall organizational efficiency, cost, and quality.

[FIGURE 2 OMITTED]

Let's review each performance category and their associated metrics, in turn.

Critical Performance Measure: Member Satisfaction

In a non-profit, member-owned organization, is there a measure of success more important than member satisfaction? Delivering electric service to the satisfaction of our members lies at the center of our mission; it is why we were formed and why we exist today. Studies show that organizations which systematically measure and act upon consumer satisfaction information achieve higher levels of performance.

The Value of Member Satisfaction and Loyalty

Delivering member satisfaction is the gateway to a more significant pay-off: member loyalty. High member loyalty delivers many practical benefits for cooperatives. For example, consider the critical importance of member loyalty when your co-op needs to:

* sell energy efficient products and services

* build a new power plant

* build new transmission

* appear before a local or state regulatory body

* be involved in contentious litigation

* win acceptance of a rate increase

* explain reliability problems

* generate grassroots support for legislative positions

In short, achieving member satisfaction and loyalty is central both to our overall mission and to the ongoing success of our business.

Measuring Member Satisfaction Performance:

Touchstone Energy Cooperatives measure member satisfaction through the use of the American Customer Satisfaction Index or ACSI. The ACSI is the most recognized customer satisfaction index in the nation, a joint project of the University of Michigan Business School and American Society for Quality. It measures customer satisfaction for 16 major industries and 190 leading corporations, from Nike to Southwest Airlines and from FedEx to Campbell's Soup. ACSI Survey results are published quarterly in the Wall Street Journal and on the ACSI website at www.theacsi.org. The results are developed through the answers to just four survey questions and are comparable across industries. Touchstone Energy Cooperatives has partnered with ACSI since 2002.

The benefits of using the ACSI are several. It will:

* Provide immediate feedback about your cooperative's level of member satisfaction.

* Allow you to benchmark your cooperative against competitors and peers, including the nearest IOU and other Touchstone Energy cooperatives.

* Help your cooperative set member satisfaction goals and engage your employees by giving them a clear performance measure.

* Improve the effectiveness of your member communications through the use of third-party (ACSI) performance reports, and

* Allow you to compare your cooperative's performance to other well-known businesses like FedEx, Ford, Nike, Southwest Airlines...