Puzzling Through the Guidance

Now that governance is a hot topic internationally, as well as within the domestic credit union movement, it can be harder for boards to find focus when sorting through the millions of documents, blogs, articles, opinion pieces, books and regulatory guidance. Sometimes our conferences don’t help, as boards consider the latest dynamic keynote on innovation, board assessment or member focus. Directors may leave events energized, yet uncertain how to fit it in the bigger governance puzzle.

As a result, CU strategic plans are becoming more complicated and boards of directors less certain about where to best focus their efforts to remain valuable and relevant. A recent Stanford University governance study concluded non-profit governance is underperforming against 21st century governance standards. Specifically, the authors concluded: “The skills, resources, and experience of directors are not sufficient to meet the needs of most nonprofit organizations” and “board processes fall short.”

A means of simplifying the complex challenge of governance is to look at the four vital domains of effective governance in the 21st century. Interestingly, the worldwide literature is consistent on these “vital few.” Let’s take a look at them.

1.  Talent. It all starts with the competency of the CU board. Passionate directors who wish to volunteer are relatively easy to find; it is harder to find good directors, experienced and competent with complex problem-solving and strategic capabilities. The accelerating discussions about term limits, recruiting younger board members, mandatory retirement ages, and proactive board succession planning all begin with the premise that the time has come for a talent upgrade within CU governance platforms. While the movement is blessed with high quality CEOs, most of us recognize that the average CU board could use a competency boost. What has your board been acting upon in this governance domain? Is your board an enterprise risk?

2.  Strategic focus. With all the regulatory hand-wringing about strong financials, most CUs are actually quite sound. The ones that are not get a heavy dose of oversight. The bigger questions facing the CU movement are about our strategic future. CUs are merging at unprecedented numbers, converting to banks, and seeking to buy smaller community banks in conversations that wouldn’t have happened 10 years ago. Younger folks are bypassing traditional CUs, technology is challenging every CU, and the competition for wallet share is fiercer than ever. This means boards must invest considerable time thinking in the future tense about how to navigate the “new normal.” If you’ve read my work you know this strategy conversation should approach 70 percent of all board dialog. Everything a board does should flow from strategy and, yes, the board should be a “strategic asset” to the CU, again calling board competency into play. How is your board’s strategic dialog investment? What are its values? Are you making sure you’re ready for the future during every board meeting?

3.  Clarity on organizational performance and risk. Tracking key performance indicators has moved far beyond “financial” domains into organizational culture, community citizenship, and enterprise risk management. While the conversation on loan risk has always been robust, credit unions have just begun the conversation on risk across the enterprise. The conversation about measuring sustainability and community citizenship is evolving in all business domains and must evolve in the CU movement if we are to keep up. A once-a-year look at “employee satisfaction” is a very old model, and demonstrates a gap in board oversight of organizational culture. How broadly is your board tracking organizational performance and risk?

4.  Clarity on governance process. Many credit unions are still using old models of agendas, strategic planning, board presentations, and performance dashboards. In general, the movement is behind in addressing board makeup and competency, self-assessment, innovation, and investment in strategic dialog. While technology like board portals and iPads is catching on, meetings continue to be quite traditional, filled with presentations rather than dialog, and frequently boring. Self-assessment of governance processes against standards of 21st century governance has become an annual expectation of high performance governance, yet only about half of all credit union boards do an annual assessment. What changes to your processes have you made based on self-assessment?

What to do? Possibly your next assessment should look within each of these board pressure points for opportunity. Certainly celebrate where you are doing well. However, challenging yourself where you may be falling behind and setting a few improvement goals over the next couple of years is how leaders behave. You can easily construct a few self-assessment questions based on the related articles cited here—you don’t need many. Don’t expect improvement to happen spontaneously—find a champion on your board to become the voice of regular assessment, change and improvement.

Les Wallace, Ph.D., the 9Minute Mentor, is president of Signature Resources Inc. He is co-author of A Legacy of 21st Century Leadership and author of Principles of 21st Century Governance. He is a frequent speaker and consultant on leadership and governance.