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< 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. 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< Back What to Do When Communication Styles Clash: Embrace It Jennie Boden Feb 18, 2019 Building a culture of inclusivity helps ensure each voice on your board is heard. Once when my firm, Quantum Governance L3C, was looking at some assessment tools that might help our clients, we spent the fall taking them for a test drive. We spent time looking at the DiSC profile , the CliftonStrengths assessment and more. In essence, we were putting our staff through some of the paces through which we often put our clients—boards of directors of credit unions, associations, foundations and other nonprofits. We use assessment tools with our clients with the intent to improve their ability to function as a team and increase their governance effectiveness. With these test drives, I learned a lot about myself and my colleagues. I learned that I like “contributing to a calm, stable atmosphere” and “working with people who genuinely care about one another.” And I definitely don’t like “dealing with angry, pushy or argumentative people,” or “having to argue for [my] point of view”—although I think my husband would likely disagree with that last observation. One of the personality tests called me “amiable.” The results of the tests helped me to understand some of the factors that motivate my behavior and the way that I communicate and interact with my colleagues, how they interact with me, and our own team’s dynamics. To this day, when one of my colleagues says I’m being “too soft,” I’ll simply reply, “Remember, I’m the amiable one.” It’s a common language and experience from which we can both draw. But it can be tough sometimes, can’t it, when personalities and communications styles clash? We all believe in the value of diversity. In fact, when we interview board members (and we interview a lot of them), diversity is one of the things that they feel their board is lacking the most! They believe that their boards (and their credit unions) would be better off if they reflected the diverse make-up of their credit union’s membership. And they are probably right. At Quantum Governance, we define diversity as the quality of being different or unique at the individual or group level. And yet, while we’re all going around valuing and actively seeking diversity, it’s the very nature of diversity that can cause communications challenges. My perspectives and the way I communicate are, by definition, different from the perspectives and communication style that my firm’s CEO brings to the table. First, the obvious: I am female; he is male. Second, I was raised in a small, rural town in Pennsylvania; he was raised, well, everywhere. He moved 25-plus times by the time he was 30. I was educated by liberals at UC-Berkeley; he, by the Jesuits of Georgetown. I studied literature; he studied law. I am a quiet, amiable communicator; he is larger than life. I like big, lumbering dogs (think Lab/Great Dane mixes!); he likes multitudes of small, cuddly pups. And yet, for more than 25 years, we have been working and collaborating happily and effectively together. And you, too, can work effectively with those who are vastly different from you. Instead of avoiding the challenges that will, by definition, arise from the diversity that surrounds you, embrace them. The true value of diversity is in what it brings us—the variety of thought, perspectives, context and experience. It helps us all—whether an entire credit union, its board or even an individual—grow and strengthen in ways that we never imagined. There is a twin pillar to diversity that will show you the way. It is the notion of inclusivity. When a diverse board, team or even diversity in a one-on-one relationship challenges your ability to communicate, work to build inclusivity—an environment where everyone genuinely feels included, supported, heard and able to contribute to the success of the whole. My father was a minister in that small rural Pennsylvania town where I grew up, and my amiable self was most likely born from his drilling into my head, “Try to understand the other person, Jennie,” which was his own definition of building inclusivity. When my communication style clashes with another, this is my go-to tactic. And I employ it all of the time. Communication styles clash because people are diverse. Ultimately, however, making a diligent effort to work effectively and even thrive in a diverse world will not only enrich you as an individual but strengthen your board and your credit union’s leadership. Previous Next

Strategic Planning Services Quantum Governance believes in a collaborative and iterative cyclical process between the CEO/Executive Management and the Board in developing a strategic plan for the fulfillment of your organization’s vision and mission. In addition to facilitating the strategic planning process, we can assist you in the following ways: Assessing and Reimagining the Planning Cycle Defining (or redefining) Your Vision, Mission & Values Identifying Strategic Goals & Objectives Contact us to learn more about how we can help you plan for the future of your organization. "An effective strategy drives your organization's mission by identifying what is possible, what is feasible and what is bold." Paul Dionne, Chief Strategy Officer

< Back Hudson Valley Credit Union’s Call for Board Candidates Refresh Jennie Boden and Dr. Alexander Stein Feb 1, 2022 As part of its board recruitment renewal project, Hudson Valley CU developed a call for candidates that outlined specific attributes that matched its changing governance needs and values. Before Nominations are being accepted through Nov. 1 for our 2020 Board of Directors Election. Board members are volunteers elected by the credit union membership and are responsible for the general direction of the credit union, leading us forward and positioning the credit union to respond to members’ future needs. Directors must carry out their duties in the best interest of the membership, conforming to all applicable rules and regulations, as well as sound business practices. Members with strong backgrounds in a variety of fields are needed, including business, finance or investments, human resources, marketing or information technology. A director must have a working familiarity with basic finance and accounting practices, including the ability to read and understand the credit union’s balance sheet and income statement. Board members volunteer an average of 10-15 hours per month to credit union business and are also required to attend a monthly meeting in Poughkeepsie, New York, as well as serve on one or two additional committees. After Nominations are being accepted now through Feb. 25 for the Hudson Valley Credit Union 2021 Board of Directors. Our Board members are volunteers elected by the credit union membership and responsible for working in partnership with our Management Team to lead the credit union to mission success: to create financial security and a better quality of life. Our Board provides governance and leadership; visionary, strategic direction; and fiduciary oversight, and we’re looking for members who are experienced critical and strategic thinkers, with a keen ability to focus on the future. If you are independent-minded but can also work to build consensus among a group of diverse people, we need your skills! And, while you don’t need a degree in finance, you do need to be comfortable reading financial statements and analyzing organizations from a strategic point of view. We are a fast-growing credit union, with a commitment to good governance and acting with integrity. If you think you have the right mix of skills, talents and attributes, can commit to an average of 10-15 hours per month in service of our credit union, plus attend a monthly meeting in Poughkeepsie, New York, and serve on at least one of our board-level committees, visit our website at hvcu.org . Alexander Stein, Ph.D . , is founder of Dolus Advisors , a consultancy that helps leaders address psychologically complex organizational challenges. Previous Next

< Back On Being the Female Chair Leading a Predominately Male Board Gisele Manole Aug 25, 2022 Two female board leaders share their experiences and advice for promoting good governance—especially, but not only, as representatives of a minority demographic. Being in a leadership role—as a credit union board chair, for example—can be lonely at times. Sitting in the chair’s seat certainly puts you in a place of distinction. After all, you have been selected from among your fellow directors to lead them in their leadership role. So, consider the task of leading when you are from a traditionally underrepresented demographic—and say, for the purposes of this conversation, you are a woman leading a predominantly male board. I recently had the chance to connect with two women who shared with me some leadership advice for other women facing just this situation. What they said wasn’t at all what I expected. I anticipated hearing their perspective on having to do it better, faster and smarter than their male counterparts. But instead, their words struck a more nuanced and universal tone that stretched beyond gender differences. Don’t Wait to Be Invited A former CUES board member, Gerrianne “Winky” Burks can count herself among the trailblazers in the industry. After a 40-year career at $4.3 billion Northwest Federal Credit Union , Herndon, Virginia, the last five of which she served as CEO, she currently serves as the board chair. Burks’ advice is this: “Don’t wait to be invited to participate on a board or committee. You may be in the minority as a woman, but you bring a perspective that holds real value. “It’s so different now than when I started out,” Burks observes. “Now there is greater value placed on having a different perspective from the rest of the group. “I followed a male board chair, and frankly, I just did things a little differently than he did,” she adds. “Our communication styles, for example: My meetings may run a little longer, because I really want to hear from everyone in the room. I feel that is important. Neither style is better than the other, and the credit union has benefited from our different styles for many years.” Change Things Just Enough CUES member Janet Burgett Martin, board chair of $625 million Copper State Credit Union in Phoenix, has spent the last two years in the role of chair and recommends changing things up too. “For those new to the board chair position, I highly recommend you change the agenda so that the board understands that there’s new leadership.” Martin shares that she added a “mission moment” at the beginning of board meetings to recognize individual staff accomplishments. “This could be a member letter thanking an employee for excellent service or an award an employee received. It starts our meeting off on a positive note for both the board and staff in attendance.” When faced with assumptions or stereotyping, Martin recommends dealing with those challenges head-on when they first present themselves. Don’t wait to see if the presumption affirms itself, she advises. Find your voice and address it immediately and directly. “In my experience, when you make your expectations clear, presumptions correct themselves quickly. I am very direct but I also lead with compassion and enthusiasm,” she says. Both Burks and Martin stress the notion of being authentic. Burks says that while it may seem obvious, “[The other directors] don’t know what you know. I think that women have gotten much more comfortable in presenting their own thoughts. I pay attention to our board meetings being a place where everyone’s thoughts and ideas are invited.” While Martin encourages all board members to participate to make meetings more productive, she says “[I] always put it upon myself to be prepared by studying the full packet.” Participation requires preparation, and strong leaders model behaviors that they expect from others, she says. Add Your Takeaways to This Starter List As more and more women engage in credit union board service and rise to leadership roles within the industry, their collective learning will continue to grow. Here are some takeaways for developing leaders. Contribute your own advice in the comments section below. Don’t wait to be invited. Share your thoughts and perspectives now! Change things up and be intentional about it. Be authentic and clear in your expectations. And then hold your colleagues to them. Be prepared and model the commitment and behaviors you expect from your colleagues. Previous Next

< Back The State Of Credit Union Governance 2020: A Summary Jennie Boden Apr 2, 2020 For years, we’ve dreamt of studying the state of credit union governance. We know what you’re thinking: Dream bigger. Some people dream of European vacations. Fast cars. Beach houses. But for governance geeks like us, it’s often all about the data. In 2018, we were fortunate to partner with CUES to realize our dream, and The State of Credit Union Governance, 2018 was published. We made some groundbreaking discoveries, like reporting that board members and CEOs frequently differ on their perceptions about governance—and that their perceptions diverge even further based on tenure. We even found that bigger really may be better: Board members and CEOs of CUs with assets of $1 billion or greater had statistically and significantly higher survey scores overall on 18 of the 21 key questions asked concerning matters of governance. And we were satisfied, for a while. But our compendium of data kept growing, and our drive to create more information for you, our colleagues, clients and friends throughout the credit union community, was compelling. Today, we are pleased to announce The State of Credit Union Governance, 2020, which provides updated figures for 2018-2019 and draws on data from the governance assessment of 115 additional credit unions—114 in the U.S. and one based in Jamaica—to enrich the findings from our 2018 report. This year’s report is a collaboration between CUES, Quantum Governance and The David and Sharon Johnston Centre for Corporate Governance and Innovation at the Rotman School of Management, University of Toronto. Our findings are also derived from a supplemental online survey conducted in September 2019 with responses from 320 directors and CEOs across 170 U.S. credit unions. While many of the key findings from 2018 still ring true today (if you haven’t read the 2018 report , we encourage you to begin there), the 2020 report is full of new discoveries that will challenge you and your credit union to new levels of governance excellence. 2020 Key Findings Board Structure and Composition: Demographic diversity was identified as the number one priority for credit union board recruitment (53%). The next highest priority identified when recruiting new members to credit union boards was an ability to focus on the future (51%). (See Figure 1.) Board members continue to think that soft skills, such as an ability to focus on the future (76%) and independent mindedness (66%), are most valuable in the boardroom. Credit union boards are more gender-diverse than their counterparts in other sectors. The average credit union board has nine members, of which three are women (36%) and one is a visible minority (16%). Board Governance: Credit union boards that focus on bolstering their governance tend to adopt a governance committee more readily than those that do not have a concerted focus on good governance. When looking closely at the 1,060 director responses in our sample, we found that directors on the same board would often report very different—and sometimes opposing—perspectives on their board’s effectiveness in four fundamental areas of board renewal: 1) periodic governance assessment; 2) the action plan based on governance assessment outcomes; 3) the director onboarding process; and 4) the frequency of board member renewal. Board Leadership: Survey respondents identified seven important leadership functions for board chairs that fall within two primary categories: 1) establishing processes (e.g., allocating time, setting the agenda, etc.); and 2) working with people (e.g., appointing committee members and chairs). Although most survey participants report that their boards do not limit the number of terms a board chair can serve, we found that more than a third do. Term limits for board chairs can range anywhere from a year to more than 10 years. More than half of the participants whose boards have a term limit in place for their chairs reported limits of less than five years. An impressive 92% of all surveyed board members report that their board is effective at maintaining a good working relationship with their CEO. However, as in the 2018 report, the average board member and CEO differed on how effective they thought their boards were on a range of key governance measures. In 2020, across the 81 surveyed CUs that provided a CEO response, we found that there’s disagreement between the board and CEO regarding the board’s effectiveness on 22 out of 49 survey questions, on average. Credit Union Strategy: We found that 32% of survey respondents do not feel that their board is effective in helping to develop the credit union’s vision, mission and strategy. Most survey respondents say they should slash—by a third—the average time they spend on routine items and operational oversight (i.e., items that do not require debate or can be approved with a single motion as on a consent agenda) and invest an average of 10% more of their time on strategic matters. (See Figure 2.) Decision-Making: Many credit unions have at least one director who says that the board is ineffective at asking hard questions (53%), holding each other accountable (54%) or engaging all members in the work of the board (49%). While directors had misgivings about how decisions are reached, most believe the decisions their boards made were ultimately good, and they could stand by them and speak with one voice. Recommendations Since many of the findings from the 2018 report remain relevant, we encourage you to revisit those recommendations as a baseline; they will serve you well as strong building blocks for any governance program. From there, we would encourage you to consider our newest recommendations from the 2020 report: Board Renewal: Focus on strategic thinking and independent mindedness. Your credit union is a complex financial institution navigating the era of greatest change in the history of the credit union movement. As a result, your board requires meaningful financial literacy, business acumen and specialized skills in such specialties as law, accounting and human resources. However, even boards with the most skilled members will fail to add value without independent mindedness and strategic thinking. Board Diversity: More than ever, credit unions are acknowledging the value of demographic diversity among board members, including gender, race/ethnicity and age. However talking about it as a priority is not enough. To ensure that your board is truly diverse, you will need to be clear in your objectives and work hard at executing them. Once you know the demographic balance you are looking for, you will need a plan to help you find the right people. Board Leadership: Take your board chair position very seriously. Although your CEO is responsible for carrying out your credit union’s strategy on a day-to-day basis, no individual in your credit union has more potential to add value than your board chair. Ensure that you have a robust, concrete job description in place for this important position. Board Governance: Build alignment around what “effective” truly means. It is both normal and constructive for board members to disagree. One might argue that without disagreement there can be no excellent decisions. In too many cases, however, our data highlights boards where one or more directors have assessed the board’s effectiveness at polar opposite ends of the spectrum. Ensure that you are engaging in these types of conversations in the boardroom—what does “effective” really look like for you? Strategic Thinking, Learning and Planning: Invest more time in strategic matters. The most valuable skill identified in credit union boardrooms today is the ability to focus on the future, yet we found that 32% of survey respondents do not feel that their board is effective in helping to develop the credit union’s vision, mission and strategy. Ensure that your board is doing everything it can to be effective in this fundamental role and responsibility. Previous Next

< 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

< Back Key Outcomes And Lessons Learned From A Board Renewal Effort Jennie Boden and Dr. Alexander Stein of Dolus Advisors Jan 31, 2022 An analysis of Hudson Valley CU’s work to revise key governance processes. Quantum Governance and Dolus Advsiors are pleased to offer the following key outcomes and lessons learned from our work with $6.1 billion Hudson Valley Credit Union in revisioning and revising their nominations process. (For more background, read the feature story detailing the work we did with Hudson Valley CU.) Key Outcomes The nominations sub-committee learned it could be nimble, coalesce around change and have a significantly increased impact on the future of the Hudson Valley CU board and supervisory committee. In the end, the members were proud of the changes they implemented and the outcome of their work. And, importantly, they served as a model on how to welcome and adapt to change for other elements of the governance system at Hudson Valley CU. There was an increased level of trust attained between members of the nominations sub-committee and the CEO—primarily through the CEO’s participation in the nominations process, but also as an extension of the still-developing constructive partnership between the board, supervisory committee and CEO/management. All the volunteers—board and committee members—gained a new and enhanced understanding of their capabilities and, despite initial trepidations, developed a significantly greater appreciation for the upsides of transformational change. The previous governance committee and the old nominations committee combined in an integrated model to become the new governance and nominations committee. This provides the credit union with the structure, know-how and horsepower to better meet its members’ needs given its size and complexity. Lesso ns Learned Include everyone in the discussions, right from the start—board members, supervisory committee members, nominations committee members, the CEO—when you’re a) discussing why and how you want to change the nomination process; and b) what the ideal board or supervisory/audit committee of the future looks like for your credit union. Cast your net wide for new candidates and volunteers. Ensure that every candidate attaches a resume or curriculum vitae to their submitted application. And be sure that you update your application to obtain the information that you need—in alignment with your call for candidates. Don’t assume that your current board and supervisory committee members are the right members for the future. Vet them as thoroughly and fully as you vet your new candidates—and against the same requirements. Prepare both the volunteers on your nominations committee and your incumbents for navigating emotionally hard decisions. Meeting the requirements of creating the board and supervisory/audit committee of the future may necessitate the departure of a long-term volunteer colleague. Ensure that the roles and responsibilities for your volunteer positions are clear, including the time commitment. Even with all the communications shared with the Hudson Valley CU candidates, several candidates expressed surprise at the level of commitment required after joining. It doesn’t have to be perfect right out of the gate. Not every tool you develop or innovation you incorporate will immediately work flawlessly. And that’s okay. Keep experimenting. One example: We developed a scoring sheet for the nominations sub-committee that ended up being more of a hindrance than a help. It was quickly set aside, and the members of the sub-committee moved on. Balance urgency and patience. A member of the governance and nominations committee admitted wishing they had developed an associate board member program years ago. But there had been resistance, and it was shelved. When the proposal was introduced last year as a part of these innovations, the practice was enthusiastically adopted. Change takes time. Prioritize equity, diversity and inclusion. Ensure that your credit union is aware of how systemic inequalities adversely affect society—and your credit union. This conscious commitment to equity will enhance organizational decision-making, lead to greater diversity around the leadership table, and help directors and executives alike develop a more inclusive, shared understanding of what everyone has to say and contribute. Alexander Stein, Ph.D . , is founder of Dolus Advisors , a consultancy that helps leaders address psychologically complex organizational challenges. Previous Next

Michael Daigneault Co-Founder & Principal Consultant Michael is a renowned expert on governance, strategy and ethics and has channeled this more than 35 years of expertise into a uniquely personable, engaging and authentic consulting and presentation style. Michael along with his wife founded Quantum Governance over a decade ago with the mission to improve the effectiveness of board and executive leadership through governance and strategy. Michael is a nationally recognized keynote speaker and published author on governance, strategy and ethics in both the credit union and nonprofit fields. Prior to founding Quantum Governance, Michael was President of the Ethics Resource Center (ERC) – the nation’s oldest, independent ethics center. During his tenure, the ERC launched the ERC Fellows Program; developed ethics centers in the United Arab Emirates, South Africa and Colombia; and spearheaded the rebirth of the National Business Ethics Survey. Michael also served as the Executive Director of the American Inns of Court Foundation, a nonprofit dedicated to enhancing the skills, ethics, civility and professionalism of judges and lawyers. Michael is a three-time graduate of Georgetown University, holding a B.A. from the College in Philosophy, and both a J.D. and a Master’s Degree from the Law Center. He lives in Virginia with his family. Back

< Back Double Your Fun: Tracking Strategic Planning For a Brighter Future Paul Dionne Feb 21, 2025 When it comes to strategic planning, I often start with guidance from Harvard Business School professor Michael Porter. Porter was the first to develop a research-based understanding of competitive strategy, and his approach begins with the dramatic premise that operational effectiveness is not a strategy ! Of course, to have a shot at sustainability and success, any enterprise would do well to focus efforts on running an effective shop. But simply improving how you do business is not sufficient to succeed over the long term. Porter’s claim was meant to be provocative because he wanted strategists to avoid falling into the operations trap. The trap is solely focusing on running an effective shop, which can be imitated by competitors all of whom are also working to improve their operations. When you consider immensely larger competitors such as big banks or fintechs, competing on operations alone probably won’t work. I can assure you that your budget and staffing for your new banking app is tiny compared to what Bank of America is spending on theirs. And yes, credit unions certainly want to offer competitive rates to members and potential members, but good rates alone won’t cut it either. Porter notes that firms who rely on operational effectiveness alone will inevitably be outflanked by competitors who can be similarly effective and are also building strategic advantages such as product differentiation and/or a deep focus on meeting the needs of specific consumer segments. Credit unions need to walk and chew gum – they should run an effective shop and also identify, choose and develop a competitive strategy that rests on being different. How can your credit union create unique value for members and potential members that is difficult for others to copy? The Future Demands Strategic Differentiation In strategic planning, credit unions often throw everything into a single process. The outcome can be muddled and end up over-indexed on the side of objectives that seek to improve operational effectiveness. Far less common is a holistic strategic plan that explicitly seeks to achieve competitive advantage. Operational effectiveness is important, but it is not sufficient to ensure future sustainability. What is also really important is figuring out how you are going to connect with new, especially younger members and provide next-generation financial services that fulfill their needs. That is where “running a tight ship” will fall short over the long haul. The credit union of the 20th century (bless our brilliant and creative forebears!) will not survive the 21st century without major upgrades to a competitive strategy and value proposition that speaks meaningfully to members hailing from the 21st century. It is their century, after all. Old fuddie-duddies like me are just living in it until our kids take over. What is to be done? To ensure you are covering both bases and building a clear and coherent strategy, divide your planning into two tracks. Tracking for Success An alternative approach to strategic planning calls for clearly dividing the process into two tracks, one focused on improving operational effectiveness and one devoted to developing long-term strategic advantage. The first takes into account all those analyses and enhancements to identify and leverage efficiencies, strengthen processes, and find ways to match or beat peers on operational metrics. The second track is more focused on changes that will position the credit union for a bright future. Senior Management and the Board should understand both efforts and learn how to support each of them from their unique perspectives. Track One: Operational Effectiveness The first track is always in play and strategy sessions should result in an annual plan for improving operational effectiveness. The key question is: How can we run a tighter ship? The types of questions and initiatives might include: How can we lower our efficiency ratio or NIM? How can we grow inexpensive, longer-term deposits? Is it time for a core conversion? These efforts can be measured, benchmarks set, and KPIs measured by Senior Management with oversight from the Board. Track Two: Competitive Strategy The second track toward building competitive advantage over the long term is where credit unions often fall short. Devote time to this work! Start from your mission and map out where you want to be in 5, 10, 25 years. The key question is: How can we be viable in the future? The types of questions and initiatives are broader and might include: What financial problems will our future members have and how can we help solve them? What makes us truly different from our competitors and how can we strengthen that difference? What should we stop doing to better advance our priorities? This effort is more difficult to measure, but it is critical to long-term success. One example might include an integrated community development approach that combines household financial well-being, targeted “healthy community” philanthropy and small business investment to create a value proposition that promotes robust communities and economic prosperity for all. Don’t fall into the trap of avoiding long term investments into changes that cannot be easily quantified or that will not deliver in a single annual cycle. Advancing strategy requires vision, discipline, and a willingness to sometimes sacrifice short-term gains. Continuity of purpose and effort are critical here. Combine, Measure, Socialize Does a two-track planning process lead to two business plans and scorecards? Ideally not. After the heavy rocks have been identified and set into place, build a combined business plan for the coming year that clearly defines and includes next steps from each track. This is where the work of integrating the two tracks is finalized and where you should build in mutually-reinforcing activities. Metrics and KPIs are essential for first track goals. A combination of metrics and milestones are often more relevant for second track goals. Socializing both the long-term vision and the short-term business plan across the credit union is another important step. Each staff needs to have an understanding of the work to be done and how they can move the needle. By delineating two tracks in your planning process, you will not lose sight of needed reflection and problem-solving for both business and strategic improvements. You get to double your fun. Don’t avoid the challenging work of designing and implementing changes that will create strategic advantage for your credit union over the long term. Adopting the two tracks in your strategic planning process means you will be more directly and clearly addressing the credit union’s short-term needs and opportunities for the coming year and, at the same time, identifying and building a pathway to longer term success. Previous Next

< Back In Search Of The Strategic Board Paul Dionne Jul 16, 2024 Discover how credit union boards can become agile strategic partners and lead their institutions to future success. “Plans are worthless, but planning is everything.” – Dwight D. Eisenhower “I always say don’t make plans, make options.” – Jennifer Aniston Credit union board directors often ask me how they can improve the way their boards provide strategic oversight and support. They describe member expectations growing as quickly as the new channels, products and services being offered by competitors. Consumers expect more convenience, bespoke service, and assurance that a provider has their financial back. Or else! As the financial services ecosystem faces ongoing disruption, credit union leaders see a need to become more agile and better prepare for multiple uncertainties. Board directors must get involved if they want to support their credit unions becoming more nimble and resilient as part of their long-term strategic direction. How can boards become better strategic partners? As credit union board directors learn during their first onboarding session, directors carry fiduciary responsibilities and bear ultimate responsibility for ensuring the safety and soundness of their credit union. But fiduciary responsibilities are often where board meetings go to die. It is so easy to fall into a “report-out” agenda with Q&A that takes up all of a board’s time and energy deliberating over what happened in the past. Boards must also devote their time to strategy. And strategy is all about the future. In order to fulfill their role as leaders of their credit union, boards must provide strategic focus and direction. In Quantum Governance ’s The State of Credit Union Governance, 2020 study, we asked What are the skills that add the most value in the Boardroom? The top answer from leaders was “Ability to focus on the future” with 76% of respondents checking that box. Boards can begin supporting strategy by developing and applying their long-term perspective to help prepare the credit union for the future. Dialogue on strategy should be ongoing, not reserved solely for the annual strategic planning retreat. Are you finding ways to keep directors informed about the future of financial services so they understand emerging risks and opportunities? Do your board meetings have substantial blocks of time dedicated to strategic dialogue? Are board directors equipped to ask future-oriented questions that enhance planning and preparedness? Returning to those fiduciary obligations, boards are typically well versed and skilled at risk mitigation for safety and soundness. But risk also comes in another form: the judicious taking on and managing of risk to gain strategic advantage. Every strategic plan includes risk! Strategic boards understand that addressing risk taking in a mindful and calculated manner is an essential element of strategic planning. A failure to pay attention to risk taking hampers a board’s ability to provide both fiduciary and strategic oversight. Consider, for example, how a credit union might advance a strategic goal by taking on more lending risk. Would extending loans to lower grades deepen member engagement, contribute to growth goals and support the mission? Or will it over-extend your lending team, balloon charge offs, and damage your reputation? What is the right balance to strike? This type of deliberation is best addressed when a board and CEO/senior management are working in concert. I am not suggesting boards take the strategic planning steering wheel out of the hands of their CEOs! Boards need to know their lane. For example, operational planning still belongs to the CEO. Boards should endeavor to engage in regular dialogue with their CEO/senior management (and likely others) on high-level strategic matters. Boards can provide constructive feedback and help ensure accountability. Credit unions enjoying a healthy constructive partnership between the board and CEO are likely to make better strategic decisions. If we are to take Ike’s and Jennifer Aniston’s quotes at their word, credit union boards would do well to learn how to contribute to their credit union’s strategic planning. Boards that understand and support their credit union’s strategy and the risks being taken can help create parameters that foster greater operational agility for staff. The benefits can make the difference between a credit union set to thrive in spite of an unknown future versus one slowly drifting into irrelevance. Strategic boards provide the kind of understanding and support that empower CEOs and their teams to execute the strategy more nimbly and confidently. Planning is indeed everything, and boards should play a central role. When that unexpected storm blows in your face, the planful credit union will be able to review the options that were developed, pivot, and keep moving forward. All with the confidence by staff that their board understands the game plan, the risks being taken, and has their back. 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