Search Results

< Back A Continuously Bigger and Better Box Jennie Boden and Dr. Alexander Stein of Dolus Advisors Feb 1, 2022 Like a nautilus, Hudson Valley Credit Union’s board evolves beautifully into its next stage of governance. The nautilus is a shelled sea creature known for renewing itself in a most beautiful fashion. It builds a new chamber inside the cover of its shell, moves out of the compartment in which it has been living, and seals off the old. As it progresses over time, the nautilus creates an amazing spiral shell with many sections. In an ideal world, credit union boards would renew themselves as the nautilus does—building on the old to create a new, more expansive governance space. But how many credit unions engage in conversations about building the next era of board governance? In the 2020 State of Credit Union Governance , we reported that almost 25% of all board members have held their positions for at least 20 years. That’s okay to some extent because historical continuity is good. Institutional knowledge and accrued wisdom are important to tackling today’s complexities. On the other hand, we’ve seen directors who perpetuated a negative culture for decades and boards where members were battling serious age-related health issues. We’ve also seen boards struggle under the weight of training too many newcomers, people with insufficient experience joining the boards of $2 billion credit unions, and recent additions who didn’t understand the difference between governing and managing. How do credit union boards transition to their next stage more like the nautilus—gracefully striking a balance between historical continuity and the next right steps for the board and the organization overall? When leaders at $6.5 billion Hudson Valley Credit Union , Poughkeepsie, New York, decided it was time to take a fresh, top-to-bottom look at the board’s nominations process, we were privileged to accompany them and provide our professional guidance along the way. We are grateful to them for letting us tell you their elegant and effective story of board renewal. “As our credit union continued to grow to over $6 billion, we knew we needed to transform our governance,” says Board Chair Nancy Kappler-Foster, a CUES member. “Through our work with Quantum Governance and Dolus Advisors on increasing the effectiveness of our policies and practices—and in particular the constructive partnership between the board and the CEO—we understood the next step was to focus on the ideal board and supervisory committee of the future and then build a state-of-the-art nominations process to achieve that.” Getting Started Led by Kappler-Foster, the board began by chartering a new governance and nominations committee, integrating the original nominations committee as a subcommittee within a broader governance committee charter; redefining the roles and responsibilities for board members; and reevaluating its board-level committee structure overall. Next, the board examined its entire nominations process from recruiting to onboarding. We facilitated workshops with the board, management and supervisory committee that enabled Hudson Valley CU’s volunteers and management team members to commit to a new process that: Developed an overall vision for the nominations process, attending to group dynamics, tone and culture, trust, psychological safety and, of course, good governance. Leveraged decision science, combining business tactics, technology and behavioral sciences through a collaborative approach to help leaders make optimal, data-driven decisions. Surveyed the decision landscape, identifying and evaluating the credit union’s needs and ultimate goals at the board and supervisory committee levels and forecasting the probable consequences of its decisions. Challenged everyone involved to overcome their biases and blind spots, subordinating their own personal interests to the credit union’s best interests. Valued character in the boardroom as highly as key performance indicators, identifying not only hard skills and expertise but also character traits and attributes to drive the identification and prioritization of candidates. Identifying Needed Skills and Attributes We helped Hudson Valley CU’s leaders clarify the skills and attributes they sought in new board and supervisory committee members. Like many CUs, Hudson Valley CU’s leaders hadn’t revisited their wish list in ages. (See Hudson Valley Credit Union's Call for Board Candidates Refresh for the CU’s “before” and “after” calls for candidates.) We looked to data to guide the way toward a new standard. The 2020 State of Credit Union Governance report found significant differences between what credit unions sought in their candidates and the skills and attributes they actually valued in the boardroom. And Hudson Valley CU was no different. When we surveyed the CU’s board, supervisory committee members and management, we found they had been prioritizing skills in financial literacy, professional services and operations. However, the perceived value of those skills in the boardroom was significantly lower than for human skills like being able to focus on the future, do critical thinking and be independent-minded. We recommended that the CU prioritize (in both its recruitment and nominations processes) what its leaders value most in the boardroom. In actuality, the shift was likely long overdue, as it is for most credit unions. Following an analysis of their survey data and focused work with both the volunteer and management leadership, Hudson Valley CU developed a new call for candidates that delineated specific skills, attributes and character traits that matched the credit union’s changing governance needs, culture and core values—in alignment with what board members actually value in the boardroom. (See sidebar, “Hudson Valley CU’s Call for Candidates Refresh.”) “I was so gratified to see the change in focus from fiduciary- to strategic-related skills for our new board members,” says President/CEO Mary Madden, CCE, a CUES member who has announced her retirement effective Jan. 2, 2023. “As we look to the future and the $10 billion threshold (by 2027), the management team will be looking to our board to ask the hard questions that need to be asked from a strategic point of view, while we’re overseeing the day-to-day operations. Certainly, board members need to continue to be responsive to their fiduciary duties, but strategically, there are a lot of critical, strategic decisions in front of us.” The Candidate Process Historically, Hudson Valley CU used traditional routes for board recruitment—issuing the call for candidates on its website and in member statements and posting it in its branches. The CU’s nominations subcommittee leveraged AVP/PR and Corporate Communications Lisa Morris to help get the word out in new ways. Morris placed ads on LinkedIn, sent word out to the area’s largest chambers of commerce, and conducted outreach through other specialty membership organizations and associations in the CU’s region. For the first time, board members took a more active role in recruiting. All told, Hudson Valley CU received 18 applications for three open seats for its board last year. In the end, new board members came from board and volunteer referrals and Morris’ outreach to the Professionals of Color Network Hudson Valley . Morris believes casting the net wide was a value-add. “Any additional outreach we do as a credit union—whether it’s marketing for a new product or issuing the call for candidates to and through a new association—means we’re reaching potential new members,” she says. A CEO once told Quantum Governance that his board was so concerned that he would “stack the deck” in his favor, he wasn’t even allowed to know how many applications his credit union received in response to the call for candidates. We took the opposite tack, recommending that Hudson Valley CU include Madden in the entire process. As a result, she participated as an ex-officio, non-voting member of the nominations subcommittee, lending her decades of expertise in interviewing, evaluating and vetting high-level professional candidates. “At first, we were all a bit skeptical about including Mary in the process,” said Julie Majak, the current chair of Hudson Valley CU’s nominations subcommittee. “But having her participate was an important, positive change. After we reminded ourselves that she had a voice—not a vote—we all quickly moved on to benefit greatly from our CEO’s expertise and insights. Her participation is now a given moving forward.” We also recommended the nominations subcommittee add a peer evaluation for any incumbent candidates, as well as psychometric testing in the form of the EverthingDISC Workplace Profile and expand interviews from 20 minutes to an hour. We also helped the committee develop strategic interview question sets to be used for all candidates to test the issues most important to the credit union. Importantly, the nominations subcommittee approached each interview with a new, elevated perspective of what was required and a clear understanding of what the board was looking for in new volunteers. We recommended Hudson Valley CU use a five-point scale for evaluating candidates based on the outcome of the assessment. Future board members should be: skilled enough to be board chair (even though it might never be right for them to be chair, see January '22 Good Governance article ); critical and strategic thinkers; independent-minded; consensus-builders; and of unimpeachable integrity. We also suggested the nominations subcommittee prioritize diverse candidates and individuals with previous board experience and expertise in the financial realm. The nominations subcommittee selected five of the 18 candidates to interview, ultimately nominating three candidates who were later elected to the board. The subcommittee also launched an associate board member program. (At cues.org/boardpolicies , see package 1). This enabled bringing in a strong fourth candidate as an associate director, creating the opportunity to increase the candidate’s general knowledge of CU governance over time, while benefitting immediately from the candidate’s attributes and expertise. The Onboarding Process Not content with improving only the nominations process, Hudson Valley CU’s leadership also focused on enhancing its onboarding program for new volunteers. A small task force comprising both board and staff was created and led by an expert in training from the CU’s HR department. The task force expanded the CU’s original, skeletal onboarding process into a robust program that includes a 15-plus hour, four-session orientation curriculum with homework assignments and between-session learning. The program also includes a variety of training modalities and sources, including online modules from CUES; in-person presentations from staff and board members; and written materials. Beyond the orientation curriculum, Hudson Valley CU has committed to at least a 12-month onboarding process that includes regular check-ins by the board chair, committee assignments and access to the CEO, and management representatives who can provide tools, answer questions and serve as subject matter experts to help new directors understand the nuances of the CU industry, the CU’s budget, executive compensation and the economy, plus learn how their strategic decisions apply to and impact operations and results. Hudson Valley CU eventually aims to have all its volunteers and supervisory committee members participate in the onboarding process. The Human Dimensions of the Process We would be remiss if we didn’t address the challenges that such a significant amount of change raised. Implementing this multi-phase process was a massive undertaking for Hudson Valley CU’s board, supervisory committee and nominations subcommittee, and it represented a gap-leaping progression in the leaders’ ability to meet members’ needs. (For more, read, “ Key Outcomes and Lessons Learned From a Board Renewal Effort ”.) Successful organizational change involves more than good processes and procedures. People are the pivotal element, and enabling them to integrate new ways of thinking about and doing things is often the most challenging task. The starting point for change is recognizing that it’s needed. Implicitly, there must have been reasons, acknowledged or not, why any action hadn’t come sooner. The reasons change is hard and the right ways to contend with oppositional forces are unique to each situation. Still, Hudson Valley CU’s journey was not uncommon. Its particulars aside, we hope—as does the CU’s leadership—their story will be helpful for others contemplating similar enhancements. Board composition did shift over time at Hudson Valley CU, so a stagnated boardroom cohort was not the main board renewal problem the credit union faced. Rather, the board had not empowered the previous nominations subcommittee to function as a strategically important committee—recruiting the best candidates, helping to refresh the strategic makeup of the board and revitalizing its vision. While today the nominations committee is viewed by the board as one of its most consequential committees, it had been for years reduced to a group of people who executed the simple task of managing the logistics of the nominations process, with little to no strategic input or impact to the overall makeup of the board. Another consequence of that legacy was a contingent that strongly believed that maintaining the status quo was in the CU’s best interest. In their view, the introduction of innovative tools and processes to enhance Hudson Valley CU’s culture and governance posed a threat to the long-held assumption that the nominations process needed to be completely independent from the board and even management. Although the board had signed off on the innovations, some members of the nominations subcommittee concluded that the changes would be detrimental. “Some members of the committee were uncomfortable with the amount of dramatic change the consultants were looking to implement so quickly,” says CUES member Misty Decker, chair of the governance and nominations committee. In such a situation, building trust and giving the naturally conservative individuals the courage to try are what’s needed more than anything else. The antidote to resistance and anxiety-driven risk aversion is assurance, not force. Our approach was to mobilize a small group of institutional leaders—the board chair, the CEO, and the governance and nominations committee chair—to join us in a conversation with the nominations subcommittee members. We acknowledged that the proposed systemic changes were indeed a substantial and understandably frightening departure from the past. We heard their concerns, validating rather than dismissing their impassioned drive to guard normed cultural traditions, and we invited them to question and reconsider the benefits to change. “We were ultimately successful,” Decker adds, “because we had established trust in Quantum Governance’s experience addressing board issues with other credit unions and in Dolus Advisors’ expertise in driving organizational culture change.” Of course, the realities of dealing with stakeholder pushback are rarely straightforward. Navigating opposition can get hot and messy. Agreeing to disagree, building or re-establishing trust, and defining workable pathways to compromise can be arduous. But there is no more important work. And this work is and has been a powerful reminder that high-performing boards are a combination of capabilities and practices coupled with human dynamics and culture. Each of these areas entails differently defined tools and solutions to enhance or repair as well as to strengthen and elevate. They also require a healthy dose of humility to accept—and even celebrate—that the changes we embrace are actually only a work in progress. Alexander Stein, Ph.D . , is founder of Dolus Advisors , a consultancy that helps leaders address psychologically complex organizational challenges. Previous Next

< Back Embracing our New (Virtual) Reality Caitlin Hatch May 22, 2020 The new virtual reality is changing the way we do business. I saw an interview recently in which author, American diplomat and former State Department official Richard Haas observed that the COVID-19 pandemic is not so much a turning point for our society, but an accelerant. His comments alluded to the idea that trends only just beginning to emerge before the pandemic, have been “fast-tracked” and their significance amplified as we unlock the ways and means of our new normal. Perhaps the best and most accessible example of this phenomenon is our new fluency in virtual or video conference meetings and even social gatherings. At Quantum, we’ve operated as a virtual organization from the beginning, conducting much of our work via telephone, video conference and the miracle of the Internet. However, an important and transformative element to our work often culminated in traveling to meet clients, sometimes one-on-one but frequently in groups of 20 or more. And the public speaking engagements at conferences to even larger groups…how does that work continue, or does it? As so many of you have, we decided to take a case-by-case approach postponing our in-person retreats and workshops at first but quickly pivoting to 100% virtual via Zoom, Meet, WebEx and the myriad of other apps that have become as familiar to us as centuries-old brands like Kleenex and Clorox. As it happens, we have been in the regular practice of video conferencing with an international nonprofit organization who asked us to conduct individual board orientations with their multi-national Board. We had previously aided them in updating their core governance structures and establishing a better understanding of their core identity and purpose —orientation of their newest directors was the next meaningful step forward. This afforded us a unique opportunity to put into practice a new way of conducting board orientation…100% virtually! In the recently published The State of Credit Union Governance 2020 Report we identified that “a significant number of board members believe their boards must improve their current onboarding process.” Less than half of the directors surveyed for the study felt that they were “using an effective process to orient new board members to the work and dynamics of the board,” with 30% categorizing it as “adequate”— hardly a ringing endorsement. Thus, we developed a virtual board orientation, a solution for boards who struggle with finding enough hours in the day, volunteers to manage the effort, or simply engaging ways to orient new board members effectively and meaningfully. So we “upped our game” so to speak. Doing more video conferencing in particular around board orientation, and we’re creating more recorded video segments and interviews. Check out our Facebook and LinkedIn for the latest and greatest! We upgraded our typical teleconference to a video conference where face-to-face from our own homes has increased the intimacy of our client relationships in a way that would make Getting Naked author Patrick Lencioni proud of both our clients and of us. 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

For Questions About the Grant, Fill Out the Form Below: Alternatively, you can email gisele@quantumgovernance.net First Name Last Name Email Message Send Thank you! We will be in contact.

< Back Closing the Board/Management Trust Gap Michael Daigneault and Jennie Boden Jul 1, 2018 5 ways to unite staff and volunteers for good governance We had a colleague once who used to say that trust is “the residue of promises fulfilled.” It’s a pretty good working definition, as definitions go. It’s simple, straightforward, and likely one that most people can identify with. You trust those that you can rely on; those that have come through for you in the past are most likely to come through for you in the future. You’re probably more drawn to the types of people in your life who do what they say they are going to do, and we bet that you avoid the other type—the kind that disappoint and fail to follow through. For years, we’ve been surveying credit union leaders around the country and, out of the more than 50 questions that we’ve been asking them, there’s one we’ve always identified as among the most important: How effective is your board at building a leadership culture of trust? Then, after years of surveying individual credit unions, we synthesized the data from multiple credit unions and learned a lot. (You can read the fruits of our labors in the recently published study entitled “ The State of Credit Union Governance, 2018: Five Data-Driven Recommendations for Future Success. ”) We found a significant difference in perceptions between credit unions’ senior staff and volunteers (board and supervisory committee members) on matters of trust. The numbers may surprise you; we know that they surprised us. If you consider trust to be an essential building block of a cooperative’s leadership culture, as we do, the numbers may also concern you. While we identify 10 elements of an effective board culture including engagement, inquiry, curiosity, respect, learning, teamwork, accountability, service and diligence, it’s the element of trust that undergirds them all. Without trust, you’re likely in real trouble. Conflict spikes up, relationships fray, efficiency plummets and morale ends up in the basement. Overall, just 27 percent of senior staff and 25 percent of CEOs that we surveyed reported that their boards were “very effective” at building leadership cultures of trust, and a critical mass of them (42 percent of senior staff and 48 percent of CEOs) thought that their boards were only “adequate,” “ineffective” or “very ineffective” at doing so! See Figure 1: Building a Leadership Culture of Trust by Position. There’s also a clear gap between what the senior staff and volunteers think. More than 50 percent of supervisory committee members and 40 percent of board members we surveyed reported that the board was very effective at building a leadership culture of trust—indicating a significant perception gap between the two groups. So, what’s going on here and, more importantly, what should we do about it? What’s Going On? A credit union board member recently described her board’s culture as “toxic,” and another suggested that there was a “cancer” within. While we certainly recognize that the culture described by these two volunteers is an extreme, we do know that all cultures, including your board’s culture, are living, breathing things that require constant tending and care. And if you’re not paying attention to yours, you’re putting it at risk. To understand more closely what may be driving these troubling findings on trust, let’s turn back to our recent study and explore three more elements of an effective board culture: 1. Engagement. If trust is the primary element of an effective board culture, engagement runs a close second. You can’t have an effective culture if your board members aren’t engaged. How many times have we heard from our clients (and have you thought to yourself) that there’s a group of board members who just come to board meetings and sit there, never talk, don’t seem prepared and don’t seem to care? How much trust do you think those board members are engendering? If we go back to our definition of trust—the residue of promises fulfilled—are they keeping the promises they made when they joined the board? Are they serving their CUs to the best of their abilities? Are they engaged, active members of the board? Lending their time, talents and energies? Sadly, the answer is often a resounding, “No.” Our survey data shows that 41 percent of CU volunteers and staff rate their board members’ engagement as only “adequate” or less than adequate. Board member engagement is—for some CUs—suffering, and such woes are likely having a negative impact on building trust. See Figure 2: Engaging All Board Members in the Work of the Board. 2. Accountability. Merriam-Webster defines accountability as “an obligation or willingness to accept responsibility or to account for one’s actions.” There’s some good news: Many supervisory committee members believe there is a fair bit of accountability on CU boards. The not-so-good news is that those actually in the boardroom on a regular basis expressed a much greater degree of concern. Less than 25 percent of board members surveyed think that they’re very effective at holding each ot her accountable—and the perspective from management is even more critical with only 16 percent of senior staff and 12 percent of CEOs finding boards very effective at holding fellow board members accountable. See Figure 3: Holding Each Other Accountable by Position. Over time, this lack of accountability is surely having a negative impact on trust. It likely means that some directors are falling short on their promises and their colleagues aren’t respectfully calling them on it. 3. Inquiry. We like to say that one of a board member’s most important jobs is asking good questions. Volunteers will never be a top expert on the CU’s operations, nor should they be. That’s why directors rely on professional CU staff for help. Volunteers must trust but verify; ask questions that staff may not have considered; and provide advice, counsel and oversight that drives success. Unfortunately, there is some evidence in our report that boards aren’t measuring up in this area. More than a third of our study’s respondents rated their boards as only “adequate” or “less than adequate” at asking the hard questions that need to be asked. See Figure 4: Asking the Hard Questions That Need to Be Asked. The key is to be sure that you’re actively creating a culture of inquiry. Understand your role and speak up. But be careful. Ensure that your culture of inquiry doesn’t become a culture of actual or apparent distrust. That is, trust but verify. Your questions should be shared for supporting and furthering the CU, not a “got ya” mentality. And don’t jump into the weeds. Keep your questions strategically focused or at the appropriately high end of fiduciary oversight. What Can Be Done? If you’ve read carefully, at least some of the answers will have begun to emerge. We’ve listed them here in five suggestions for you to consider: 1. Assess your credit union’s governance effectiveness and culture. If your board hasn’t conducted a governance assessment recently, it’s time to do so. Just like you go to a doctor regularly to evaluate your health, your CU’s governance health and culture should receive its own check-up on a regular basis—usually every two years. This should include a formal assessment process to identify your strengths and challenges and the development of an action plan for improvement. 2. Keep your promises. Say what you are going to do and then do it. Don’t disappoint. Follow through, and if you can’t, be clear why not. 3. Show up. Be prepared. Participate. If you’re not clear about what is needed, ask. Ensure you have job descriptions for directors and officers; make sure you have committee charters, too. These all help to clarify (and quantify) roles and responsibilities. 4. Be accountable and hold others accountable, too. Accountability is a two-way street. Just as we talked about keeping your promises, you need to be sure that your colleagues are keeping their promises, too. Once the roles and responsibilities are clear, and everyone knows them and agrees to them, commit to a culture of accountability. Ensure you have a chair in place who is bold enough and strong enough to lead the charge. 5. Ask the hard questions that need to be asked (and have the hard conversations that need to be had). This last suggestion is perhaps the most challenging of all. It will require you to be open and vulnerable at the same time ... to put your trust in your colleagues and to ask them to put their trust in you. But it’s a must, and as we said, probably your most important role as a board member. Previous Next

About Quantum Governance, L3C Our Vision Exceptional Leadership for Mission-Driven Organizations. Our Mission Partnering with mission-driven leaders to enhance governance and strategy effectiveness for exceptional outcomes. Meet Our Team Who We Are Founded over a decade ago, Quantum Governance is an L3C, a low-profit, limited-liability service organization dedicated to the public good. We are experts in governance and strategy. Our work is designed to help organizations realize the full potential of their missions. Our team provides assessment, consulting, planning, facilitation and implementation services to mission-driven organizations of all sizes. Quantum Governance is a Callahan company. Click here to learn more. Our Values Authenticity. We are committed to being truth tellers, knowing that candor empowers our clients to better fulfill their vision and mission. Compassion. We connect with empathy, kindness and respect. Innovation. We strive for creative and nimble ways of thinking, doing and growing. Diversity. We advocate for the enrichment that diverse backgrounds,experiences and perspectives provide in shaping better outcomes for everyone. Inclusivity. We value the unique insights and contributions of each individual. Dependability. We honor our commitments and build trust through consistently responsible actions. Excellence. We set – and then work to exceed – the standard of what is being asked or expected to produce work of the highest quality.

Leadership Resources Finding Balance in Board Meetings Efficiency vs. Engagement Read More A Matter of Leadership CUs need to pave a new road to ensure a strong, high-performing board over time. Read More Nine Leadership Challenges The board of the future will need the strength to overcome these. Read More No Higher Calling The challenge of effective CEO evaluation Read More 'Quantum' Board Engagement Six questions to help you more fully get your board engaged Read More Board Engagement Needs A Boost Strategies to use in your monthly meetings Read More A Matter of Culture What drives yours? Here are 10 elements to shoot for in your board room. Read More Surfacing Assumptions Knowing what you're assuming can boost board strategic thinking. Read More Fiduciary AND Strategic Thought Needed Finding the right balance between operational oversight and visionary dialogue in your boardroom is worth the struggle. Read More

< Back Director Onboarding Post-Election Michael Daigneault Dec 22, 2015 9 steps to take to help new directors serve well In a previous Good Governance column on CUES , I talked about the importance of having a process in place to identify potential board members, introduce them to the credit union and, eventually, ask them to run for the board. Once directors are elected, you’ll need to build a robust, comprehensive onboarding program that includes such elements as: Public announcement of the election. Kick off your orientation program (and a welcome to the board) with a public announcement of your new colleague’s election. Use this opportunity to get to know your new director and for him or her to know the credit union more closely. Hold both formal and informal board orientations for the board and staff. This is the easy part. Schedule formal briefings with both the board and staff for your new director. From our experience, this is where most credit union orientation programs start … and, sadly, where they also stop. Appoint a mentor or guide. Identify a seasoned director to mentor and guide your new colleague for the first year. The mentor can answer questions on a one-on-one basis, accompany the new board member to credit union events and generally help shepherd the new director through the first year. Schedule regular check-ins by the board chair or mentor. Have regular de-brief conversations to “check in” with your new board members to answer any questions and take their pulse within the first two months. Schedule an informal meet and greet event. To introduce your new director to the full board, host an informal event, either before or after his or her first meeting, to welcome your new director to the ranks. Have the chair appoint the new director to a committee or taskforce. After a period of time, and in consultation with the new board member, appoint him or her to a board committee or taskforce. Be sure he or she is well oriented and welcomed by the committee or taskforce chair. Schedule regular check-ins by the board chair and/or mentor. Schedule another check-in at three to six months. Encourage participation in external educational opportunities. Expose your new board member to external educational opportunities, such as national conferences offered by CUES. Schedule regular check-ins by the board chair or mentor. Schedule another check-in in the 6- to 12-month time frame. In addition to the steps outlined above, some credit unions have developed associate director programs in which new directors join in a non-voting capacity before any official positions become available. Still others use their supervisory or audit committees as effective training grounds for new board members. Remember, ultimately, you are bringing a new colleague into the fold. I know that for many of you, it may be difficult to remember back to your first board meeting. For some, it may have been 20-plus years ago. And the times have changed dramatically. What you needed to know then and what your new colleagues need to know now is night and day. Develop a plan. Be persistent. Be patient. But above all, prepare your new board colleagues well. Previous Next

< Back A Case for Reaching Higher Michael Daigneault and Caitlin Hatch Sep 26, 2017 Musings on the Federal Reserve’s proposed guidance on supervisory expectation for boards In August, the Federal Reserve published its Proposed Guidance on Supervisory Expectation for Boards of Directors and invited comment and discussion on the subject of better performance though better governance—a topic near and dear to us at Quantum Governance . These proposed guidelines, which apply directly to the boards of directors of banks and savings and loans (not credit unions), seek to “establish principles regarding effective boards of directors focused on the performance of a board’s core responsibilities.” These proposed guidelines are inspired largely by the 2007-2009 financial crisis and are designed around supporting “safety and soundness.” While we applaud any effort to improve governance, we are concerned that these guidelines are too focused on the oversight or a “supervisory” role for the board. That is, they are concerned largely with mitigating exposure to risk and, as such, promote a narrow view of the board’s role in governance. Even though the proposed guidelines do not directly apply to credit unions, we think it is vital to comment, as there are natural parallels to credit union governance. The Fed’s proposal seeks to better distinguish the role of the board from that of management by encouraging the board to focus on its core responsibilities: (1) setting clear, aligned and consistent direction; (2) actively managing information flow and board discussions; (3) holding senior management accountable; (4) supporting the independence and stature of independent risk management and internal audits; and (5) maintaining a capable board composition and governance structure. While all of these are admirable goals, they tend to cast the board’s work in the more traditional role of fiduciary oversight, focused on monitoring performance and mitigating risk. While these things are certainly important and necessary for preserving the safety and soundness of a financial institution, they only address one aspect of what makes a board truly effective today. Governance today is not, as the proposed guidelines imply, simply a matter of carving out areas of responsibility and levels of oversight. To foster a highly effective governance culture, a board must create a genuine, constructive partnership with the CEO—and in credit unions, with the supervisory or audit committee as well. This constructive partnership, we believe, is the true foundation of good and effective governance. A well-conceived constructive partnership is one in which the duties and responsibilities of all parties are clearly communicated, understood, respected and mutually supportive of each other. The board knows not to get involved in day-to-day management (indeed, this is one of the desired outcomes stated in the Federal Reserve’s Proposed Guidelines), but its role goes far beyond this basic standard. The proposed guidelines do acknowledge a situation that bedevils credit union boards as well as bank boards—the overly burdensome amount of information a board is expected to review. These requirements consume so much time that a director is, ironically, actually distracted from properly fulfilling what we believe are the higher principles of governance: setting the long-term strategic vison and direction of the credit union; defining “success criteria” which do not necessarily have to be financial in nature; encouraging genuinely diverse ideas and discourse; and, as mentioned above, constructively partnering with the CEO and staff to further the credit union’s mission. In short, we are concerned that the Fed’s proposed guidelines are grounded in an outdated governance model that may foster boards to move back in time, not forward. They appear to be based on a set of legal requirements that focus on a minimum standard. We advocate for all boards to “reach higher” and to put into practice governance principles and skills that are holistic and proven to lead to truly exceptional leadership and ultimately mission success for their credit unions. 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 What Key Factor May Be Working Against Your Interest in Raising Board Engagement and Accountability Jennie Boden Aug 7, 2024 Discover the hidden factor sabotaging your board's engagement and accountability, and learn how to address it effectively. In 2023, we identified four elements of good governance in our State of Credit Union Governance Report : 1) board members fulfilling their roles and responsibilities; 2) engagement; 3) accountability and 4) trust. Our study found that these four elements were VERY strongly correlated, meaning that if one of these elements was weak within a board, it was very likely the other three were as well; the reverse was also true. If a board was scoring well in just one or more of these areas, then it’s likely that all the elements were markers of a high-functioning board. We were thrilled. The findings were so strong (with correlations equal to or greater than 0.79) that it now meant that we could identify the weakest link among our clients, focus on that element, and the other elements would become stronger as well. But that marked just the beginning of our work. How does one build engagement, accountability and trust? And why might these scores be low in the first place? The study also found that among all four of these elements, engagement was the lowest across all respondents. Our work started to change after the release of this study and when we began assessing our clients through this very lens: How are our clients fairing among these four elements? And which of the four are the lowest scoring among them? In particular, I’ve been thinking a lot lately about the element of engagement. I once wrote about the phenomena of workplace bullies, noting that “The [Workplace Bullying] Institute reports that 30% of all adult Americans have been bullied at work. More than 48.6 million of us have been bullied on the job – but a total of 76.3 million workers (or 49% of all Americans) have been affected by workplace bullying. That means those workers have either been bullied or witnesses to it, which has its own impact, too. Sixty-seven (67%) of the bullies in our workplaces are men and 33% of them are women, and same-gender bullying accounts for 61% of it all. In fact, I was prompted to write about these bullies after being bullied myself by a colleague in the field. And recently, I was on the receiving end of some unpleasant behavior in a client retreat, and I found myself so stunned, I could do little more than tilt my head in disbelief, thinking, “If this director responds to me, an invited guest, in this manner, how might they respond to their colleagues with whom they disagree?” After the room had cleared, I shared my thoughts with the board chair and CEO: “This is likely the kernel of our low engagement among the directors. You have a bully in the boardroom, and the other directors are afraid of being called out by the individual in question.” Since then, I’ve started paying attention to how many “bullies” sit on boards with low engagement scores. And it’s a lot. And guess what? That number also correlates with a low level of accountability, meaning that no one is calling out the bad behavior. No one is saying, “Knock it off,” or “Don’t talk to John or Sally or whomever that way; that’s against our values,” or “If you continue to use foul language in the boardroom, there will be repercussions.” And those are extreme cases. Sometimes the uncivil behavior can be as subtle as the rolling of eyes, dominating the dialogue or dismissing a colleague’s perspective. And very few are saying a word. One of the board chairs with whom we worked was actually being bullied by their CEO. This board chair went so far as to conceal the bullying in an effort to protect the rest of the board, which gave way to a higher threshold of tolerance for the uncivil behavior and allowed the CEO to bully the staff too. But boards and cultures can change. I’ve seen it happen. I’ve seen a board that tolerated a bully for nearly two decades move swiftly – within a matter of weeks – to address (appropriately, professionally and sensitively) the inappropriate behavior of one of their own. Think of the message that this significant shift sent to the board as a whole and to the staff: these are our values; this is what’s acceptable and what’s not acceptable. If there’s a bully in your midst, solve for that to level up your engagement and accountability. 2021 Workplace Bullying Institute U.S. Workplace Bullying Survey. Single Page Results Flyer. https://workplacebullying.org/ . Retrieved on December 5, 2021. Previous Next

< Back Taking Action On Credit Unions’ No. 1 Director Recruitment Priority: Diversity. Jennie Boden Sep 21, 2020 The credit union and women’s movements are clearly doing something right. But we still have a long way to go. The day after Kamala Harris was picked by Joe Biden as his running mate, I was talking with a colleague of mine about his choice. I have to note that the colleague in question is a woman, and she is about 10 years younger than me. She was lamenting that everyone in the media was focusing on the fact that Ms. Harris was a woman and, of course, a woman of color. From her point of view, as someone from a younger generation, why should this be the news? She sees Ms. Harris as a qualified, strong candidate for the position, regardless of her sex or ethnicity. In my colleague’s mind, of course she would have been in serious contention for the job. It started me thinking about what my sister would say as someone who is 10 years older than me. She was in college in the ’70s, and I remember her then with long, straight hair, playing sad Joni Mitchell songs on her stereo and challenging my father, the minister, on nearly everything he said. She would bring with her the perspective of history: knowledge of the years when women struggled to have a voice in their marriages, let alone a seat in the boardroom, and of the racial struggles that plagued even my small hometown in rural Pennsylvania when she was in love with an African-American boy in high school. Then my mind moved on to my niece. She is 10 years younger than my colleague . She’s a graduate of Stanford University, recently married to man whose parents immigrated from India, and studying to be a doctor at one of the best medical schools in the country—maybe the world (University of California-San Francisco). Now, at this point, it should be noted that I write from a point of great advantage, and the cast of characters in this article also enjoy great advantages. We all hail from stable families, where shelter, food and love were plenty. We are all well-educated. We are all white. So, what does this have to do with credit unions? And, specifically, with governance, since that’s my area of specialty? My biggest fear in all of the focus on DEI is that it will remain a discussion point and not become a point of action for us all. - Jennie Boden I had two thoughts immediately after the conversation with my colleague and my ensuing reflections about my sister and niece. The first was around the notion of board renewal. We talk about the topic all the time at Quantum Governance, and we’re finding that credit union boards are increasingly talking about it, too. It used to be that credit union board members would join the board and stay for years—for decades, even. I’ve had a client who had two board members who served until they died in their 80s or 90s. Others explained odd behavior by noting that a few of their board members were displaying early signs of dementia. And so, the first rule of board renewal is that you must renew, for the health of your board. It’s the board’s responsibility to ensure that you do. The guiding principle for board renewal is to find a healthy balance of historical continuity and renewal. I celebrate that my colleague just assumes that Kamala Harris is right for the job of vice president and that my niece sees a horizon as wide as possible for herself and all those around her. (And I also imagine what will be available, once they are grown, to my great-nieces.) But, it’s also critical for all of us, as women, to realize from whence we’ve come. My sister’s perspective is valuable, too. She reminded me recently that when she was growing up, girls were shut out completely from sports in high school, and today we have a woman coaching in the NFL. How far we have come, but still, how far we have to go… Ensure that your board is balancing these perspectives—all of them. Historical continuity will give you important points of view on the past, and renewal will open future possibilities the likes of which you’ve never conceived. The second thought that came to mind following the conversation with my colleague arose directly from the research that we published in The State of Credit Union Governance, 2020 report. For the first time ever, we found that demographic diversity was the No. 1 recruiting priority among credit union board members and leaders, surpassing financial literacy for the first time. Source: The State of Credit Union Governance, 2020 We also reported the news that the average credit union boards have nine members, three of which (36%) are women! On its face, this may not seem significant, but it is. In comparison, a 2018 study by Deloitte and The Alliance for Board Diversity of America of Fortune 100 companies found that women held only 25% of their board seats. And in 2018, CUNA found that 52% of credit union CEOs are female, compared to only 5% in commercial banks and 6% in Fortune 500 companies. And it’s not just among the small credit unions: At credit unions with between $1 billion and $3 billion in assets, more than 14% of the CEOs were female, compared to just more than 3% of bank CEOs. As a movement (both a credit union and a women’s movement), we’re clearly doing something right. But we still have a long way to go. It seems that today, everyone is talking about “DEI” or diversity, equity and inclusion. (Note that Quantum Governance believes the appropriate order is “ EDI ,” given that the notion of equity is a broader concept that underlies both diversity and inclusion.) It’s a most worthy discussion, and it’s been a long time coming. My biggest fear in all of the focus on DEI is that it will remain a discussion point and not become a point of action for us all. But clearly, we know how to do this. We’ve started to make true inroads in terms of integrating women into the boardrooms and C-suites of America—at least among our credit unions. Be sure not to let up on that focus. Rather, let’s add to it. While we can celebrate the gains made for women, we’ve not moved the needle one bit on increasing the number of visible minorities in the credit union boardroom or C-suite, and that’s just as important. In fact, remember, demographic diversity is now the No. 1 recruiting priority among credit union board members and leaders. How much richer would your board be if 50% of its members were women? If you had true diversity in terms of ethnic and racial background? In terms of age and tenure? In terms of skills and experience? How much more stirring would the conversations in your boardroom be if you were truly open to listening to everyone’s voices? Previous Next

< Back The Ever-Elusive Millennial Director Michael Daigneault Mar 28, 2017 Tailor your message and medium in recruiting younger board members. An almost universal goal among credit union boards in recruiting new directors is to improve their outreach to millennials. A common expectation is that prospective directors from the generation born from 1981 through 1997 would better understand and represent the needs of younger members. Moreso than previous generations, millennials are deeply immersed in the digital age and intuitively appreciate the new ways commerce and communications have morphed. In addition, younger consumers now spend $600 billion annually; by 2020, their total annual spending is projected to grow to $1.4 trillion annually, representing 30 percent of total retail sales. They are an economic force that must be reckoned with. Challenges in recruiting millennial candidates may be a reason only one in five board members we’ve surveyed report that their credit unions are “very effective” in attracting people with the attributes identified as desirable to stand for election as directors or to serve in other capacities. Our surveys also find that the average age of directors is on the rise, as is the average director tenure on boards. The combination of these factors puts the need for board rejuvenation at many credit unions at a critical tipping point. At the risk of being bearers of additional bad news, board recruitment won’t get easier in the years to come. Basic demographics are a reason that recruitment of younger candidates will become even more difficult. The Pew Research Center reported in April 2016 that the baby boomer generation (1946–1964) has been the largest in the United States to date, with a whopping 76 million births. Gen X (1965–1980) fell far short of that mark by nearly 21 million births. To some extent, then, the recruiting challenge boils down to numbers: There are simply fewer adults in the gen X age group. In addition, those born after 1964, perhaps because they have been submerged in the technological revolution throughout most of their lives, often engage with or give back to their communities in ways very different than previous generations. As Beth Kanter put it in her book The Networked Nonprofit, “Social media use is becoming ingrained in the way that people relate to one another and work together. In particular, social media are shaping the way that young people think, connect, engage, and work together.” Assuming this is the case, how should your credit union overcome the vital governance challenge of attracting future board members? The vast majority of boards will need to work much harder—and differently—to attract those elusive gen Xers and millennials. First and foremost, keep in mind that people in their 20s, 30s and 40s are as committed as older Americans to social good. However, they are inclined to engage in the world in very different ways, and they may be motivated by different factors. Gen Xers and millennials also may “join” in different ways than previous generations. They tend to: want to help others, but often not through a formal institution. support social issues, but less so the organizations affiliated with them. take small preliminary steps before fully committing to a cause. be strongly influenced by the decisions and behaviors of their peers. treat things they value (free time, money, friends, their network, key social missions, etc.) as having relatively equal value in their lives. experience an organization’s work—and offer their own time and talents—without having to be at a particular place. A strong commitment to mission is central to millennials. In your recruitment efforts, talk about your credit union and the cooperative movement as offering economic freedoms and opportunities in ways that will tap into their passion. Go well beyond the business aspects of what they will focus on as board members to emphasize the greater good. Another strategy is to recruit gen X and millennial candidates in multiples. It is hard to be the only younger person in a leadership position. Many young adults are influenced by the decisions and behaviors of their peers, and networking is as important for them as it is for your current directors. Finally, never treat younger candidates and directors as tokens or underestimate their skills. Depending on their age (and yours), they may be as young or as old as your own kids, but in the context of board service, they are your peers. Though their level of experience on a credit union board may be limited, the abilities, experiences and perspectives of gen X and millennial directors may offer extraordinary value in board discussions, planning and deliberations. Remember, millennials stand where you once stood, and your relationship with them should be one of genuine mutual support and commitment to the betterment of your credit union’s members—and your community. Previous Next

< Back Dealing with Divisive Directors Jennie Boden Jun 27, 2023 Honor the principle of democratic member control even when you need to remove a board member. Like a lot of things in life, governance challenges seem to come in threes. There was the year that we had three clients struggling with their representative boards. Last summer, the trials were three different mergers and acquisitions. This spring, three of our clients have been grappling with how to hold a problematic board member accountable. And not just problematic board members, but very problematic ones. We’ve seen this before—and not just in threes. Let me begin by saying that, as a believer in exceptional governance, I value the cooperative principle that “credit unions are democratic organizations owned and controlled by their members. One board member equals one vote, with equal opportunity for participation in setting policies and making decisions.” But sometimes you run into a board member whose presence completely derails the democratic process. What to do when removing such a member would actually improve governance, the operation of the board and contribute to stronger organizational outcomes? The Principle of Democratic Member Control: Pretty Drastic The democratic member control principle drives three of the paths available to credit union boards when they believe that it’s time for one among them to leave their ranks. (These are the options available to federally-chartered credit unions as outlined in National Credit Union Administration federal credit union standard bylaws. Additional options may be made available for state-chartered credit unions by their regulators.) Article VI. Board of Directors, Section 8. Attendance and removal. a. If a director or a credit committee member, if applicable, fails to attend regular meetings of the board or credit committee, respectively, for 3 consecutive months, (choose one of the following) ____ or 4 meetings within a calendar year, or ____ 4 meetings within any 12 consecutive months or otherwise fails to perform any significant duties as a director or a credit committee member, the board may declare the office vacant and fill the vacancy as provided in the bylaws. Article IX. Supervisory Committee Section 5. Powers of supervisory committee—removal of directors and credit committee members. By unanimous vote, the supervisory committee may suspend any director, board officer, or member of the credit committee. In the event of a suspension, the supervisory committee must call a special meeting of the members to act on the suspension. They must hold the meeting at least 7 but no more than 14 days after the suspension. The chair of the committee acts as chair of the meeting unless the members select another person to act as chair. Article XVI. General Section 3. Removal of directors and committee members. Notwithstanding any other provisions in these bylaws, any director or committee member of this credit union may be removed from office by the affirmative vote of a majority of the members present at a special meeting called for the purpose, but only after an opportunity has been given to be heard. If member votes at a special meeting result in the removal of all directors, the supervisory committee immediately becomes the temporary board of directors and must follow the procedures in Article IX, Section 3. These are drastic paths to have to take, and they put into play reputational risks for both the board member and the credit union. But there are other options besides the most drastic ones. Other Pathways, Starting With Accountability The name of the game, ultimately, is accountability—setting clear roles and responsibilities through the development of both board member and officer job descriptions (I encourage you to develop job descriptions for the supervisory/audit committee chair and members too); outlining expectations for behavior in a board member covenant and even a code of ethics that applies to everyone throughout the credit union, from the board to the tellers; and implementing accountability mechanisms to ensure that everyone is doing their job within the boundaries of the covenant and the code. But what do you do when that fails you? Here are some tried and true steps that you can take, in increasing order of seriousness: Solicit the help of the board member’s trusted peer (or peers) for a private conversation to address the behavior. Schedule a formal meeting between the board member, the chair and another board officer to address the behavior. Outline the offending behavior in a written reprimand letter, asking the board member to correct their behavior immediately. Call for a written apology from the board member to those offended. Require formal sensitivity/or related content training. Prevent the board member from participating in any trainings, conferences or seminars paid for by the credit union until select steps (such as those outlined above) are complete and the behaviors are corrected. Provide a copy of the written reprimand letter to the governance and nominations committee to inform the nominations process. Institute peer-to-peer evaluations and provide a copy of the board member’s results to the governance and nominations committee to inform the nominations process. And for especially serious cases: Stipulate that the board member will be formally censured or that their resignation would be called for unless select steps (such as those outlined above) are complete and the behaviors are corrected. Note to the board member that formal censures and/or a vote for their resignation will appear in the credit union’s public minutes. It’s Worth the Effort to Manage Divisive Directors I can tell you that all our clients who have adopted any number of the steps above did feel a sense of relief ultimately, as hard as it might have been. In most instances, the board members simply resigned, knowing that it was best for them as individuals and ultimately for their credit unions. While no process is ideal, and we at Quantum Governance certainly want you to honor and adhere to the principle of Democratic Member Control more than anything, sometimes a bully or undemocratic individual acting in bad faith needs to be stopped. Sometimes, that board member who refuses to adhere to the credit union’s policies must simply be shown that their behavior is unacceptable. And sometimes, their behavior becomes so antithetical to the very essence of a cooperative that you don’t have much of a choice. Previous Next