I own the dubious honor of once stopping a credit union board dead in its tracks. An article I penned on the responsibilities and liabilities of creditunion boards (although mild in tone and vetted by attorneys) had panicked the directors.
I received a frantic call from the CEO, claiming his board refused to take any action during its most recent board meeting. While I know the CEO was exaggerating, I still provided him with a letter of clarification that he could share with his board to move them off the dime.
A democratically elected board of volunteers is one of a credit union’s greatest strengths. It’s also one of its greatest vulnerabilities. As the challenge to craft policy in a complex and sophisticated financial world becomes more difficult, a weak board can be devastating. The economic and regulatory challenges credit unions confront today will be even more complicated in the years ahead.
Amazingly, there are still some CEOs who prefer to keep their boards selectively in the dark. They worry about directors who are simply meddlesome by nature, misinformed, or poorly trained. No matter the reasons, it’s the wrong approach.
I recently read "Peak Credit Union Board Performance" by Yvonne Evers—a credit union consultant who, for years, has guided credit unions on leadership and governance issues and for whom I have a great deal of respect.
Evers believes every good CEO needs a board that’s performing at its peak. Like any consultant worth her salt, she provides her advice entertainingly and outlines five core strategic principles that boards should strive to implement:
- Accept nothing less than trust and respect.
- Take a proactive approach to board member succession.
- Ensure the CEO compensation package shows value.
- Plan for the right leader.
- Understand external factors when defining success.
This approach sounds simple but it isn’t. Some boards consistently fail to implement one or more of these principles.
CEOs who try to restrict what their boards are allowed to hear don’t trust or respect their boards. And boards whose members don’t trust and respect each other are dysfunctional. Disagreement, debate, and eventual compromise are essential to a well-functioning democracy—be it a nation or a credit union.
Failing to plan for board member succession also is all too common. Long-tenured members who long ago lost their effectiveness compromise many boards. Tenure doesn’t necessarily affect ability, but constant training is vital to keep board members up to par.
And recruiting and preparing future board members ensures that quality people will set policy, and better ensures that your board’s makeup will reflect the demographics of your membership.
Credit union management requires a very important set of skills and qualifications that can’t be purchased cheaply. It’s common for some volunteer directors to measure the CEO’s compensation by comparing it to their own compensation—a recipe for disaster. Running a complex financial institution requires finding and paying for the right talent. Otherwise you’re shortchanging your members.
Compensation, however, is just one part of the equation. You need to plan for the right leaders by clearly defining what your credit union needs and why. This means finding someone with more than a well-written résumé. Multifaceted organizations require a level of intangible talents that include empathy for members and employees, confidence in setting direction and hiring the right people, flexibility, self-awareness, and a touch of humility. Dig deeper than the paper.
Lastly, understanding external circumstances when defining success means the board must understand the world that surrounds the credit union and the influence of global and local trends on a credit union’s competitive capabilities. We don’t exist in a vacuum, and what goes on elsewhere in some manner eventually affects us.
Volunteer boards are too critical to credit union success to not heed the insights of people like Yvonne Evers.
MARK CONDON is CUNA's senior vice president, business and consumer publishing. Contact him at 608-231-4078.