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< Back Supervisory Committees Function Well, But... Michael Daigneault Apr 29, 2015 Just like CUs and their boards, supervisory committees must change with the times. We survey a lot of credit union board members. And generally most will say they are pretty satisfied with the job their supervisory committee is doing. In fact, of the five areas on which we survey (vision, mission and strategy; board structure and composition; fiduciary oversight; governance and leadership; and supervisory committee), fiduciary oversight and supervisory committee usually are the two highest-scoring areas. But I’ve been troubled lately. Why? Because a good percentage of board members we interview admit that: (1) they don't really know what their supervisory committee does; (2) if they do know what their committee does, the practices of their supervisory committee do not appear to have changed much in the last decade; and (3) almost 45 percent of board members think their supervisory committee’s analysis of the top operational and strategic risks facing their credit union are less than effective. Notably, half of the board members at one CU client even described their supervisory committee’s oversight of the external auditor--traditionally one of the key functions of that committee--as either adequate or even ineffective. So, what’s going on? Today’s credit unions are not like the credit unions of yesterday. The CU world is increasingly multifaceted, with regulatory complexity, a growing number of mergers and acquisitions, disruptors from all sides, evolving board governance and leadership practices, exploding technology, and different types and degrees of risk. Just as your credit union evolved from its early days when the governing board served multiple roles and the supervisory committee’s charter was likely focused only on the external audit, so, too is it time for that committee’s purpose to evolve with the changing landscape. Many supervisory committees today are being stretched beyond their traditional focus of helping to oversee the internal and external audit functions of a credit union. They also are being asked to carry out verification of accounts, receiving member complaints, ensuring regulatory compliance, and other critical oversight processes, including – for some credit unions – the possible suspension of credit union board members. The most progressive credit unions are going even further--asking supervisory (and audit) committees to expand the scope of their efforts to include the idea of risk beyond just financial risks. As such, some supervisory committees are taking a more active role in helping to encourage the credit union’s enterprise risk management efforts--working in cooperative partnership with management, including the CEO and CFO--to identify and mitigate key risks facing the credit union. How far does your supervisory committee go? And how would you and your colleagues on the board answer the question, How effective is your supervisory committee’s analysis of the top operational and strategic risks facing your credit union? Previous Next

< Back Start Onboarding Pre-Election Michael Daigneault Nov 24, 2015 Eight steps supporting new board members' success Many credit union boards think the new director onboarding process starts when new board members have been elected to serve. But really, the key to building an effective onboarding program is not to wait for the election to take place. Just like board meetings run best when advance work is done to set them up for success, onboarding of new directors is greatly facilitated by steps boards can take before your members elect new directors. Consider taking the following key steps before the board election: Develop a matrix of your “ideal board” for achieving strategic goals. Create a skills matrix outlining the attributes and skills your board members currently have. Then, create a separate matrix showing those skills directors will need to carry your credit union successfully into the future. Be sure to do this with your strategic plan in mind. Identify board composition gaps. Compare your board’s current skills matrix with the skills matrix of your future, ideal board. What weaknesses do you see in your current board? Conduct a gap analysis. What attributes or skills are limited – or missing? Identify potential board candidates. Given the gaps you identify in step 2, what types of directors should you actively seek? You can even consider looking beyond existing credit union members and recruit board members from the community. Remember, they can always join the credit union, and they might add real value to your efforts. Involve, engage and educate potential directors. Show them the love! Ways to bring potential directors into the fold might include having them be a part of an associate board member program, or inviting them to a local community event. At the very least, you will want to be sure they visit a local branch and meet with the CEO and some of your credit union’s best and brightest staff. Do a background check and talk to references for potential board members. Remember, your potential, new volunteer will be responsible – legally and financially – for the credit union. Do your due diligence. Gauge the prospective director’s level of Interest. Here’s where you can begin to introduce your potential candidate to your other directors. Begin to take his or her pulse more formally to gauge his or her interest in candidacy. Confirm the potential director’s interest in and willingness to serve. Have a candid conversation about what time and knowledge is involved. Talk about the risks, too. Formally invite the potential director to stand for election. Here’s where your hard work pays off. Make the ask. If your candidate agrees to run—and is ultimately elected—you’ll need a process in place for orienting him or her to the work of your board. Previous Next

< Back The Need for Evolution: One of Today’s Central Governance Challenges Jennie Boden Jun 7, 2024 If your credit union has grown have you re-considered the balance of authority between your board and CEO? I spent the morning interviewing another credit union board chair. It’s one of my favorite parts of the job. I always learn something new, and I leave every encounter feeling a little in awe that they candidly share what’s on their minds … and most importantly, how they think their credit union’s governance could be improved. Sometimes our interviewees don’t actually know much about formal governance best practices. At other times, given the long tenure of most credit union directors, I’ll note a resistance to change. But this morning’s interview was different. Yes, the chair was a long-tenured board member—even serving on the credit union’s supervisory committee as a precursor to board service. In fact, their service had started when the credit union’s assets were just about $125 million, and today, they are cresting $2 billion. It’s safe to say that this chair had seen a lot of change during their tenure. When I posed one of our standard questions, “What would success look like for you?” they were clear: “I think that we all need to get on board...What are our jobs as board members now? And what will they be as we continue to grow? Sometimes, we get bogged down in the little things. That might have been okay when we were checking the repo lot, but not anymore. Now, there are just bigger fish to fry.” “I’m sorry,” I interrupted in disbelief. “Were you actually on the board when they were checking the repo lot?” “Yes,” was the short answer. (Well, the supervisory committee to be precise.) And when they checked the teller’s drawer monthly and reported to the board the number of envelopes that they stuffed the previous month. “ We were a lot smaller then,” the chair explained. A lot smaller to be sure. But here they were, still vitally contributing to the life and governance of the credit union and identifying one of the most prevalent governance challenges that we see today: the need for governance evolution. In our State of Credit Union Governance, 2023 , we reported that mid-size (with assets between $500 million-$900 million) credit unions identify their governance as above average, with a score of 3.2. Critically, that same study found that as credit unions’ assets grow, their board members’ sense of governance effectiveness diminishes. Credit unions with assets between $1 billion-$2.99 billion reported only an average score of 2.8 when asked about their governance effectiveness, and the score dropped even more (2.7) for those credit unions with assets of $3 billion or more. So, what’s at play here? As we reported, those mid-sized credit unions are “seemingly sitting in their governance ‘sweet spot,’” with “few prepared for the governance changes that occur at the next level of growth—where the board’s focus shifts in earnest from not only the fiduciary to encompass strategic issues, but also generative questions to ensure continued relevance and efficacy.” But it goes beyond merely the board members’ focus; if your credit union has grown like my interviewee’s, have you re-considered the balance of authority between your board and CEO? Are you still overseeing the compensation and benefits of the senior management team? Have you considered potential, needed changes in your board-level committee structure? While still addressing your fiduciary responsibilities, have you turned the corner to spend more time on where the credit union should go, rather than how things are being done? The good news is that if you haven’t been asking yourselves these questions, it’s not too late, and you are definitely not alone. Take note, however. This is one of today’s most central governance challenges. As you grow, whether from $125 million to $250 million or $750 million to $1.5 billion, ask yourselves this central question: How does the board need to evolve to most effectively govern at this new level? And what are we doing to get there? Previous Next

< Back Who's on Your Board Today? Tomorrow? Michael Daigneault and Jennie Boden Mar 27, 2018 The State of Credit Union Governance, 2018 report finds credit unions are more certain of their current mix of directors than they are about the future composition of their boards. Here’s what this means for board renewal. Data from our new report, The State of CU Governance, 2018 , find that the majority of credit unions feel pretty good about who’s currently on their boards—but are much less sure about the future.Almost three-quarters of survey respondents (74 percent) of respondents report that their boards are “effective” or “very effective” at having the right mix of skills/experience to accomplish [their] governance roles and responsibilities. But remarkably, almost half of all of the survey respondents (46 percent) describe their effectiveness in “attracting the right people to serve on the board” in the future as only “adequate,” or “ineffective” or “very ineffective.” Figure 1: Attracting the Right People to Serve on the Board - Overall Our experience is that your collective worries about attracting the right folks to serve on your credit union’s board are well-founded—and things may get worse before they get better! The number of board members available to serve in the coming years is likely to shrink. Using generational definitions from Pew , the Boomer generation (born 1946–1964) consists of 76 million people and is shrinking. Generation X (born 1965 – 1980) is estimated to be only around 55 million people, causing a significant lack of potential board members for a good number of years until the much larger millennial generation (born after 1980) begins to peak. This means that you and your board colleagues will be competing more and more for fewer and fewer potential board members. In his book, Generations: The Challenge of a Lifetime for Your Nonprofit , Peter C. Brinckerhoff notes that both members of Generation X and millennials typically volunteer for different reasons and in different ways than members of the Boomer generation. Brinckerhoff goes on to say that members of the Boomer generation historically committed to volunteerism in support of institutions, whereas younger generations volunteer in support of people and issues rather than organizations. They often prefer discrete projects rather than large commitments, and they can experience all that volunteerism has to offer without having to be commit to regular “face-time,” all of which goes against traditional board service. So, how do you attract, and then keep, the ever-elusive millennial? Here are a few do’s and don’ts to consider as you work to refresh your board’s membership: DO: Talk about your credit union’s mission. Millennials are often cause- or mission-driven, but ensure that you’re talking to them in language they understand, using today’s technology. Mix your credit union’s business with passion. Ensure that your board meetings are not all business. While addressing the business of the day is important, see that you are also addressing the broader, strategic impact that your credit union is having (see point No. 1, above). Bring them on in multiples. That is, don’t just add one millennial at a time to your board or its committees; add a number of them so that they don’t feel like a token (see point No. 1, below). DON’T: Treat them as tokens. It seems like everyone is talking about adding a millennial to their boards. Ensure you have a meaningful role for them to fill on your board and its committees (see also point #3 above). Under-estimate their abilities & skills. They have a lot to contribute; ensure that you are listening and learning from them. Think of them as “kids.” While for many board members, they may be the same age as your kids, they are not your kids. Treat them with the professional respect that they are due. Previous Next

< Back A New Credit Union Model with Classic Principles Focuses on Social Purpose Michael Daigneault and Caitlin Hatch Oct 1, 2018 Reclaim the ‘why’ of credit unions by deeply embedding social purpose in all your activities. Most modern credit unions significantly under-leverage their cooperative model. A key reason for this is the way the leaders of most credit unions conceive of “success.” Our thinking a few years ago was that the perspective of all CU leaders about success fell somewhere along a spectrum we could define (see graphic). On one end of this spectrum, CU leaders were very “member-centric” in their approach. “After all,” they would say, “credit unions exist for their members. Success is providing member services and benefits that improve people’s lives—sometimes at the expense of better financial results or ratios.” These CUs’ cause was to—first and foremost—benefit the member. They did so while prudently ensuring the ongoing viability of CU operations. On the other end of the spectrum, CU leaders were strongly focused on their CUs’ “financial performance”—fundamentally oriented toward financial success, growth and sustainability. “You can’t help members if you don’t exist” was a perspective such credit unions often shared. They did not ignore their members by any means, but ultimately, success for credit unions on this end of the spectrum was primarily based on classic financial measures, sometimes at the expense of rewarding members first. Their “cause” was to ensure the ongoing financial health of the credit union so that it might, in turn, offer products and services to members and their families. Still other CUs were in the middle of our success spectrum and took a “balanced approach.” These CUs did all they could to thoughtfully harmonize the member-centric and CU-centric approaches. They saw the essence of their success as an ongoing balance of excellent service and strong financial results. Sometimes service was paramount in their thinking. Sometimes financial strength had to be the priority. Overall, however, the careful balancing between the two would lead to true success. These CUs’ “cause” was twofold: to benefit members and craft a strong financial cooperative. More recently, as we have talked to other CUs about ways they could take greater advantage of their cooperative model (and what it truly means to be a CU today), we learned that a few were thinking in a new way about success. These CUs reported that the essence of their approach was to include their relationship to their communities in their thinking about every one of their programs. These CUs have a new cause orientation and new success metrics. After talking with these CUs, did we need to revise the entire spectrum? The answer was a resounding yes and no. We’ll explain. ‘Revising’ the Spectrum The much more robust and comprehensive “community focus” that these CUs were taking didn’t seem to fit well on our initial spectrum. On the other hand, this new approach remained closely related to the fundamental CU ideas of member service and financial strength. What we ultimately learned is that by adding a third focal point—community —to the member-centric and financial performance focal points, a new way of framing success for credit unions emerged, one that is a direct descendant from the movement’s foundational principle of people helping people. At this point, some of you may be thinking, “Hey, maybe we are already a social purpose credit union. We already do lots of good things in the community.” You are not alone in suggesting this, but the social purpose approach goes much farther than nearly all of the community engagement efforts we have seen to date. As Coro Strandberg , former chair of $21.7 billion Vancity , Vancouver, British Columbia, and a corporate social responsibility pioneer, explains, “It is not uncommon for credit unions to find that they are not as far along toward becoming a social purpose organization as they think they are. It is because they already have the philosophy built into their DNA. [But, because of that,] they think they are doing more than they actually are!” The Social Purpose Model The social purpose approach—fully executed—means integrating social purpose into everything a CU does. It has a direct connection to the values and underlying principles that propelled the CU movement many years ago. In this model, the CU commits “a substantial portion of its assets to social finance projects rather than having social investment as an ancillary corporate social responsibility plan,” wrote Sean Geoby and Olaf Weber in a 2013 article in the Journal of Sustainable Finance and Investment . In other words, the focus on community impact becomes the driving vision of the CU, which then embeds social purpose values into all aspects of its governance, strategy and operational efforts. This does not mean that a CU should abandon its members nor the credit union’s financial health. Rather, to really serve members and substantially grow the credit union’s financial strengths, shifting to a broader focus on community can help rally many more people and organizations to the “cause” of the credit union. To do this, Strandberg advises, “As a board and management team, you need to determine what your purpose is. Why are you here?” The answer, she suggests, should not be to just meet member financial needs, but to go beyond such needs and—in a targeted manner—address some of the broader societal issues negatively impacting members and their families. And yes, this may mean helping others in the community who are not yet connected with the CU. As Simon Sinek challenges us all in his book, Start With Why: How Great Leaders Inspire Everyone To Take Action , organizations need to both examine and reclaim their “Why?” CUs should certainly serve their members and their families with excellent products and services—what Sinek terms the “what.” They should also effectively execute their cooperative business model and maintain strong and sustainable financial fundamentals—which Sinek calls the “how.” But they should also think deeply about their core societal purpose—the “why”—a societal purpose that embraces members’ needs, but also extends far beyond just members in its ultimate reach and impact. This helps to transform the entity from one that simply provides a service or a commodity—like so many others in the marketplace—into a social movement. A cause! When helping the community becomes part of your core product line, and you think about it that way and it's part of what you are doing, focused on it on a daily basis, you are starting to arrive. -- Brett Martinez, Redwood Credit Union Social Purpose CUs Vancity : Chief Governance Officer and Corporate Secretary Karen Hoffman says the CU defines success as “building healthy communities and increasing and preserving the well-being of our members.” Under this vision, the CU has achieved 25 percent market share in one of Canada’s most sophisticated and international financial cities. Vancity does not focus on community simply because it has the “luxury to do so” due to its large asset base. It is so large today—and has gained such a passionate and loyal membership—due to its courageous decision to improve the Vancouver community. The CU has succeeded in transforming itself into a cause to improve Vancouver—a cause that many people in the city and its surrounding areas can truly believe in and actively seek to be a part of. For example, one of the CU’s most important efforts is its high-impact community investment loan that supports affordable housing; social purpose real estate; local, natural and organic food; the environment and energy efficiency; as well as social enterprises and social ventures. The CU’s social finance portfolio dwarves traditional corporate social responsibility efforts at many institutions. Vancity’s journey toward the social purpose model was sometimes two steps forward and one step back. The CU’s leaders had to experiment to see what would work. Other CUs can learn from its experience and take inspiration from its success. University Federal Credit Union , Austin, Texas : Under the banner of “When Our Community Is Strong, We Are Strong,” $2.3 billion University FCU has elevated its already strong community efforts to a new level. “This demonstrates where the heart of UFCU is—with our members and our community,” says Heather McKissick, VP/community impact and a CUES member. “In only its first year, our DO GOOD program has rallied our employees’ efforts around our community partners and made a real impact on the people they serve.” The credit union’s CEO, Tony Budet, understands that the model has its challenges. “We needed to attract new leaders to our board who were from within the community and had an interest in it, and it was a culture clash at first,” the CUES member says. “It’s difficult to go through that. A lot of credit unions will have this challenge if you don’t have an anchor or a group of people on the board who are part of the community you serve. It needs to be board-driven.” Lake Trust Credit Union , Brighton, Michigan : David Snodgrass, CCE, CEO and a CUES member, says: “We were talking about our strategy, culture and our business plan and we were wrestling with answering the question, ‘Why?’ We started reflecting on, ‘Why we are here?’ and ‘What is our purpose beyond just the traditional banking services we offer?’ It is still a journey we are on today.” $1.8 billion Lake Trust CU pursued a number of avenues, including forming a 501(c)(3) foundation to encourage charitable participation in some of its community endeavors, pursuing a grant from the U.S. Treasury’s Community Development Financial Institutions Fund. “Our CDFI grant request is to help seed a micro loan fund for small businesses in rural communities across the state of Michigan and to help us to take more risk than we would otherwise in our standard business practice—take a chance on a single mom who wants to open a hair salon, a young man who wants to open a pizza shop, in an effort to breathe economic opportunities into our smaller communities across the state,” Snodgrass says. Like Budet, Snodgrass also emphasizes that a social purpose model needs to be driven at the board level. Lake Trust CU has recently added four new board members and two associate directors from the non-profit sector with very deep roots in the community. “The contributions of our new board members have been multiple,” he explains. “It has invigorated the leadership team … to think even bigger about where we can go. They have opened up their networks to us and connected us to other thought leaders or other social purpose enterprises. That has been priceless. Having partners is part of this—we can’t do it all ourselves.” Redwood Credit Union , Santa Rosa, California : Sometimes pressing circumstances demand new approaches. Last year $4.3 billion Redwood CU found itself at ground zero in one of the most destructive wildfires in California history. CUES member Brett Martinez, CEO, says that the CU’s historic response was a result of having reacted to earlier fires in 2015 and 2016 and the recognition that the CU was able to react in an emergency to meet its communities’ needs. Because of its already deep relationships, Redwood CU was able to raise $32 million from 41,000 donors and help ensure the funds got to the right hands. “The state senator knew the areas, what the needs are, and the newspaper helped to communicate, get the word out and manage the communication, and that helped us being able to take in and distribute the money,” Martinez says. “Affordable housing is a huge issue,” he adds. “We didn’t do construction loans. We didn’t do agriculture lending either. There were other people doing that, and there wasn’t a need. Now, we are doing them, and we intend to keep doing them, even after recovery is completed. When helping the community becomes part of your core product line, and you think about it that way and it is part of what you are doing, focused on it on a daily basis, you are starting to arrive.” Redwood CU’s response to the disastrous fires has helped to propel it to a whole new level. Its leaders acknowledge they will never be the same after this experience. Future plans include more fully integrating the lessons learned—a hallmark of a maturing social purpose model. Pursuing the Model Snodgrass acknowledges that really understanding community needs and developing authentic relationships with community partners can be challenging. “Deciding to do this requires a degree of humility,” he says. “It’s not about you—all of your energy is directed to others. We were meeting with a social purpose organization in downtown Detroit. They are doing some amazing things: employing homeless women, designing jewelry, creating products. We wanted to understand how we would could add value and support them. We were met with a degree of skepticism. When you start engaging in community organizations, they don’t expect that somebody really cares. They expect that this is some sort of propaganda play.” Much work remains to be done to fulfill the promise of CUs’ social purpose model, which offers a blend of classic CU principles, an innovative community-centered approach and the promise of re-energizing the “why” of CUs in a way that appeals to young people. The approach also appears quite flexible and allows for both incremental development and a broad reach. It also stimulates innovation and a renewed passion from credit union leadership in how they design the credit union to be a meaningful cause—a cause that genuinely invites others to collectively reclaim the “why” of a credit union and create positive impact for members, their families and communities. Caitlin Hatch previously served as a senior consultant with Quantum Governance and has worked with credit unions for the past eight years, focusing on governance and strategic planning. Prior to that, she served for 25 years as general counsel and corporate secretary for the largest anthracite coal company in the United States. Previous Next

< Back A Deep Definition of Governance Michael Daigneault Jun 3, 2015 How does your board use its formal and informal authority for the good of the credit union? While there are as many definitions as governance as there are consultants in this world, here at Quantum Governance , we believe that governance ultimately deals with the legitimate distribution of authority throughout a system--whether it’s a country, a corporation or a nonprofit like a credit union. We believe governance is ultimately how organizational leaders use both the formal and the informal authorities vested in them. How they think, make decisions, develop strategy, persuade, develop future leaders, structure their board and execute initiatives. How they communicate with key stakeholders ... with their staff … with their customers … with their marketplace … with their constituents … and even with each other. Good governance also applies to how your board oversees your CEO; tracks its own performance and the CU's results; conducts its budgeting process; allocates its resources; addresses membership or constituent needs; moves in and through its community; adheres to ethics and financial integrity standards. And, yes, good governance is even about thinking in a genuinely strategic manner. There are some who say “good governance” centers on legal issues--bylaws and conflict-of-interest policies--and how an organization’s board oversees its audit process. But at Quantum Governance, we ask our clients to look much deeper, to how well the board is doing on the many aspects of governance outlined above. Previous Next

< Back Is Your Organizational Success An Accident? Gisele Manole & Jennie Boden Nov 22, 2022 New study suggests where to look for the answer. We’ve been studying credit union governance for more than a decade now and amassed mountains of data on credit unions of all asset sizes and from all over North America. Perhaps the most frequently asked question we hear is some variation of, “How do we know when we’re getting it right? Our assets are increasing, and our membership is growing so we must be governing ourselves well. Right?” As we prepare to publish The State of Credit Union Governance, 2023 Report, we looked closely at the data to see if it was clear to us what the key indicators were that a credit union was governing itself well—that as a credit union’s assets and membership grew, the organization’s governance practices were evolving too, both in terms of meeting changing regulations and best practices. What we learned focused our attention on four things: 1) board members meeting their roles and responsibilities; 2) members of the credit union’s governing system (board and supervisory/audit committee members and senior leadership) meeting high accountability measures; 3) strong levels of volunteer engagement; and 4) building and maintaining a leadership culture of trust. We found there is a significant positive correlation among each of these four areas of governance—meaning that if a respondent reports that their credit union is highly effective in one of the governing elements, they generally report that they are highly effective in the other three elements, too. Therefore, the four elements—accountability, board member roles and responsibilities, engagement and trust—are inextricably linked and together provide tremendous insight into the strength of your credit union’s governance. Figure 1: The Four Elements of Good Governance These findings identify the four elements as likely keys to unlocking the secret to good governance and creating a high-functioning board. In addition to pinpointing areas of focus, our findings suggest that actions to improve the effectiveness of one of the four elements may lead to improved effectiveness in the other three elements. So, as we begin to more succinctly answer the question, “How do we know when we’re getting it right?” we can look to these four areas of governance for some indication of whether your credit union’s board and executive leadership are “getting it right” or not, and whether further study is necessary to identify which element of your governance needs your focus to ensure the continued success of your vision and mission. Previous Next

< Back Resolutions for a New Year Michael Daigneault Jan 24, 2017 Taking the Opportunity to Make Changes It’s that time of the year again. The holidays are behind us, and the decorations are back in the attic. If you have kids, they are (thankfully) back in school. Most people began the new year with great hopes for what they will accomplish in 2017. How about you? Have you set (and already broken!) your own New Year’s resolutions? Are you eating better? Spending less and saving more? Working out more often? Achieving a better balance in your life? Here’s a New Year’s resolution that we would like to challenge you and your credit union’s leadership to make and keep: Spend 2017 focusing on improving your credit union’s governance and leadership. This resolution has the potential for such amazing impact that you’ll want to extend it permanently. Many credit union leadership teams spend the lion’s share of their time focusing on financial, fiduciary, and high-level operational concerns: asset growth, ROI, capital ratios, membership, services and, at least once a year, strategic planning. But how often do these leaders pay attention—meaningful attention—to governance? And what is governance, anyway? We define governance as “steering, directing, influencing or persuading from a position of authority. It deals with the legitimate distribution of authority throughout a system—whether that system is a country, a corporation or a credit union.” That means that for your credit union, you are governing not only when you are using your formal authority (passing policies or voting on procedures), but also when you are using your informal powers of persuasion (encouraging fellow directors to support a new venture or working in constructive partnership with the CEO to fine-tune your strategic priorities). Because governance involves the “distribution of authority throughout a system,” we encourage you to look beyond the board when you think of who is involved in governing the credit union. Working in constructive partnership to support the holistic governance of the credit union should be the board, supervisory or audit committee, board committees, and the CEO and management team. In your efforts to improve governance, consider at least these basic components: Governance assessment. If you haven’t completed an assessment of your credit union’s governance for two or more years, you should. It’s important to check in on your “governance health,” just as you would on your own physical health. An assessment can help you and your board colleagues: (1) develop common ground with each other; (2) push the board and management team to ask better questions and think more strategically; (3) develop a clear road map of how to move forward together; (4) form even more productive relationships among your board, CEO and management team; and (5) ultimately improve your governance and leadership efforts to better serve members. CUES offers a self-assessment tool to help boards evaluate their governance health. Board member and board officer job descriptions. It’s important to have clear, up-to-date job descriptions for both directors and board officers. Ensure that you review these on a regular basis (at least every two years) for relevancy. The danger of having out-of-date job descriptions (or worse yet, no job descriptions at all) is that board leaders will be falling short of their critical governance responsibilities . Committee charters. We find that many credit unions do not have charters in place for their committees, and most fail to review their committee structures on a regular basis. Be sure that you are doing both! Board committees , when they are well chartered, staffed and effectively operating, can be one of the most efficient ways to carry out the work of the board. At their worst, they can be a drain on your management team and leave directors feeling underappreciated and overwhelmed. Board meetings. Review your board meeting agendas, structure and functioning to ensure that you are addressing strategic and governance issues at every meeting. Be sure you are developing agendas that are engaging and generating lively discussions for directors, the CEO and management team. Board meetings are critical. They can make or break the health of your board, so give their structure and functioning the attention they deserve. If this work seems daunting, don’t be overwhelmed. Take it one step at a time. Perhaps start with a simple online assessment to establish a baseline. Regular evaluation of governance is both vital and doable for credit unions of all sizes. We have seen boards that are in trouble—real trouble—realize the benefits of focusing on governance in as little as six months. When board and management leadership roles are clarified, micro-management decreases, the quality of board meetings improves, committees add more genuine value, an approach to renewing the board’s composition is agreed upon, and the boundary of operational vs. strategic thought is better defined. For 2017 and beyond, resolve that you will make a commitment with your colleagues to improve your credit union’s governance and leadership—for the health of your board and management team and the good of your members! Previous Next

< Back To Pay or Not To Pay Michael Daigneault Sep 22, 2015 Deciding whether to compensate credit union and CUSO directors is a hard question. There’s been a lot of buzz recently about whether credit union board members should be compensated. For a long time, this notion was taboo. For many, it literally seemed to go against the very essence of a cooperative credit union. Then the idea of compensation seemed to shift from being taboo to being merely uncommon. Though federal credit unions can provide compensation only to one member of their board, usually the treasurer, some state-chartered credit unions may compensate more broadly. A recent study published by Filene Research Institute (and underwritten by Quantum Governance and CUES, among others) notes that there has been a new and significant shift, with many beginning to support the notion of paying their boards, “with some even believing that doing so would soon be crucial to their ability to attract and retain effective board members.” The study, aptly titled Should Credit Unions Pay Their Directors? , goes on to report that “At 145 credit unions in 12 states, directors earn somewhere between $60 and $37,597 annually.” The report’s author, Matt Fullbrook, manager of the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto’s Rotman School of Management shares that while “In most states, credit union director compensation is dwarfed by fees paid to directors of commercial banks …the pay trend is slowly catching on, especially among large credit unions.” On the one hand, such a trend makes some sense. Credit unions deserve engaged board members who feel appreciated and perhaps, at times, fairly compensated for their significant efforts. They bear significant burdens. They are, for example, legally responsible in ways that even the CEO isn’t. And I don’t have to tell you that there is a lot at stake: millions of dollars in assets for most credit unions and even billions for an increasing number in this age of consolidation. Credit unions need the best and the brightest board members to meet the tremendous challenges of the day, but it has become increasingly hard for many credit unions to recruit high-quality, dedicated directors. If compensation can help in that regard, perhaps it is one tool that should be utilized. Yet on the other hand …there is a rich tradition of board members serving their fellow members in a voluntary capacity. Indeed, you and your colleagues are in the business of running a cooperative credit union on behalf of your members. What About CUSO Boards? Like a credit union board member, directors of credit union service organizations are tasked with providing good governance, effective oversight, strategic vision and the like. But unlike credit union board members, they are guiding for-profit entities. And therein lies a very significant difference. CUSOs were created as “outside-of-the-box” business solutions – creative ways for credit unions to effectively address effective business needs. One argument for compensating a CUSO board certainly is that in order to attract and retain the most creative, “out-of-the-box” thinkers, compensation is a must. But as in the credit union community, there are also cons to the practice of compensating CUSO board members, many of whom are credit union CEOs themselves. That con list includes: the argument that the CEOs are already handsomely compensated by “the community”; that while the CUSO is a for-profit entity, it exists to serve a cooperative community and should, therefore, follow cooperative principles; and that it may send the wrong message to credit union members or the community, among others. The long and the short of it is this: There is no simple answer to the question for either credit unions or CUSOs. The notion of compensating a CUSO board (despite its for-profit status) can be just as perplexing. What I can tell you is that for both credit union boards and CUSO boards, answering the compensation question does require a board that doesn’t shy away from asking the hard questions. All of us should consider the long-term implications, as well as pros and cons of compensation at the board level, and dig deeper to find common ground on this challenging issue. Previous Next

< Back Some New Remote 'Norms' Are Here To Stay Michael Daigneault and Gisele Manole Aug 25, 2020 Five tips for a successful pivot to virtual board meetings At a recent credit union board retreat, we asked the group (a mix of board members and executive leadership); “How do you think the post-COVID-19 world will be different from the pre-COVID-19 world?” The answers were varied and included: More of the workforce will work remotely Better overall hygiene practices Less brick-and-mortar retail and other traditional storefront businesses Increased consolidation of the credit union field Fewer major airlines and fewer travelers We ask this question because, as they say, “the genie is out of the bottle” on so many of our new norms and behaviors. Our businesses and our culture have made a sharp turn to adapt to new laws about social distancing—a foreign concept just a few months ago. This pandemic has accelerated our transition into the digital realm. Which of the changes that we have made are likely to stick? Which ones should we adapt to craft the “new normal”? Perhaps the most immediate change our boards have had to make is switching to virtual meetings. So many boards are asking us and themselves if and how can they effectively and meaningfully conduct their work virtually? Quantum has had to make some changes along these same lines. While the majority of our work is conducted remotely, our facilitated retreats, often considered the pivotal “aha!” moment for many of our clients, had to be reinvented as virtual experiences. It was a daunting challenge but one that we attacked as a team composed of different strengths, talents and experiences. Some of us are more confident with new technologies than others. And then there was a sense of mourning for the loss of our in-person retreats. We had invested so much of ourselves over eight long years and hundreds of thousands of miles to fine-tuning our practices. Who are we without our flip charts, big stickies and colorful illustrations? How did we pivot? We practiced … a lot! We spent countless hours choreographing and rehearsing for our first virtual retreat. It is safe to say that we have successfully pivoted now that a number of our clients have commented, “I think this was actually a much better format for our retreat. We were so focused and got so much accomplished in a shorter period of time!” And, “This (virtual retreat) raised the board’s governance IQ but also our video conferencing and communication skills which will make us stronger, too.” Here are a few best practices that this short and intense period of adjustment has taught us about teamwork and conducting successful virtual meetings: While we are limited to only a virtual meeting format, make it the best possible experience. Be present just as you would be if you were seated in the same room with your colleagues. Make sure your video is on, that your face is well lit, that your sound is strong with no background noise or distractions, and that you are knowledgeable about how to use whichever conferencing platform you are using, such as Zoom or Google Meet. Come prepared in every other way and review in advance the board materials you were provided in advance. It may seem like common sense, but many board members still treat virtual meetings like “board meeting light,” as if they are in a holding pattern until they can meet in person again. This experience of continuing to operate and indeed grow your organization in a pandemic has likely already provided you with opportunities to conduct vital business and make board-level decisions remotely. If it hasn’t already, it will. Your loyalty to the mission of your credit union and your responsibilities as board members are the same today as they were in the pre-COVID-19 world. Have a focused agenda and aim to keep your virtual meetings to about 90 minutes. (We think two hours is the max.) Participation can fall off a cliff if a video conference goes on too long ... we have all been there! Consider meeting for more than one session if you need more than 90 minutes. Keep your agenda tight while leaving room for strategic discussion. It is a delicate balance and requires excellent meeting facilitation by the chair and active participation by the rest of the board. Use all of the tools available to you on whichever video conferencing platform you use , including “breakout rooms” for small groups and strategic discussions, “polling” (which is a great way to efficiently get a Five-Finger Consensus ) and the “chat” feature (which, used appropriately, is a great way to take the pulse of your entire group in record time.) Remember that teamwork is essential. Everyone has to be “all in” on the virtual experience and 100% committed to your meeting’s purpose. The pandemic crisis has been a gut check for leaders in the credit union community. Having a deep bench of various talents, experiences and cultures has never been more important. Perhaps nothing is a complete substitute for “breaking bread” and the ways that in-person meetings, practices and rituals build community and culture. However, think about how a hybrid model of virtual meetings (when done well) and in-person meetings (with social distancing, masks and hand sanitizer) can help you to expand the reach of your board recruitment and diversify your membership. As we continue to adjust to the post-COVID-19 “new normal,” the most important lesson is to remain nimble; don’t be afraid to try new things and accept that experimentation will lead to some failures, but ultimately to success as well. Previous Next

< Back Moving Beyond The Strategic 'Moment' Michael Daigneault and Jennie Boden Sep 27, 2016 Incorporate strategic planning and thinking into your routine discourse. When more than 30 percent of our clients describe themselves as “less than effective” at something, we sit up and take notice. And that’s exactly how (and how many) of the board members and CEOs we work with describe the challenge of articulating a compelling future vision for their credit unions. Not having a future vision for your credit union is a genuine problem, but one that can be overcome (though not easily, or a third of our clients wouldn’t be struggling with it!). Is your credit union challenged with crafting or updating the foundational components of your overall strategic plan—vision, mission and strategic goals—as well as the more specific strategic objectives and metrics undergirding them? It's worth the struggle to get your future vision right. This is much more than just a convenient tagline or agreeable-sounding statement in your annual report. The conscious or unconscious future vision that a board and senior team hold in their heads has real consequences. Crafting a clear and effective path forward that will truly benefit members is among the most critical and nuanced challenges you will collectively undertake. Yet many boards and executive teams spend less time thinking about the consequential strategic issues facing their credit union than they do on small changes to the loan-loss ratio, car loan volume or even on a single member complaint suggesting that the carpet needs to be replaced in a branch. We recently facilitated the CUES Director Development Seminar in Santa Fe, New Mexico. When we asked the 100-plus attendees who included strategic discussions regularly on their board meeting agendas, one brave soul posited, “Well, we have an agenda item called the ‘strategic moment.’” Though the room spontaneously filled with laughter, the speaker was quite serious, and everyone knew it. Many other attendees may have recognized that by including such a “moment” on the agenda, their colleague was likely well ahead of their own routine meetings typically filled with data-intensive, financial and fiduciary oversight reports. Veteran directors may recall the days when their credit union was just forming and their role was to pour over financial statements, do cash counts and fill the void that a lack of professional staff created. Today the director’s role is quite different. Unless your credit union is very small or in start-up mode, you rely on professional staff to brief you on financial and fiduciary reports. You need to provide effective oversight, hold staff appropriately accountable—and then move effectively to your strategic responsibilities that will help propel your credit union to flourish into the future. In that spirit, we recently developed a list of sample strategic topics for directors to discuss in board meetings, even just for 20-30 minutes. Not all of them are applicable to your situation, but they are the types of questions that can help you regularly exercise your strategic thinking muscles: What criteria would you use in considering—or rejecting—an offer to merge your credit union into a larger one? What types of risks does the evolution of payment systems foreshadow for your credit union? How is your credit union growing? How might you need to grow differently in the future? Even if your credit union is growing, is it genuinely improving members’ financial lives? What would the “ideal” board for the credit union you envision in the future be like? Do you have the right blend of directors for that future? What would the future focus be? What committees would the board have? What type of relationship would it have with your CEO and executive team? What type of relationship would it have with your members and the community? How does your credit union define its risk tolerance or philosophy? Are you too risk-averse? How does your credit union’s risk profile compare to peers? How should you balance ROA, risk and stewardship to members? How do you leverage your cooperative culture into a competitive advantage? Are there other success measures you should be looking at, beyond financial performance? We strongly encourage the board to work hard to fine-tune a strategic plan that includes clear vision and mission statements, strategic goals, objectives and metrics in constructive partnership with your committee leadership, CEO and executive team. After reaching a consensus on the features on the accompanying chart shown in blue, challenge your CEO and executive team to develop their organizational work plans to meet or exceed your agreed-upon strategic goals. But don’t stop there. Include regular and ongoing strategic thinking, discourse and potential changes to your strategic plan, if necessary, in board meetings throughout the year. Insist that your CEO and management team report regularly on the strategic metrics of success as you march toward achieving your strategic goals and objectives. Consider changes in the marketplace or your business environment regularly to assess whether anything needs to be fine-tuned, adjusted or even eliminated. Strategic planning and thinking are continual processes. Off-site sessions annually or every few years may be helpful to recalibrate your leadership’s thinking, but they’re not the end-all. The real work of strategic planning should be a regular feature of the discourse and thinking of the board and executive team—day in and day out, moving beyond the “moment” (though that’s a good start) to become the central focus of your most important deliberations. Previous Next

< Back Gender Equity In The Boardroom: We're Not Done Yet Jennie Boden Aug 25, 2023 Boards still have work to do to support their female directors and wider DEI&B efforts. Gender politics, like all politics, can be polarizing. At the risk of taking a polarizing position, I can't ignore a string of recent encounters that prompt the question: Would that have happened if I (or she) were a man? If you’ve read my posts before, you may know I regret that as a society we still need a publication entitled Advancing Women , but I’ve come to realize that it’s an imperative. If we don’t call out the subtle (and sometimes not-so-subtle) gender biased actions that minimize the voices of women, it’s akin to deferring to only the male perspective. After observing a recent credit union board meeting, I watched with concern as a female board member walked out with her head hung low. Later, I spoke with her as a part of our formal assessment process. I learned then that the board chair—a man—had admonished her about her behavior in the meeting—behavior that hadn’t even registered a raised eyebrow with me (and I’ve conducted hundreds of meeting observations over the years and seen and heard plenty of eyebrow-raising behavior). It’s interesting to also note that a male director had spoken very rudely to a fellow board member in that same meeting, and I don’t believe he received feedback from the chair regarding his behavior. While with another client, I witnessed a long list of follow-up and action items being delegated to the only female on the board, prompting a hearty round of laughs from her male colleagues. I, too, have had my own experiences in this regard. For example, I have recently been challenged by men both about my presentation and facilitation style, correcting my cadence and tone. These conversations are impossible to imagine if I were male. In these instances, I wondered: Would these men have acted in the same way toward us if we were men? The informal poll I’ve taken, among both men and women, resulted in a resounding “No.” Don’t Let DEI&B Efforts Disappear While gender is just one of the many elements of diversity, these three recent experiences tell me that a commitment to diversity, equity, inclusion and belonging remains vital. And even more so now, given that LinkedIn released a report last year that found the hiring of chief diversity officers dropped in 2022 after “experiencing significant growth in 2020 and 2021.” An article on the Society for Human Resource Management’s website referenced the LinkedIn study and quoted Amy Hull, director and head of DE&I at Paycor, a global leader in human capital. Hull “said the LinkedIn and Revelio data shows that the pledge to impact change was not followed by genuine effort.” Even our own research at Quantum Governance suggests that our colleagues in the credit union space may not really value demographic diversity. One of our recent studies found that only 35% of credit union board members are women, compared to 51% of the total adult population in the United States. And when we asked those in the credit union community (board and supervisory/audit committee members, CEOs and members of senior management) what they valued most in their boardrooms, demographic diversity ranked sixth out of 13 . What’s of real interest, though, is that for two years running, Filene researchers Quinetta Roberson, Ph.D., and McKenzie Preston found that “creating governance and accountability systems” around DEI “are paramount to the development of a sustainable approach to DEI that activates real change and drives financial performance.” In the previous year’s study , those same researchers also noted that “diversity may create advantages in terms of market growth, enhanced member experiences, risk management and increased strategic performance. Yet … it is not enough to simply have diversity. Effective solutions for building and maintaining fair and inclusive work environments are needed to leverage the potential for DEI to achieve its performance objectives and develop sustained competitive advantage.” And, I would add, to truly achieve change. I will admit some people do need some coaching on their delivery, and I am always open to learning. Additionally, the board chair is certainly in a position to insist on civility in all manner of dialogue and address situations where it is lacking. However, it’s critical to apply “the rules” unilaterally—to provide a forum where every voice and perspective is heard and valued. Women serving on credit union boards are, like their male colleagues, professionals. They are not supporting members, taskmasters and coordinators. Their roles and responsibilities include the same level of strategic thinking, planning and inquiry as their male colleagues. And before you give a woman subjective and stylistic advice on her self-expression, consider whether you would be so bold as to provide the same advice or subjective feedback to a man. Previous Next