I was hiking recently at Haleakala National Park on Maui. The trail started at almost 10,000 feet above sea level, at the top of the ancient volcano, then descended over 3,000 feet to the moonscape-like floor below. While resting at a campsite at the bottom nestled among huge black undulating lava formations, I met a few locals. The usual “Where you from? What do you do?” pleasantries followed, and I shared that I was on the island to speak at a conference for Credit Union directors.
I was surprised, pleasantly, to hear my new friends talk about how familiar they were with their local credit union, how the small local focus served them and their neighbors. And how they knew some of their credit union directors. Not at all the type of connections you expect in the often-times impersonal world of finance, and certainly not in the shadow of umber and ochre colored cinder cones.
If these smaller organizations can tap this sense of intimacy by carefully and strategically utilizing their board, the board can provide an outsized positive impact that can translate to benefits for the members and the community.
Successful organizations come in all sizes. Small can be particularly advantageous because smaller credit unions can build a more intimate relationship among their board, their employees (including executives), and their members. If these smaller organizations can tap this sense of intimacy by carefully and strategically utilizing their board, the board can provide an outsized positive impact that can translate to benefits for the members and the community.
We recently completed a survey on credit union governance practices, where leaders from 85 credit unions responded to 43 questions on topics from board selection and evaluation to CEOs’ involvement in the board and board meeting norms. The initial output from the data was a series of infographics comparing the full data set to best practices. Given the differences in scope and scale of differently sized credit unions, we wanted to look specifically at smaller credit unions (i.e., under $1 billion in assets) to share the data and some tips for this group. Of the total 85 respondents, 39 belonged to credit unions with under $1 billion in assets—nine with under $100 million, 14 between $100 million and $499 million, and 16 between $500 million and $999 million.
Here are some tips. They apply to any size credit union but can especially be capitalized on by a nimble organization.
Bright Lines
Boards of directors hold fiduciary responsibility to oversee management on behalf of members. But boards can also be a strategic asset, particularly in smaller credit unions where every bit of talent matters.
When asked, 10% of small credit unions reported they lacked a clear delineation between the CEO’s and the board’s responsibilities. Even 10% is too high. Open the dialogue and begin to draw bright lines if you feel the same.
As much as we want boards to be active and engaged, it’s essential to have clear delineation of responsibilities and authority between management and the board. This may feel like a contradictory statement, wanting the cake and eating it too, but having bright lines and guardrails in place empowers all stakeholders to be their best, brightest, and boldest. When asked, 10% of small credit unions reported they lacked a clear delineation between the CEO’s and the board’s responsibilities. Even 10% is too high. Open the dialogue and begin to draw bright lines if you feel the same.
It can start with an informal discussion of the adage “Directors should have eyes, nose, and ears in, but fingers out.” That means directors should watch, listen, and give things the smell test to make sure they’re right, but they aren’t operators—fingers out, please! Some credit unions find it useful to introduce a statement of responsibilities and how they differ between management and the board. No matter how you do it, getting an outsized benefit from your board ironically starts with the board and management staying in their lanes.
Compose Your Board Purposefully
To use your board as an asset, you need to know its strengths and weaknesses, yet 33% of smaller credit unions indicate, “We don’t benchmark our board makeup,” and 56% “never” evaluate the board. As advisors, advocates, connections to new business, and even as watchdogs—your board is a resource! They should be purposefully selected to provide a portfolio of professional skills that can enhance, coach, and even collaboratively challenge your strategies, brainstorm solutions, and ask questions to advance the credit union. Seek out different talents that together provide a Swiss-army knife of different but complementary tools.
Develop this “attribute matrix” then annually assess each director on it. What do we have enough of? What do we need more of? What’s changing in our competitive landscape and strategy that requires new/different attributes?
How do you achieve this? By collective agreement—including with your board—upon the top skills, knowledge, connections, and member demographics you want at the board-level. Develop this “attribute matrix” then annually assess each director on it. What do we have enough of? What do we need more of? What’s changing in our competitive landscape and strategy that requires new/different attributes? Let the answers to what you need more of now and in future guide board education and what you are looking for in new directors. If you use associate directors or have a supervisory committee, fill those openings with talent with the key attributes needed for future board members.
As importantly, make sure the boardroom culture fits your ideal team. Positivity, engagement, and generosity are the soft skills of every good team. Given that most credit union directors are volunteers, chances are they’re already passionate about your credit union and willing to give of their time and talent, but don’t forget attention to boardroom culture. You can purposefully establish it by discussing and reinforcing the key values of working together (e.g., transparency, respect, valuing differences of perspective) in the boardroom and when selecting new members.
Onboard Your Directors
Once elected, have a plan in place to quickly ramp up new directors. When you hire a new employee, you wouldn’t just leave them alone to figure their job out, so don’t do that with directors.
One way to quickly onboard is mentoring, yet only 31% of smaller credit unions use mentoring to onboard new directors. Successful onboarding means mentoring by more senior directors—a great role for emeritus directors if you have them—and credit union executives who can provide them with an understanding of the specific and meta challenges facing your credit union and the industry. Give them opportunities to have the floor and be heard, so they know from day 1 that their opinions and expertise are both valued AND expected. Utilize both Executive–Board mentoring and Director-to-Director mentoring; and remember, mentoring goes both ways. Be intentional about cultivating their impact rather than missing any opportunities. You can also use committee assignments to get directors up to speed. Let them dig into a committee, then rotate directors’ committee assignments to round out their knowledge.
Educate and Develop Directors
The board attribute matrix of desired resources, skills, and connections can also provide development opportunities and guide educational investments. The key here is annual assessment—among the 44% of smaller credit unions who evaluate their board every 1–3 years, 94% do director self-assessment.
Best practice is annual director self-assessment tied to educational investments and development plans. Ask each director for their key strengths among those attributes and which they’d like to supplement or advance in the coming year. If only one director identifies a need, invest in classes for her/him. If multiple directors need more of a certain knowledge base, select conferences or make educational opportunities a part of your board meetings to educate the whole. Importantly, tie the organizational investment in the board to those development plans. Smaller credit unions reported key educational areas for their directors include credit union industry overview/trends (92%), financial acumen (77%), compliance (74%), governance/board best practices (72%), and deep dives into their credit union (62%).
Plan for Succession: Yours and Theirs
Being the best leader of your organization means taking responsibility for continuity and maximizing the future success of the organization you invested in so heavily. Unfortunately, 38% of smaller credit unions reported no annual review of succession planning outside of an emergency plan and shockingly 8% reported their board never evaluates the CEO/President.
Don’t wait for the board to ask if you’re in this situation—put it on their agenda annually! Among smaller credit unions, 92% indicate the CEO sets the meeting agenda, with 56% also including the board chair. During these assessments, provide the board with your accomplishments, areas for development, and other tracked elements, then go over the talent you’re developing in the organization, and don’t forget to expose key talent to the board regularly as a form of development.
Research shows the optimal turnover is between 12 and 15 years of board service. Too early and you lose people at their peak performance; too late and you risk a complacent, change-resistant board committed to the status quo.
Executive succession isn’t the only type of turnover credit unions need to plan for. A key to achieving strategic advantage through your board is getting the balance between directors with deep expertise in your credit union, the industry, and your strategy, and those with fresh perspectives that come out of director succession. This points to an aspect of governance most credit unions are behind the curve on—term limits. Among smaller credit unions, 87% don’t have term limits for directors and none had a retirement age for directors. This simply isn’t healthy, but it’s a delicate matter to bring up. Research shows the optimal turnover is between 12 and 15 years of board service. Too early and you lose people at their peak performance; too late and you risk a complacent, change-resistant board committed to the status quo.
Perhaps this data can be the start of the discussion with your board chair—every director I’ve ever spoken with one on one agrees that it would be bad for the credit union if the exact same board were in place 20 years from today. What if your regulators won’t allow for term limits? Agree to them as a board norm: the nominating committee will not ask a director to return nor advance a director for re-election beyond a fourth or fifth 3-year term.
Maximize Board Meetings
A meeting can be well-run, have an excellent agenda, and still underachieve. Every meeting is a huge commitment of time and talent and needs to be valued just like the people attending. Smaller credit unions reported meeting face-to-face 10 times per year and virtually for another six. That’s a lot of meetings. 21% of respondents from smaller credit unions said the typical board meeting is less than an hour, while 3% said the typical meeting lasts 3.5–4 hours. As with Goldilocks, something in between is the goal.
With over 14 meetings a year, you need to strategically manage agendas, meeting lengths, and format. Face-to-face meetings are necessary for strategic discussions whilst virtual meetings are ideal for more consent agenda type matters. Asked about the amount of time their board devotes to the future, smaller credit unions reported an average of 47% of their time, but these same credit union executives want 69% of board time devoted to the future. If you only talk about the past and present, you’ll miss out on the intentionality and purposefulness I’ve been suggesting throughout this article. Interestingly, our survey showed that, when compared to larger credit unions, smaller credit unions can spend more time talking about the future—a testament to how small can be better!
Better management of meetings also requires management of the board packet expected for each meeting. 82% of our smaller credit union respondents said they were concerned with director preparation—8% responded that fewer than half of their directors come prepared, while 74% said their directors were “somewhat” prepared or that “most” directors were prepared for each meeting. Regulatory requirements make for a long board packet and agenda, but there are ways to manage meetings better. In one method, called “time-boxing,” you set an expected amount of time per discussion item; this encourages people to make their highest quality observation quickly.
Every board meeting should also include an executive session, time without the presence of the CEO/President, yet 28% of smaller credit unions never schedule this in, and only 59% sometimes do. Again, put it on the agenda. Whether it takes seconds for the chair to ask if anyone has concerns/questions and everyone to say “No,” or it leads to important feedback on the meetings, strategic questions, etc., for your management team—executive sessions are necessary at every meeting.
Be Mindful of Your Members
Big or small, every leadership team needs to keep sight of the ultimate customer—the credit union members—but be mindful that they can’t possibly represent everyone’s unique perspective. 56% of smaller credit union respondents say they consider “mirroring member or community population” when selecting a new director, while 46% suggest “mirroring credit union geography” is important.
When describing the makeup of their current board, smaller credit unions reported having between five and 13 directors excluding the CEO/President, with an average board size of 8. Of these directors, 35% of directors are women, 27% are from an underrepresented race/ethnicity, and 2% are LGBTQ. Accounting for age, smaller credit unions reported no directors 29 or younger, 23% between the ages of 30-49, 55% between the ages of 50-69, and 22% over 70 years old.
While it’s true that demographics aren’t entirely predictive of how a director will represent members, if one of your goals is to attract younger members—a refrain I frequently hear—it’s important to consider how your board reflects this or any other goal of your credit union.
Turning back to benchmarking of the board and future directors, most credit unions consider the skills and unique perspectives needed among board members to be as important as reflecting credit union membership. Here again, stay focused on how directors’ talents can supplement the organization. That’s the idea behind marrying oversight with strategic advantage.
Credit unions were built upon the ethos of commitment to members and community, and it’s a defining factor whether your credit union is large or small. However, small credit unions managed for strategic advantage offer better intimacy between the board, management, and members. While larger credit unions can also benefit from the governance best practices discussed above, smaller credit unions can often advance these initiatives more nimbly and quickly to gain an outsized advantage.
