You Have to Know the Score

In business, just like in sports, one must be able to measure how well an organization stacks up to its competitors. To do this an organization must define key performance metrics to apply to its business practices that compare consistently with others in that business. To this end, you may have noticed a new item call the Balanced Scorecard on our web site recently. Its mentioned on the bottom of our home page.
 
This scorecard provides a snapshot of key business metrics in Member Satisfaction, Safety, Reliability, and Cost. It then maps Tipmont’s scores on sliding scales that are divided into performance quartiles designed to compare our performance with other cooperatives across the country. I’ll talk a little bit here about how Tipmont stacks up in each performance category but if you haven’t seen the scorecard itself, I would encourage you to go to the web site and check it out. There is also a narrative there that explains each measure and provides some comments on Tipmont’s performance.
 
Without spoiling the surprise (and quite honestly to get you to go check out our web site), Tipmont stacks up pretty well in many areas of performance with cooperatives across the country. Our safety scores are all in or right at the top quartile of performance. Our performance results related to cost are very good with two scores falling in the top quartile and the other reflective of our investment in our systems. Scores related to service reliability range from just under the top quartile of performance to a fourth quartile score. We are already looking at how to improve in this area. Last but not least, our member satisfaction score falls in the middle of the scale when compared to other cooperatives nation wide. This score is based on a random survey of members. We will be looking hard at this score to see if we can improve our survey results next year!
 
There is one set of these measures I do want to discuss further for you here. These are the “cost” measures and the issue of “regional” costs for consumers in this region of the state. Many members compare Tipmont to Duke on a fairly regular basis. If you are a regular reader of this column you know that I have spoke in the past about the difference in our service charge created by the issue of consumer density. Without going into a great amount of detail about various aspects of operational differences that make Duke’s current overall cost lower than that of Tipmont, let me comment on a long standing basic premise that lead to the development of cooperatives to begin with and why we do not try to benchmark ourselves against Duke.
 
Cooperatives are here because large, more urbanized electric companies would not come out into the rural areas to serve the residents there. The reason why is pretty straight forward. It is considerably more expensive to serve these areas. Simple economics pretty much covers the story. Those large companies simply did not see the rate of return their sharholders wanted to make it worth the effort. In some cases, they even saw where building lines out to the most isolated consumers would actually cause them to loose money when compared to the investment in the distribution lines. At that time there were no laws or regulatory agencies that made it mandatory to provide power to any individual. So, long story short, if it wasn’t profitable to the level they wanted, they simply didn’t provide the service.
 
Today, thanks to various legislative acts, the most significant being the Rural Electrification Act of 1936, almost all paying consumers have the ability to access electric service from some entity. However, to think the laws of economics have flipped on their head and cooperatives as a whole will be able to provide cheaper service is a fundementally flawed thought process. I am sure there are a few cooperatives in the country with minimal or no growth and limited maintenance that may be able to come close and even beat a few major investor owned utilities in some cost metrics in their market region, but not many can make this claim. However, don’t misinterpret our intentions in these thoughts! We will continue to hunt that “big dog.”
 
Although we have recorded and looked at these individual metrics for some time internally, the whole point of the balanced scorecard is to provide a starting point and a consistent measurement tool that can, from year to year, provide us with a way to compare ourselves against other cooperatives across the country. It also allows our members a high level glimpse of how we are doing in key areas of performance. This goes back to the concept of business transparency that was discussed in the December 2009 article. As always, if you have questions I am more than happy to answer any emails. Drop me a line if you are so inclined!