How to Spot a Board in Trouble (An Incomplete Listicle)

By Tim Harrington and Kevin Smith

This is not a comprehensive list. In fact, we’d like to hear from others the things that they’ve seen or what they look for. We’re sure our smart readership has some things to add. This is also not a checklist. We’re not suggesting that once you’ve identified all eight of these you’ve found your troubled board. (Notice that some of these are countervailing.) But these are things that show up regularly and have been present when dealing with troubles.

How to Spot a Board in Trouble, Red Flags

How to Spot a Board in Trouble

 

  1. No turnover on the board – Why? Lack of desire for change? Lack of recruiting? Difficulty in recruiting? Contentment with the status quo?
  2. Heavy turnover on the board – Again, why?
  3. No diversity on the board – this means you really don’t represent the demographics of your membership. (We doubt your field of membership is made up exclusively of 67-year-old white dudes.)
  4. The CEO attends all committee meetings – Is this the board’s overreliance on the CEO? Or is this the CEOs inability to let go of control?
  5. No executive sessions – This suggests that there is a lack of trust somewhere (or a lack of understanding of executive sessions). See our blog post about this topic.
  6. Same chair for the last 20+ years – This is a red flag about resistance to change. (This could be a chair that has been begging for years for someone else to take the helm, which is also a red flag.)
  7. Four CEOs in the last five years – Not long ago we talked about the “rebound” CEO, which means it’s very possible to have had three CEOs in the last five years and that’s only a bump in the road and not a red flag. But the minute you reach the number “four” this is a giant red flag.
  8. All of the board members are from the single SEG sponsor (even though the CU has had a community charter for years). Do we have to explain this one? See #6.
How to Spot a Board in Crisis

How to Spot a Board in Crisis

Some of you are going to disagree. We’re fine with that.
Some of you are going to point out a piece of anecdotal evidence that contradicts what we’ve said above. We’re also fine with that, and we still strongly make our claim despite your story.

Let’s duke it out and talk about it.

Yes. Context is everything. These are red flags that cause us to explore, and ask more questions.

Any questions? Any answers? Anyone want a mint?

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2 Comments

  1. “Same chair for the last 20+ years – This is a red flag about resistance to change.” I agree with almost all of your points. This one I don’t understand. Nobody says “the same CEO for the last twenty years- Wow a red flag!” They say “the same CEO for the last twenty years- look at the performance of the credit union! If it is great he can stay another twenty. The same is true of directors we never seek term limits for executves while they perform, only directors! Why, when we have good and poor performers in both categories should good CEOs can stay forever but good directors should move on after a set time?

  2. Tim Harrington

    Hi George, good to hear from you and thank you for commenting on our blog. I’ll first share a quote from Ike Eisenhower, “All generalities are false, including this one.” Our comment about long-term chairs is a generality. However, it is built upon 30 years of working with boards. Two issues that often, though certainly not always, come with a long-term chair are 1. Power becomes crystalized or centralized in the chair position; and 2. Other directors become disengaged and leave the much of the board work to the long-term chair.

    While this may not ring true at your credit union, I can tell you that it happens far too often.

    We believe that the board is most often best served when every “appropriate” director has a chance to serve as the chair. We don’t believe in rotating the chair position, because not every director will be a good chair. But if they have the appropriate skills and temperament, the chair position can be moved around. As I’m sure you have learned, the chair is in a unique position to have more interaction with the CEO, usually sees more data than the rest of the board, has unique interaction with fellow directors and simply learns a more about the credit union and about effective governance than other directors.

    Our experience tells us that when there is a position limit on chair terms, and the chair position is “re-shuffled” every 2 to 4 years, a board ends up with more directors who are experience and informed. Also, if a chair is unavailable or must leave the board, there are experienced ex-chairs who can step in. When roles become calcified and not moved around, other directors can become disengaged. This can often result in ‘rubber-stamping’.

    Regarding term limits for directors, we do NOT recommend this. Director term limits simply change boards but do not necessarily improve them. Board Evaluations and Alignments improve boards. But position limits for the chair? Well we stand by that recommendation.

    I know our generalization has flaws, but my experience tells me that it is generally true. You may see this differently, and I respect that. We recognize that there are many organizations with long-term chairs who are very progressive and effective. So we know our generalization is not always right. Each board needs to look at its system and ask, “Is this working well for our organization?” As you have pointed out, the real question is effectiveness. A long-term CEO could be effective or ineffective. If the CEO remains effective and changes with the changing market demands, they can stay forever. At the board level, it is about effectiveness too. I think the real key is to ask the CEO and other directors. They will usually speak their minds and let us know if re-shuffling may be best.
    I hope this helps you understand our stand on this issue.

    Tim

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