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< 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

< Back Who Needs A Shadow Board? Jennie Boden Jun 25, 2024 Add younger employees and members directly to your C-suite and board to benefit from their skills and knowledge today. I read with interest a Fortune article entitled “ Companies are turning to ‘Shadow Boards’ to keep in touch with the real world .” The author, Lila MacLellan, defines a shadow board as “a committee of typically younger employees who come together within a firm to advise the management team on key topics, such as company culture, product marketing, trends in technology, and sustainability efforts.” She continues, noting “They are not an official board, of course, but their views often supplement those of experienced, much older corporate directors and C-suite leaders. “These advisory groups give some businesses insight into their customers’ tastes and passions.” MacLellan reported that companies like The Body Shop have embraced the trend, and her colleague, Fortune ’s Orianna Rosa Royle, recently found that The Body Shop developed its shadow board, with its members aged 30 and under, “when it became aware of the gap between the company’s youngest workers and its leadership team and directors.” After reading the article, a colleague of mine posed a logical question: “Would shadow boards be a good strategy for credit union?” The question made sense. After all, our own 2023 State of Credit Union Governance recently found that 89% of credit union board members are aged 51 or older, and the average age of most credit union members in North America is 53. But here’s the thing. Creating another board isn’t a ready-made solution to the problems of an aging board and membership. In my mind, it’s simply a workaround. In our work, we’ve found that most credit unions struggle managing the governing boards that they already have. Many credit union boards have failed to evolve their governing roles and responsibilities even as their credit unions have grown around them—from financial institutions with assets of $250 million to those with well over $1 billion; some face challenges with that ever-elusive balance of authority between the board and the CEO and still others are still lingering “in the weeds” too much, not finding their stride in being strategic thinkers. Marie Kondo has ushered in the era of “tidying up,” not “cluttering up.” You must attend to that which you have, and like I said, too many governing boards are already flying under the radar, receiving too little attention. Why add another? Instead, add those younger employees and members directly into your C-suite and onto your governing boards— of course, given that they meet the requisite qualifications . Don’t keep them waiting in the wings until they reach some magical age where you deem them acceptable for full service. Benefit from their skills and knowledge now. A Gen Z member of our team recently sat in on a webinar proclaiming to share insights into the mind of the Gen Z credit union member. It was taught by two individuals in their 50s. In. Their. 50s. To be fair, our team member said they got some things right, but they also got a lot of things wrong. After, we asked her to present to our team what she thought that members of her generation were looking for from their financial institutions. You know what she said? Hope. To learn more about what Gen Zers really think, read this May blog from Quantum Governance’s governance administrator, Lauren Paradise. Previous Next

< Back A Cautionary Tale of Risk Management in This Time of Bank Failures Gisele Manole Mar 30, 2023 Defining roles and responsibilities and continuing education help ensure appropriate coverage. While the news surrounding the failings and futures of Silicon Valley Bank and Signature Bank remains in the headlines, we are learning a great deal about the role that rising interest rates, cryptocurrency and governance played in each organization’s demise. The federal government reacted quickly to minimize panic that might have destabilized the entire banking industry, and National Credit Union Association Chairman Todd Harper was quick to assuage the fears of our nation’s credit union members, saying “No one has ever lost a single penny of insured share deposits within the credit union system.” And while there is much debate about who or what is ultimately at fault, there are important lessons to be learned from these examples about the risk management responsibilities inherent within your own credit union’s system of governance. The International Organization for Standardization defines risk as “the effect of uncertainty on an objective”—a direct correlation to a credit union’s strategic plan. A secondary definition of risk is simply, “managing uncertainty.” This perspective brings front and center the human dynamics at play in measuring and managing risk. And while enterprise risk management can be clearly defined by the Committee of Sponsoring Organizations of the Treadway Commission, each individual credit union must have its own understanding of risk, or more specifically, its appetite for organizational risk. Ensure that your board, in constructive partnership with your CEO and senior management, has defined an explicit risk tolerance statement that indicates the level of risk your credit union is willing to take. Who’s Responsible for Risk Management? Remember that risk management is not the responsibility of just one entity within your credit union; it should not solely fall upon the shoulders of your internal auditor or your supervisory or audit committee. It is a function of your board, CEO, internal auditor, senior management, and the supervisory or audit committee working in constructive partnership. The board approves the credit union’s risk profile and oversees its ERM program. However, the risk profile itself is developed by the credit union’s board, CEO and senior management during the strategic planning process. Address risks in your strategic planning process by scanning your credit union’s internal and external risks. Does your credit union have a charter for its board-level risk management committee and a job description for its members? Like all best practices, this one is essential. Clearly defining roles and responsibilities around risk management ensures appropriate coverage and a system of checks and balances that won’t leave the credit union unnecessarily exposed. Additionally, a job description will ensure you have the right talent with a collective finger on the pulse of what is happening in our world that will impact the credit union and present opportunities for growth and failure alike. Uncertainty about whether your credit union has the right people in the right seats may indicate a need for a director’s skills assessment that can recommend further education and training. Look to Committees and Director Development Allen DeLeon, CPA, founding partner of DeLeon & Stang , and adjunct consultant with Quantum Governance, advises boards to ask whether their management-level asset/liability committees and board-level finance committees are meeting regularly and having robust conversations about liquidity and asset/liability management. “Make sure that both members of the board (through your finance committee) and senior management (through ALCO or ALM committees) are knowledgeable and experienced and that you are monitoring your rates during this time while the banking sector is under some level of instability,” he says. Lastly, once you have the best and brightest serving your credit union, ensure that you have continuing education requirements and resources at the ready to help your ERM committee stay on top of the shifting sands of cybersecurity, cryptocurrency, regulatory changes and interest rate hikes. To help you in your risk management efforts, you can purchase Quantum Governance’s ERM Policy , which is part of our library of policies, charters, procedures and job descriptions. Previous Next

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

< Back Make Your Voice Heard Jennie Boden Nov 17, 2023 Speaking up can be scary, especially if you’re the only woman in the room, but it’s important to call attention to problematic behavior in the workplace. I recently observed credit union CEO introduce a new, young, female staff member to a predominantly male board of directors. The male board members lined up to welcome her—a new staff member they hardly knew—with a hug. In my follow-up conversation with the board chair and CEO, I was amazed to find that the male board members, as well as those in leadership, didn’t seem to realize there was anything wrong with this interaction and how they were collectively objectifying the new staff member. Though we have undoubtedly made significant improvements in moving towards gender equity, power differentials between men and women—particularly in governance and leadership spaces—are still painfully real. I see this regularly in my interactions with credit union boards and leadership. This spring, I facilitated a session with another board where there was only one female director. This female board member, who also served as the chair of the governance committee, absorbed all the tasks being delegated to her by her fellow board members, all of whom were men. No one else was taking ownership of any of the to-dos coming out of our working session. Again, I talked with the board chair and CEO about my concerns in a follow-up session. These two situations are teaching moments for women in traditionally male-dominated spaces. While the credit union sector has taken steps to diversify its leadership, most board members in our field are still white men. Many of them are older as well and unaccustomed to reflecting on how their actions and habits resonate in spaces with women in leadership roles. Gender bias, or gender-informed behavior, can happen under even the most kind, thoughtful, open, progressive leadership. It can happen with male and female leaders. It can happen even if you have eliminated traditional, gendered power dynamics in your personal relationships. I’ve also worked with male leaders who are willing to reflect on how women are—or are not—set up for success as directors on their board or as members of their staff. In meetings, they’ve reflected on their role as leaders and how they could do better to eliminate power differentials in these spaces. Unfortunately, these conversations often stay just that: conversations. When we face these types of scenarios, it can be difficult to speak up. Sometimes the best way to address the problem is with a follow-up conversation. It’s wonderful when we can speak up in the moment, but we women often lose our voices even when we know something isn’t right and when we know we should say something. We’re afraid of being seen unfavorably by male-dominated leadership, of being passed up for opportunities, of being considered “difficult.” I know these challenges very well, and such fears are not unfounded. As Francesca Gino writes in Harvard Business Review , “Speaking up can also result in negative performance evaluation, undesirable job assignments, or even termination. Most people are aware of these potential costs; as a result, most stay quiet about bias, injustice, and mistreatment.” However, psychologist Catherine Sanderson, writing for Greater Good Magazine , deftly explains why inaction is both contagious and dangerous. She says: “When facing an ambiguous situation, our natural tendency is to look to others to figure out what’s going on. But here’s the problem: If each person is looking to the people around them to act, and no one wants to risk feeling foolish and embarrassed, the problematic comment or behavior may be left unchallenged.” While I know it can be challenging to make your voice heard in these situations, take a moment to find your power. This power can be in yourself—in speaking up—or even in just interrupting the moment by saying “Hmmm,” while you consider what to say next. It can be in allies you have in the room, who can help you hold others accountable. That power can manifest in so many different ways. You can gracefully redirect tasks that are being piled on a female colleague to others in the room who can take them on. You can stand by a junior colleague who has become the target for inappropriate behavior to serve as a buffer and demonstrate solidarity. You can gracefully share that specific behaviors are inappropriate. And, as was mentioned earlier, if action isn’t possible in the moment, small gestures—even after the fact—can go a long way. Changing workplace culture is hard work. But you can be the change you want to see. Find your voice and speak up! Previous Next

< 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 Nine Leadership Challenges Michael Daigneault Mar 25, 2015 The board of the future will need the strength to overcome these. At Quantum Governance, we’ve been taking a look at what the credit union board of the future will look like and, almost more importantly, the challenges it will face. Ultimately, we have identified nine key challenges that are already (or will be) confronting your leadership. The Composition Challenge. Gone are the days when your credit union can simply rely on a nice cross section of its membership to fill open slots on its board. The most progressive boards today are actively recruiting the talent they need; identifying the skill sets that deliver the talent, connections and expertise they need on the board; and then inviting those individuals to become members of the credit union. The Technology Challenge . The rate of technology is changing at lightening speed. I don’t have to tell you that. But here’s the thing. It’s changing at a faster rate than anything else we’ve ever seen. Faster than political change, business change and even social change in our world. Is your board ready? Is the credit union? The Community Challenge. The very notion of community is being altered by technology. Community is ceasing to be largely defined by geography and more often it’s defined as a sense of belonging. How does that impact your “community” credit union? Indeed, as a credit union member myself, I haven’t set foot in a local branch for more than a decade. What does that mean for your business? Is your board discussing the impact of this from a strategic point of view? The Disruptors . How many of you have heard of Uber? Five years ago, could you have ever conceived of an online reservation ride service? I’m sure the taxi companies in nearly 130 American cities never dreamed their business could tumble by more than 65 percent in just one year, like it did in San Francisco. Uber wasn’t even on the radar then. What’s not on your radar now? It’s difficult to know. And that’s the point. You won’t know. More than 99 percent of the disruptors will fail, but it will only take one to succeed and have a dramatic impact on your credit union’s business. The Demographics Challenge. We love Baby Boomers. First, there are lots of them. Eighty million of them, and they are doers. Board service has been a part of their DNA. But what about the next generation: Generation X? Much has been said about them and most of it hasn’t been good. I happen to think they are doers, too. And very civic-minded, but in a different way. Their way of giving back is more individualistic. When they want to get involved, it’s more on a one-on-one basis. When they want to make a difference, they start their own organizations … forge their own path. And critically, there are 40 million fewer people in Generation X than there are Baby Boomers. If you think you’re having a tough time finding good, qualified and engaged board members now, it’s about to get harder. The Information Challenge. With your iPad and your smartphone, you probably have more information at your fingertips than the entire federal government did 25 years ago. But what matters? What’s important? What information will move your credit union forward? What do you need to know and what is just white noise? One of the key challenges for credit unions is not a lack of information, but rather the volume and variety of data available. The current flood of information can be like trying to satisfy your thirst with a hose attached to a fire hydrant! The Complexity Challenge. This challenge is related to The Information Challenge and every credit union will face it. It’s a distinct moment in time – that moment when the abilities of a credit union board are overcome by the increasing quantity and complexity of credit union regulations, responsibilities and requirements. There is more and more expected of you and your colleagues as directors. The demand for your knowledge base is only continuing to grow. The Risk Challenge. There’s a great book titled Competing for the Future , in which the authors say organizations that “create the future are rebels. They’re subversives. They break the rules…Foresight often comes not from being a better forecaster, but from being less hide-bound.” It comes from breaking free from your mold, from taking more risks. Is your credit union board “hide-bound?” Are you stuck? My guess is that you and your board colleagues spend more time on the lower end of the risk spectrum – most credit union boards do. But, if you’re going to grow … if you’re going to forge the future, maybe even be a credit union disruptor yourself, you’ll need to learn how to effectively balance two abilities: 1) understanding, identifying and mitigating risks to the credit union; and 2) tolerating the risk that will enable you to grow. The Impact Challenge. It’s not enough to keep your head down and do good work. You have to not only keep your head up, but you have to get out. The Impact Challenge requires that you foster relationships, as leaders and always in constructive partnership with your CEO, with external stakeholders to have the greatest impact. And that goes far beyond your membership to include governmental representatives, local businesses and, yes, even other credit unions. To face these nine challenges successfully, your board will need to regularly strengthen its leadership and governance abilities. You can do it! Previous Next

< Back Un-Cage Your Thinking Michael Daigneault and Caitlin Hatch May 24, 2016 Good Credit Union Performance Doesn't Equal Good Governance Board members and CEOs frequently ask us: “Do we really need to focus on governance?” Before answering, we ask: “What’s behind your question?” The most common response we receive is, “If it ain’t broke, why fix it?” That is, many assume their governance is effective largely because the credit union’s “numbers are good.” When we suggest “just because a credit union is performing well financially, it doesn’t necessarily mean the credit union is being governed effectively,” we get a lot of blank stares. Our perspective comes as a surprise to some. If the credit union is “doing well” and the board is responsible for the credit union, then doesn’t that mean the board is doing its job effectively? In a word…no. Without a much deeper analysis, simply equating “good credit union performance” with “good board performance” or general “good governance” is leaping to an unwarranted conclusion. Of course, to many board members, it feels perfectly natural to make the leap. That’s because it is a result of how we, as humans, are designed to work. In some situations, making a quick analysis is perfectly appropriate. In others, it can lead to flawed decisions. So, why is the “natural conclusion” unwarranted here? Well…it could be the credit union is blessed with a great CEO and management team who are doing a terrific job – dare we say it? – despite the board! Or, it may be the credit union is fortunate enough to be benefiting from a strong economy. Or, it could be there is a long lag effect and decisions made five years ago are what improved performance. And, yes – it could be the board’s leadership is actually contributing to the credit union’s performance. It’s just that “good governance” is too complex a conclusion to simply reach from “good financial results.” So why do we do it anyway? We instinctively try to create some type of order out of our environment and our experiences by finding meaningful patterns and connections in acts, decisions, and the results that flow from them. We do this because we are designed to do so. Only by being more conscious of (1) how our own minds work, (2) being more aware of what connections we are consciously or unconsciously making, and (3) determining what facts are truly related and relevant to the issue at hand, can we avoid some of the thinking traps. Below are just a few of the tricks our brains regularly play on us while we are trying to “make sense” of our world. They are so subtle and so ingrained we are frequently not even aware of them. By calling them out, by asking each other the hard questions that must be asked at the fiduciary, strategic and generative levels, credit union leaders can together minimize the impact of the tricks our brains can play on us and, thereby, make better decisions. Seeing connections that may not be there . We can all take a little bit of information and build a story linking the bits of information into a simple explanation for what may be a very complex reality. But we don’t always have enough facts, and sometimes we aren’t even asking ourselves the right questions. Is good financial performance the same as good governance? How is the board directly contributing to the credit union’s success? Even if we can’t answer the questions, maybe by being aware the answers shouldn’t be based on an assumption can lead to better discussions, better decisions and a better understanding of what the board is actually contributing to the success of the credit union. Personal bias. We all filter facts through our own experiences so we better understand them. When others perceive our thoughts as open and relevant, we may be viewed by others as wise, aware or even empathetic. When our minds are already made up, when we don’t listen, many view our thinking in terms of a “personal bias.” We need to do all we reasonably can to be aware of our own biases and assumptions and try to be genuinely open about seeing the world differently. The halo effect. Our overall impression of something influences our feeling and thoughts about it, and it can work for you or against you. Take the city of Las Vegas, for example. People tend to either love it or hate it. The halo effect goes beyond a personal bias because you can have an opinion about Las Vegas without ever having been there. This effect can be so strong it can outweigh the facts, especially if they don’t agree with strong feelings or assumptions. Anchoring. We tie thoughts and feelings to a piece of information and then apply it to another piece of information, even if the two things do not have anything in common. We tend to apply specific facts to general circumstances. That first piece of information becomes the “anchor” around which we perform our analysis. Consider a credit union board that bases its discussions on “how we used to do it,” and uses that filter to make decisions for the present day. The analysis is “anchored” to a prior experience that may have little or no relation to the needs of present-day members. The endowment effect. It’s likely you’ve done this one, too. Have you ever assigned more value to your own abilities than others’ abilities? We all tend to think we are better than average. Study after study notes anywhere from 65 percent to 85 percent of people think they are “better than average.” Confidence can be a good thing, but that many people can’t be better than average, it is mathematically impossible. Boards—yes, even your board—may unconsciously assign more value to its efforts than the impact warranted. Your board may be one of the majority of credit union boards that would rate itself as “better than average.” Loss aversion. Credit union boards are notoriously risk adverse. Many strongly prefer avoiding loss to the risk of acquiring gains – or even serving members in better ways! Our focus on avoiding future loss can cause us to overestimate how truly risky some actions are. Being prudent is a good thing, but being extremely conservative can be the riskiest approach of all! These are six examples of how we typically think. This instinctive thinking is one of the things that makes us human, and it is embedded deep within us. But when thoughtful analysis is required, we may get led astray by our instincts. We suggest being aware of the reasons underlying your judgments and actions can help you and your colleagues make better decisions about what you do and how you do it for your credit union, your members and the communities you serve. 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 Two Of The Five Top Questions Board Chairs Have Michael Daigneault and Jennie Boden Oct 23, 2018 1. Should chairs vote? 2. What’s the best way to ask a director to move on? Quantum Governance recently had the privilege of spending a few days with nearly 100 credit union board chairs, vice-chairs and others when we conducted the Board Chair Development Seminar for CUES in Amelia Island, Fla. In this article, we put forth two of the top five questions we learned were on their minds and make an attempt to answer them. Question 1: Should board chairs vote on all regular matters? This first question surprised us. We were amazed to find that 50 percent or more of the board chairs in attendance said they didn’t vote unless there was “a tie in the boardroom.” Remarkable. They, in turn, were stunned when we told them that this practice was simply wrong. Digging further, their assumptions behind their abstention made some sense and evidenced an important desire for fairness. For example, they were concerned that: “A board chair, in expressing his or her opinion, might unduly sway the will of the whole,” and “Our board chair is the most senior member of our board and everyone looks to him; it wouldn’t be fair.”These are valid points, and we wholeheartedly agree on the need to ensure fairness and the ability to hear everyone’s voice in the boardroom. However, even board chairs have rights! The No. 1 question on Robert’s Rules of Order ’s online FAQs is: “Is it true that the president [also meaning chair] can vote only to break a tie?” Robert’s Rules of Order says “No, it is not true that the president [again, here, they also mean a chair] can vote only to break a tie. If the president is a member of the voting body [which the board chair of a credit union is], he or she has exactly the same rights and privileges as all other members have, including the rights to make motions, to speak in debate, and to vote on all questions ….” When you and your colleagues on the board address conflicts of interest, your efforts are not about eliminating them, but mitigating them. Similarly, your board chair not only has rights, but also a governance duty to independently express his or her opinion on matters before the board. He or she should also share experience, thoughts and perspectives which you likely want to consider. Follow some basic steps and you’ll be fine: Elect individuals to the role of chair who can be fair, objective facilitators. Ask the chair to share his/her thoughts at the close of the discussion, not at the beginning. Unless the vote is a private ballot, the chair’s vote should be rendered last. (Note that we found this voting issue to be so important that we’re working on a full white paper on this topic, and it will be published soon!) Question 2: How do I talk with a board member about moving on? In our recently released State of Credit Union Governance, 2018 , 74 percent of respondents reported that their boards are effective or very effective at having the right mix of skills or experience to accomplish its governance roles and responsibilities. And yet, still, asking a board member to move on remains one of the top issues on board chairs’ minds. We get it. It’s a hard one. Without term limits in place at many credit unions, board members may serve far beyond their time. We know it sounds harsh, but it’s true. We had a client once warn us that there were one or two members on the board that might have dementia, but they did not ask them to move on for fear of upsetting them. From a human perspective, we understand it. But from a governance perspective, one has to ask whether those board members are able to aptly fulfill their legal duties and governance roles and responsibilities. We offer these five tips to help you engage in the hard conversation when it’s time for a board member to transition off your board. Have your chair, along with at least one other trusted board member, engage in a private conversation, and: Be respectful and open; approach the conversation with a genuine desire to learn. Try to understand where the board member in question is—what his or her perspective is and what might make a transition easier. Focus on what you’re hearing and not on what you’re saying. This isn’t about you. This is about your board member. People will respond better if they are feeling heard. Be direct and get to the point. We know it’s a hard conversation, but don’t “beat around the bush.” Don’t put it off! When you know that you need to have the conversation, have it. You’ll be doing everyone a favor. Don’t wait until you get to the point of having a member with dementia—even possible dementia—on your board. Expect a positive outcome, even if that outcome may be that the board member moves on; it could be good for him/her and the board. Not all transitions are bad. Don’t assume that the outcome will be bad for the board member. Look for a graceful exit and transition for all. We felt that all five of the top questions on board. chairs' minds were vital—and that if they were on the minds of the board chairs, they were likely on the minds of other directors and CEOs, too. (Are they on yours?) Previous Next

< Back Understanding the Importance of Ethics Michael Daigneault and Jennie Boden Nov 28, 2017 Principled leadership is a vital part of any cooperative’s DNA. For many years, my focus was on ethics – particularly organizational ethics. As an undergraduate at Georgetown University, I majored in philosophy and minored in psychology. My father thought it was imprudent to follow such a course of study, but I persisted. As such, I studied many of history’s greatest ethicists. I went on to law school, immersing myself in the study of law and justice. My favorite class was…yes, legal ethics. (Many of my law school colleagues were convinced something was seriously wrong with me at this point.) I then decided to double down and became the first person to receive a Masters in Law from Georgetown University Law Center with a concentration in Legal Ethics and Professional Responsibility. I went on to found a consulting practice called “Ethics, Inc.” and then served as President of the Ethics Resource Center – the nation’s oldest, independent ethics center. I even had a license plate for my car that read “Ethics 1.” It’s safe to say, ethics was a really big part of my personal and professional life! And then…my central focus shifted. Over the course of my early career, I witnessed ethical lapses in both for-profit and nonprofit organizations that were attributed (by their senior leadership) to the actions or decisions of a “rogue employee” or “bad person” in their midst. Occasionally this was the case, but often it wasn’t the whole story. In helping many institutions in their quest to address the difficult ethical questions or situations that confronted them, I came to realize that many of their so-called “ethical challenges” were actually – at their root – issues of governance. As a result, in 2012 I️ and my wife, Alessandra, created a new limited liability low-profit firm dedicated to the public good firm – Quantum Governance, L3C – that reflects a substantially broader governance and leadership focus. (And yes, I also have a new license plate – which now reads “QNTM GOV.”) “A fish rots from the head down.” It’s a cliché, yes, but it’s a cliché because it’s repeated so often; and it’s repeated so often because it’s so often true. What I have continually observed over the years is a failure of genuine leadership at the Board or senior management level. These failings frequently resulted in organizational cultures that ignored (or even encouraged) unethical or unprincipled decisions. The likely causes were as varied as the organizations I came into contact with…a lack of clarity around tradition-bound leadership roles and responsibilities…too much authority in just a few individual’s hands…lip service by leaders to an ideal – and then actions to the contrary…the absence of proper boundaries…a lack of transparency and – yes – sometimes a systemic failure by leadership to set forth the ethical standards (and then clearly communicate, model and reinforce them) that are a vital part of a sustainable organization’s DNA. To govern is to steer, direct and influence or persuade from a position of authority. It includes at the very least both the Board and the Management team, and it addresses both their formal (directional and policy setting) and their informal (influence and persuasion) forms of authority. Ultimately, governance deals with the legitimate distribution of authority throughout a system – whether a country, corporation or nonprofit. As such, does governance include ethics? Yes! But just because you’re getting your “governance house in order” doesn’t necessarily mean that you’re paying sufficient attention to your ethics culture, standards and practices and that you’re regularly working to instill them throughout your credit union. At Quantum Governance, we are ever-mindful that there are a lot of things resting on the shoulders of today’s volunteer and staff-led credit union leadership, but we are growing more convinced that a first-in-class ethics program should be among them. Previous Next

< Back An Antidote For Shifting Sands Michael Daigneault and Jennie Boden Sep 24, 2019 Your strategic planning process is as important as the plan and should be ongoing. Recently, Henry Meier, SVP/general Counsel at the New York Credit Union Association penned a blog addressing “ Why D.C.’s Policy Pronouncements are the Key to Economic Growth .” In it, Meier discusses the shifting sands of today’s political environment, as well as the state of our economy and how “We are now more dependent on Washington than ever before.” The business environment in which your credit union operates is, to say the least, complicated. Beyond the challenges that emerge from Washington, you are likely faced with growing competition, shifting demographics, technological disruption, as well as the potential for an economic slowdown or recession. What else would you add to your list? Challenges with board succession? A CEO transition? A core conversion? How prepared is your credit union to meet these challenges? Do you have a solid strategic plan in place? What about your process? We think the process, in these turbulent times, is nearly as important as the plan. There are four common strategic planning processes that you and your colleagues can adopt: A traditional planning process would have you identify where your credit union is today and where you want to be in the future (for example, three to five years from now). Then, you create a disciplined timeline, set of strategic goals, milestones, and financial and other resources needed to get there. The only problem with this process is that stuff happens. Presidents implement tariffs. Timelines for core conversions drag on. You get the point. Scenario planning allows you to plan for a number of different potential futures or scenarios on a contingency basis. The challenge here is that it’s much more time-consuming because of all of the time required to create and consider alternative scenarios (and accompanying plans)—many of which are sometimes necessary, particularly in an unpredictable world in which very different futures may unfold. In phased planning , it’s understood that the world may change quickly and, therefore, it’s difficult to plan too far into the future. Accordingly, the phased approach tries to break up the strategic planning process into manageable periods (or phases) of time. The downsides to phased planning are that you can lose sight of longer-term goals and default to a form of operational planning. Cyclical planning combines best practices from all three of the above methods—It’s “real-time,” “continuous” or “ongoing” strategic planning. To quickly put you at ease, cyclical planning does not mean that you are re-creating your strategic plan at every board meeting or even every year. What it does mean is an important change in the mindset of both your board and your management team. It means that strategic planning is regarded not as something separate from the board’s governing duties, nor is it separate from management’s responsibilities. It means that strategic thinking and planning are core elements of your board’s and management’s responsibilities. It means, therefore, that your board and management are holding meaningful strategic discussions on an ongoing basis—throughout the entire yearly cycle of board and committee meetings. (And that these discussions go beyond merely an update on how you are doing on the metrics.) It means there is no designated start and end to “the plan.” It is thoughtfully considered—and modified if need be—over time. It means that as the sands shift in Washington, China or in your backyard, your credit union’s board and management team are prepared to react—quickly and in “real time” to meet the credit union’s changing strategic needs. Previous Next

< Back Transitions of Power Jennie Boden Jan 26, 2021 A perfect time to re-evaluate your organization and its direction is when a key leadership shift is on the horizon. The recent transition of power in our country got me thinking about transitions of power in credit unions—both at the board and CEO levels. I think as a community, we give the most thought to CEO transitions, and this is definitely smart. The CEOs of many credit unions have been around for years, even decades. These CEOs have shepherded their credit unions through incredible growth, sometimes from managing receipts in a shoebox to managing billions of dollars in assets. The change that CEOs have experienced in their credit unions over these years, even if their growth has not been quite that phenomenal, is substantial—just as significant as the change that the credit union community has seen. And it’s important to step back and take the time to think about the future before the critical transition of power needs to take place from one CEO to another. It’s important, as a long-tenured CEO prepares to depart, to re-evaluate the credit union’s future direction, even the future direction of the board. What you needed and wanted from your CEO 10, 20 or even 30 years ago is, by definition, different than what you will likely want and need today. And clarity is key. Be honest. If you’re a risk-averse board, hiring a progressive CEO could be a non-starter. You’ll be clashing before your first board meeting. Chair-to-Chair Transitions Board-level transitions of power are just as important as CEO transitions. The transition from one chair to the next is far too often overlooked from a strategic point of view. Perhaps it is because it happens with greater frequency, but we take for granted that every member of our board will know how to take the gavel in hand when it’s her or his turn, and that’s simply not true. Not every board member is cut out to be the chair, just like not every board member would make a great treasurer, for example. (I know that I wouldn’t make a good treasurer!) And sometimes, certain individuals would be best suited for specific moments in time. A board member who has experience with mergers and acquisitions, for example, would be terrific if organic growth falls last among your strategic priorities. We’ve also seen some credit unions place their officers on a moving conveyor belt, rotating individuals through the four positions every year or even two. This also doesn’t support a healthy transition of power. By the end of year one, like in most jobs, the officer is just learning the position and putting solidly into place the relationships that they need to govern. By the end of year two, things are just beginning to click, and then the rotation begins, and the process starts all over again. Consider a four-year term to allow for a healthier transition of power, on-the-job learning and a few years of smooth sailing. Reflection on Your Organization and Its Direction Finally, take these important transitions—each of them—to pause and learn more about your credit union and what you want it to be in the future. Reflecting on your vision, mission and strategy when a new CEO transitions into the credit union or revisiting the board’s governance structure, policies and procedures after a three-to-four-year period is prudent. This is not to say that we don’t support a consistent, rigorous schedule of self-reflection and even self-assessment—we do. But in particular, transitions of power—both within our country and within our credit unions remind us, as the nation’s new favorite poet reminds us: “And yes, we are far from polished far from pristine but that doesn't mean we are striving to form a union that is perfect. We are striving to forge a union with purpose…” - Amanda Gorman Previous Next