Management

Give Board Engagement a Boost

Study compares corporate and CU board practices.

January 31, 2012
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Credit union and corporate governance are so similar that if credit unions followed most of the best practices compiled by the Business Roundtable—an association of CEOs of leading U.S. companies— board engagement would increase significantly. 

That’s one conclusion from “Boards and Leadership: How Boards Can Add More Value,” the latest governance report published by the Filene Research Institute, reports Credit Union Directors Newsletter.

 

 If credit unions and their boards “skillfully implemented” a credit union version of the Roundtable’s list of board responsibilities and practices, “it’s highly likely that their members would be better served in both the short term and the long term than they are now,” says Bob Hoel, author of the report. Here are a few examples of how credit unions can adapt the Roundtable’s “Principles of Corporate Governance”: 

  • The business of a credit union is managed under the oversight of the credit union’s board. The board delegates to the CEO—and through the CEO to other senior management—the authority and responsibility for managing the everyday affairs of the credit union. Directors monitor management on behalf of the credit union’s members.
  • Making decisions regarding the selection, compensation, and evaluation of a well-qualified and ethical CEO is the single most important function of the board. The board also appoints or approves other members of the senior management team.
  • Directors bring to the credit union a range of experience and knowledge, but there are certain characteristics that all directors should possess. Every director should have integrity, character, and sound judgment. In addition, directors should represent the interests of all members and shouldn’t represent the interests of particular constituencies.
  • Effective directors maintain an attitude of constructive skepticism. They ask incisive, probing questions, and require accurate answers.
  • The composition of the board, as a whole, should reflect a mix of skills and expertise that’s appropriate for the credit union given its circumstances, and that collectively enables the board to perform its oversight function effectively.

Four types of boards

Most descriptions of corporate board responsibility stress the importance of monitoring, controlling, advising, and coaching, Hoel says. Applied to credit unions, he identifies four types of boards:

1. Watchdog boards emphasize monitoring and controlling. But in excess, these actions can turn into micromanaging, with boards second-guessing CEO decisions.

Give Board Engagement a Boost

2. Rubber-stamp boards aren’t strong, capable advisers and coaches, nor are they energetic watchdogs. They focus on small, even trivial issues and leave major decisions to management.

Directors might lack intellectual and experiential attributes necessary to direct modern credit unions. They highly value collegiality and might be selected because they’re likely to go along with whatever management and other directors want.

They might also be known as sleepy boards because most of their members lack the mental energy and physical stamina needed to perform their board duties well.

3. Scout and new technology boards are always searching for better ways to meet their members’ financial needs and preferences. They understand the concept of market segmentation and push for more effective methods to attract new members, especially young ones.

They embrace new technology for product and service delivery. They see that the consumer finance industry is rapidly evolving and that their credit union isn’t likely to deliver high value to members in the future if it doesn’t adapt.

4. Challenger boards combine the best features of scout/new technology boards and watchdog boards. As in the corporate world, boards in this quadrant are relatively rare, but they’re the most effective.

They focus on the future and act as a watchdog—two activities that aren’t easy to integrate, but which yield excellent results.

Directors Newsletter

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Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

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