There’s a lot to be said for having old folks around the board table making credit union decisions. They have tons of experience. They’re familiar with the institution, both its history and its operations. They tend to be risk-averse, which is actually pretty good for a financial institution. With few exceptions, they care … a lot.
There’s a lot to be said for having younger folks around the table making credit union decisions. They have tons of ideas. They’re immersed in outside ideas and organizations. The right ones are ambitious and they care, too.
The existing governance model is effective, but it is closed. I was at dinner with a group of CEOs the other night and they were talking about how very hard it would be for anybody to challenge the status quo – for better or for worse – on their boards. The elections are virtually always uncontested, the annual meetings get sparse attendance, and in one case the board had written several thousand proxy votes into its bylaws on the off chance it ever needed to quash an insurrection. Changes in credit union governance are NOT going to break their way in. They must be invited.
Enter nvohk. This surf-inspired eco-friendly clothing company promises its (future) customers several appealing things in return for an annual $50 "investment":
- the opportunity to actively create and manage nvohk from the ground up (YOU GET TO RUN THE COMPANY)
- 35% of net profits are distributed to members via reward points that can be used to buy nvohk products (1 to 1 ratio of dollars to points!)
- upon activation members will receive 1) an exclusive nvohk member t-shirt, 2) member sticker, and 3) a “plant-a-tree” seed pack
- members will receive regular business updates and vote on major business decisions (e.g., logo design, product designs, advertising, sponsored athletes and musicians, etc.)
- members will receive a 25% discount on all nvohk product purchased directly through nvohk.com; as well as a 10-day exclusive purchase window before products are offered to the public
- members will also be entitled to receive custom product offers from nvohk’s business partners
The skeptics among us will rightly ask: “So I’m paying half a bill for a t-shirt, a bumper sticker, a sapling, and the privilege to fill out an online survey?” Yes. But here’s the good part: Skeptics can still buy the stuff if they think it’s cool. And the true believers (aka “the best customers”) get leadership value for their money.Nvohk soft plays it, but business decisions are still made by managers with input from the voting customers, not with voting as the final word.
There’s no reason such a system couldn’t play well in credit union governance. The board still makes boring decisions like which firm to hire for this year’s audit, but members (especially younger tech-savvy members) get to vote on meaningful things like whether to offer lower rates or a better rewards program on a platinum card. Heaven knows such members haven’t been coming to the annual meeting for years. Even if they have, I doubt they get to talk about things like where to build a new branch or whether to sponsor the high school football team.
The good news: Credit unions don’t even have to charge like nvohk does to get this going. For pure bootstrapping, you could even do the survey for free on surveymokey or freeonlinesurveys. To get people to sign up, though, try offering these tangible benefits:
- the opportunity to actively create and manage [Community FCU] from the ground up (YOU GET TO RUN THE COMPANY)
- a 10 basis point discount on loans and premium on deposits, just for signing up to vote
- participants get a 5% bump when it comes time for extraordinary year-end dividends
- cash rewards every time you vote, $1 to $5 straight to your share account
- a cool t-shirt (no logo polos, please) ... try this site instead
And if eco-friendly surfware isn’t your bag, try managing a real British soccer (er, football) team.
Comments
6
I do like the idea. Somehow, in this industry, the status quo seems to be acceptable. It’s what we’re used to. It’s what we’ve become accustomed to. If it doesn’t change, it will also contribute to the stagnation and demise of the industry. I think, in part, the lack of participation in elections comes from CU management. They don’t want to have to deal with the ballots, the counting, the solicitation of new prospective board members, the mailings, etc. Nor do they want the costs associated with it. The mentality has to change before anything else will change.
Current CEOs have been ‘brought up’ in the current Board-Management relationship. They wouldn’t know how to manage the credit union, or the Board, in a different setting. Nothing will change unless the mentality changes.
I am interested to see if Nvohk will work. I won’t be paying $50 for a T-shirt, that’s for sure. But, the idea of rewarding them for trying new things, and rewarding them for trying to change the status-quo, is commendable.
Link to this comment
Hey Ben,
I hear you about it being tough for a new comer to unseat an entrenched established board member. But recently I had the thought that if someone young and ambitious really wanted to do it, they could probably pull it off if they pounded the pavement and created a grass-roots groundswell utilizing social media/networking. Sort of like Mike Belle’s run for city council in Gainsville Florida, but with a different outcome. Although I suppose they’d have the same kind of problems to overcome :)
Link to this comment
There you go again Ben…making us think. What you’ve done is taken 4 steps ahead of what most people are thinking in the area of changes to CU governance. As with most innovators, the idea will make many people uncomfortable which is a good thing. Perhaps you could pitch this to a 30u30 member or i3 group to pilot the concept.
In the case of the football squad, it seems to have created a buzz in the UK. As a Washington Redskins arm-chair quarterback I would submit my ideas on who they should draft this year would beat Mr. Snyder’s dubious track record!
I’m a board member of a food coop and we too struggle with member involvement. We just had a bylaw change vote with less than 1% participation, but our t-shirt design contest participation rate was about 4 times higher.
I don’t know what all this means, but you (and Nvohk) are onto something…
Link to this comment
It’s funny, I was thinking about the same issue just recently after a visit to REI, another cooperative company which isn’t really trying to be different from other traditional, corporate retailers (they are just doing “it” better). CU’s say they strive to be different from banks, but given the fact that the “man on the street” doesn’t know the difference between the two, then CU’s really aren’t doing enough to BE different.
As far as the board being a facilitator or impediment to this, I’ve made presentations to a number of CU boards over the past few years, and I think it’s safe to say they are not hotbeds of “new” thinking. If we accept that the biggest problem for CU’s is not being differentiated from banks (this certainly seems to be CUNA’s hottest issue), then I don’t agree that the current governance model is effective, and I think thought leaders in the industry need to raise the red flag on this issue.
CU’s either need to really BE different, and embrace ideas like the one’s Nvohk is using, or they need to be like REI and be like banks but much, much better. I personally don’t think the latter is a viable strategy (there is only one REI, after all), so the former seems like the way to go. But the governance model will have to change first…
Link to this comment
It seems this is one of those problems that everyone knows is there, but no one is willing to REALLY talk about. I think your suggestions are great. Great comments, too!
We have a difficult time getting members to attend our annual meeting, let alone run for the board. Small waves can become big agents of change…offering members to give feedback or ideas in a non-committal way could increase their interest in the credit union in general. You addressed the “What’s in it for me?” issue with rewards. Why not offering something (better than a pen or keychain) to members who take the time to tell you what they think might work or be the best option??
Not that long ago, if an employee at my credit union made a suggestion for a product to be developed or improved and it was implemented, we paid them $25. How would something like this be that different?
Link to this comment
Hi CUTomorrow Thanks for the awesome article and your analysis on how credit unions can implement some of the principals of Nvohk-ing business democracy. Around the office here we have been using “Nvohk-ing” as if it a new verb, like “Google”.
You commented “they were talking about how very hard it would be for anybody to challenge the status quo — for better or for worse — on their boards.”
Just when I was about to think “Yeah, wouldn’t it be great if they….” I spotted something truly revolutionary from United Communities CU. It is brave moves from innovators,like United Communities CU, that have the potential to transform and safeguard the future competitiveness, differentiation and uniqueness of credit unions. Just think of the benefits of using online voting tools; the board applicants would have the opportunity to truly represent their principals and experience—thereby increasing the chances of more experienced, respected and DIVERSE boards at our credit unions.
Without further ado ………..
United Communities recently completed a unique campaign to encourage its membership to participate in the credit union’s AGM and vote in its Board elections.
United Communities established this website in order to improve member participation. The credit union reports considerable online buzz about the campaign and an impressive number of views demonstrating the interest the site created among the credit union members.
Link to this comment