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The 600-Dollar Question: When Board Oversight Becomes Death by Interrogation

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There is a moment that happens in credit union boardrooms across America. It is the moment when a well-meaning director leans forward, adjusts their reading glasses, and asks the CEO: “Why did we spend six hundred dollars on those new break room chairs?”

by That One Consultant You Hired and Then Ignored 

The CEO—who has spent the past week negotiating a $40 million loan participation, managing a core system migration, and quietly talking the compliance officer off a ledge—takes a breath. A long breath. The kind that has a legal team and a therapist on speed dial baked into it.

This is not governance. This is archaeology. And unfortunately, it is extremely common.

The Oversight Paradox

Here’s the dirty secret about board oversight: done poorly, it doesn’t protect the organization. It quietly suffocates it.

Oversight exists for excellent reasons. Boards are the stewards of member assets, the guardrails of institutional integrity, and the last line of defense against the kind of strategic disasters that end up as case studies in graduate school. Good oversight is invaluable. Necessary. Even heroic, on a good day.

But there is a version of oversight that has drifted—slowly, with the best of intentions—from “strategic accountability” into “interrogating the invoice for printer toner.” And that version is doing real damage.

The paradox is this: boards that ask too many small questions are usually avoiding the big ones. It’s easier to audit the break room chairs than to have a difficult conversation about whether the five-year strategic plan reflects anything resembling current market reality.

*To dig in further on why we do this, revisit our blog on “Bikeshedding and Boards.” It’s our brain’s fault.

A Field Guide to Interrogation Styles

For identification purposes, here are the most common species of oversight-gone-wrong, observed in their natural habitat:

  • The Archaeologist. Asks detailed questions about decisions made six to eighteen months ago. Loves phrases like “Wait, when did we approve this?” Finds comfort in relitigating the past, possibly because the past is safer than the present.

 

  • The Micromanager in Disguise. Frames operational questions as governance concerns. “I’m just asking” is their signature opener. Recently wanted to know why the CEO chose FedEx over UPS for a document shipment. (True story. Or close enough to be true.)

  • The Second-Guesser. Waits until a strategic decision has been made, implemented, and is showing early results—then raises concerns about it. Thrives in hindsight. Has strong opinions about the road not taken, mostly because they don’t have to drive it.

 

  • The Gotcha Questioner. Doesn’t actually want an answer. Wants to demonstrate that they spotted something everyone else missed. Questions arrive pre-loaded with implied conclusions. “Isn’t it true that…” is a preamble, not a question.

None of these directors are villains. They are, almost without exception, people who care deeply about the credit union and are expressing that care in the wrong direction. The problem is that their questions consume the room’s oxygen—time that could be spent on strategy, member impact, or the seven other agenda items patiently waiting their turn.

What This Actually Costs

Let’s talk about the real price tag, because it’s considerably higher than six hundred dollars.

When boards slide into interrogation mode, several things happen. First, the CEO and senior leadership start preparing for board meetings the way defendants prepare for depositions. Every decision generates a paper trail not because it’s strategically useful, but because someone will ask. Defensive management is expensive, time-consuming, and demoralizing. It is also, in a tragic irony, the least strategic thing a leadership team can do.

Second, risk appetite shrinks. If every initiative is subject to retroactive cross-examination, smart leaders learn to propose only what’s safe. Bold moves get quietly shelved not because they’re wrong, but because they’re hard to defend under fluorescent lights to an audience with a prepared list of skeptical questions.

Third—and this one is genuinely painful to watch—good CEOs leave. Not dramatically, not all at once, but gradually. They stop bringing their best ideas to the board because the board has trained them not to. Eventually they bring their ideas somewhere else. Often, that’s a different credit union.

The Question Behind the Questions

Here is something worth sitting with: when a board asks too many operational questions, it is almost never really about the operations.

It’s about trust. Or the absence of it.

When a board genuinely trusts its CEO—when there is transparency, consistent communication, and a shared strategic framework—operational minutiae stops being interesting. The chairs cost six hundred dollars? Fine. The CEO made a call, the call was reasonable, let’s talk about the loan-to-share ratio.

But when trust is thin, everything becomes a data point. Every expense is a clue. Every decision is potential evidence of something. The interrogation is really a trust deficit wearing a governance costume.

If your board is regularly diving into operational weeds, the most useful question isn’t “Why did we buy those chairs?” It’s “Why don’t we trust the person we hired to make that call?” That conversation is harder. It is also the only one that actually fixes anything.

What Good Oversight Actually Looks Like

Good oversight asks hard questions—at the right altitude. It is the difference between “Why this vendor?” and “Does our vendor management policy reflect current risk exposure?” One is a transaction. The other is governance.

A few principles worth adopting:

  1. Ask about policy, not purchases. Your job is to ensure the right frameworks exist—not to audit individual decisions made within those frameworks. If the CEO has spending authority up to $25,000, don’t ask about the $600 chairs. Ask whether the spending policy itself is still fit for purpose.
  2. Interrogate strategy, not symptoms. The second-guessing instinct usually points to a real concern buried under an unhelpful question. Surface the real concern. “I’m worried our operating expenses are drifting” is a governance conversation. “Why does the coffee machine cost this much?” is not.
  3. Distinguish accountability from hostility. Accountability means holding leadership to agreed-upon standards, with transparency and fairness. Hostility means treating every board meeting like a deposition. One builds a stronger organization. The other builds a stronger résumé for the CEO’s recruiter.
  4. Build the trust infrastructure. Regular CEO evaluations, transparent dashboards, clear strategic KPIs, and an open-door culture for candid conversation—these reduce the need for interrogation because they replace anxiety with information.

Closing Thoughts: The Right Questions Are Hard

There is a version of your board that asks fewer questions and governs more effectively. That board has done the hard work of building trust, aligning on strategy, and distinguishing its role from management’s. Its questions are rarer, sharper, and more consequential. Its CEO sleeps better. Its members are better served.

And yes, it probably has nicer break room chairs. Because someone made a reasonable call and nobody needed to schedule a follow-up to discuss it.

The goal of governance isn’t to catch the CEO doing something wrong. It’s to make sure the institution does something right.

Those are very different jobs. It’s time more boards knew which one they showed up to do.

Making Your Board Meeting Agenda More Strategic

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Boards can keep their focus on strategy sometimes by tweaking small things like the board meeting agenda. Prioritizing strategic discussion early in the board meeting forces this focus, downplays the operational to the benefit of all involved.

By Kevin Smith

Prompt: An unorthodox board meeting room. From Leonardo.AI

I’ve seen a lot of credit union board meeting agendas. They’re not identical, but they do tend to be pretty similar. It’s pretty common for the consent agenda to be the first item. This can feel like a big  of something accomplished right away – with a whole lot of bullet points underneath! It feels like momentum gathering, right? Now, don’t get me wrong. I’m not knocking the consent agenda. You absolutely should be using it. And if you aren’t go here and explore what it is. It’s fabulous. But I’m going to throw a bit of a wrinkle here and suggest that it shouldn’t be the first item on your board agenda.

Listen to Tim

This concept comes from my partner, the inimitable Tim Harrington. He and I have been spreading this idea whenever possible, and that is to make sure that strategic discussion is the first item on your board agenda. Prioritize it!

Prioritize

Prompt: An unorthodox board of directors meeting room designed by Pablo Picasso. From Leonardo.AI

What often happens is that we like to get a bunch “must do” items checked off of our agenda and out of the way so that we can get to the “big” stuff. Then, inevitably, these perfunctory, “must do” items bring up questions that need answers, and side tracks, and rabbit holes. The next thing you know, you’re at the end of the scheduled time and there’s nothing left for the juicy strategic discussions. Either you’re out of time or out of gas for the most important stuff. And let’s be honest – many of those “must do” check marks lead you into operational weeds, don’t they? (I know within reason that they do because I work with a lot of boards and I hear about it constantly.)

Tim told me about one of his clients that made this simple change to the agenda and the fabulous results that they got. They told him of their inevitable decline into operations with the first couple of items in their agenda and the constant short shrift that strategy got, OR, how very lonnnnggg their meetings became. By putting strategy first, they got to the good discussion, but then were able to “fit in” the rest of the items without devolving into the weeds. It’s efficient in so many ways. They were amazed at how different the tone of the meetings was, and how much better.

No Copy And Paste

Prompt: An unorthodox board of directors meeting room designed by Henri Matisse. From Leonardo.AI

Many of you may be using ctr+C and ctr+V for your agendas and have for a very long time. I challenge you to shake things up a bit. Try something new. Spend more time on the most important element of your job as a director. It’s amazing how some minor adjustments to the nuts and bolts of the job can have such a profound impact on the work you do. It’s important to look carefully and regularly ask, “why do we do it this way?”

Now … don’t get me started on the shape of the table in the board room and who sits where …. A discussion for another time.

About the Images

Naturally, I’m jumping on the AI bandwagon like everyone else. (I’m here to learn.) And since my blog topic was about shaking things up a bit I wanted to see what Leonardo.AI would spit out for me. 

The first image prompt was “an unorthodox board meeting room.” And what you see is pretty M’eh, in my opinion. Yes, it’s got a few out of the ordinary items in there, like the stuffed owl. But otherwise it looks pretty recognizable. The table shape is as predictable as it gets!

The second image prompt was “an unorthodox board meeting room designed by Pablo Picasso.” Now we have some great things to look at but otherwise, it’s still a predictable board room. It looks like the board room for the Picasso Foundation. Booorrrring!!

The third image prompt was “an unorthodox board meeting room designed by Henri Matisse. Now we’re getting somewhere! It’s my favorite, but then again Matisse is my favorite as well. At least the word “unorthodox” carries some weight here. 

Honestly, all three were disappointing. We’re learning that AI has some interesting things to show us, but there are certainly limitations. Maybe I need to work on my prompts? Human creativity is far superior. (But what will these look like in a few years?) 

Board Packet Purge

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Good governance and strategic vision are influenced by the materials that the board sees and hears. It’s important to periodically take stock of those materials to make sure they are not only  aligned with strategic goals, but that they also useful. Boards are often resistant to the board packet purge, opting to add materials, but never reduce.

By Kevin Smith

How many pages is your board packet? Seriously. Go check. How much does that vary month to month? And how many times have you gotten that packet before a board meeting and let out a bit of a *sigh* as you get ready to review it? Be honest. I remember doing it when I was on a supervisory committee. It can be a daunting task. At least we no longer live in the age of paper board packets that take three days for your staff to photocopy and then send out via FedEx. (Please tell me you don’t have paper packets still! If you do, email me privately. We’re going to chat.)

There are very few credit union jokes, but the one that I know is this: “What is the most terrifying sound to a credit union CEO? Answer: The sound of a board packet being opened at the beginning of a board meeting.” :-) 

In some ways the digital board packet can make things worse, because it is so much easier to add reports, data, detritus and links to spreadsheets in the digital realm. This just adds to the volume. Consider how much time the board spends as individuals reviewing dozens (and dozens) of pages each month. You want this to be valuable time.

Take Stock

It’s time to go through the packet and take stock of what’s in there, determine if/how it connects to the strategic plan, and figure out how to winnow things down to what’s necessary and useful. I’m not suggesting that the goal of this exercise is to get the packet as small as possible. The goal is to make it as useful as possible.

What we often hear when advising boards about this process is that they discover a couple or ten reports that are in the packet every month, and always have been, that no one currently on the board knows why they’re there. Often it was something that a former board member asked for years ago that got added, and there it remains. New board members join and absorb the culture of the board and its packet, and presume this is something that they need to know and understand. They simple accept it as part of the status quo. It might be something that was tied to a strategy approach that is long gone. But there it remains. If the board can purge even a couple of items like this, it is moving towards greater efficiency.

Ties to Strategy

The goal of the packet is to inform the board about how the credit union is moving towards its strategic goals and to provide relevant context. Make sure every item has a direct connection at the appropriate level of detail. This level of detail should also evolve, depending on where you are in the process. For example, a brand-new branching strategy will require more detail at the beginning and you will trim it after some time and progress. Avoid having items that are locked in place once they are added. The packet should evolve, expand and contract regularly. It is not static.

Reigning in the Directors

One approach to the packet is to make sure that any potential new additions come to the full board for consideration and a vote before adding them. Also, get the CEO’s very honest thoughts on any additions. This should be a written policy. The board then must force itself to think about how the new information will serve to inform the strategic governance of the board and avoid individuals who just want to see things.

No Perfect List

Of course, I know that what you’re looking for from TEAM Resources right now is the perfect list of items to put in the packet. And of course, you know, if you’ve heard me before, my answer is “it depends.” There is no perfect list. You need to customize this to your credit union, to your strategic plan and to the culture of your board. That doesn’t mean that you shouldn’t take on this project in the effort towards efficiency.

Dashboards

The visual representation of data is your absolute friend here. It’s so much easier and more efficient to have your information in dashboards that show you trends and targets. My snarky response is that I want to be able to take off my trifocals and be able to tell whether the trends are on target or heading astray. If they’re on target, I don’t ask any more questions.

The Arguments

There are a couple of common arguments about slimming down the board packet. One is that the board has a fiduciary duty to oversee what’s happening in the organization and that involves examining the individual numbers. I agree about the fiduciary duty. But once you learn where the numbers are coming from and that you can trust them, then the dashboard is sufficient and efficient. This also helps keep directors from getting too far into the weeds. (I’d also suggest that the auditors are far better at this kind of work than your average director.)

Another argument is that the board should have access to any and all data in an effort towards transparency, so that the CEO or staff aren’t “hiding” something. This is reasonable and it’s easy to link to the deeper data for an occasional review outside of the norm. This is also often where new directors learn the ropes of the financial. Learn it well enough and quickly enough to know what you can ignore. And consider that it is also possible to “hide” things by burying the board in date.

Not a “One and Done”

Over the years, Tim and I have encouraged this process and have seen some success. Remember, this is about efficiency. Make sure your meeting preparations are worthwhile and not mind-numbing reviews of hundreds of pages. So, if you’ve done the packet purge and found efficiencies, don’t presume that you’re done for a generation. Repeat the process every couple of years. The more often you do it the quicker it will be as well.

Strategic Efficiency is the goal. We cannot afford to waste time.

Bikeshedding and Boards

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Boards have made progress over the years in keeping their focus on the strategic and out of the operational “weeds.” But this is an ever-present tightrope walk with many falling regularly into minutia. Our brains may be working against us on this one. Acknowledging and paying attention to cognitive bias will help directors and CEOs keep things on track. It will take some work.

By Kevin Smith

A couple of months ago while preparing for a webinar on cognitive bias I had an “a-ha,” lightbulb moment. I was thinking more carefully about the concept of Bikeshedding, also known as Parkinson’s Law of Triviality. You may remember that I wrote about cognitive bias a year ago, on Oct. of 2022. A quick reminder: a definition of cognitive bias from Gleb Tsipursky, PhD. – “a predictable pattern of mental errors that result in misperceiving reality and, as a result, deviates from reaching goals, whether in relationships or other life areas.” These are aspects of our brains that developed when the world was vastly more dangerous, but also more simple. Many of these biases helped us make quick decisions that kept us alive. However, in our more complicated world, these biases, wired in our brains, can work against us and cause us to make bad decisions that run counter to our rational desires and goals.

 

Board Work and the Implications

Let’s set the stage here before we get to Bikeshedding. One of the first things I learned about board governance almost 20 years ago, was the importance of making sure that boards stay at the strategic level and stay out of the operational ‘”weeds. As a matter of fact, this was the conversation that I heard more consistently than almost anything else. This was (and remains) a persistent issue in board work and one that CEOs bend my ear about regularly (and not because it’s going perfectly). Despite a lot of focus on this desired approach there seems to be an ongoing struggle to stay out of the weeds.

A couple of, ahem, “interesting” examples:

  • I was once privy to a conversation where a board member insisted it was strategic territory for her to have some say on the colors in the logo.
  • Another conversation was a board member who insisted on having a say in which side of the building the drive through was placed. And, no, he was not a civil engineer or anyone with relevant expertise. Just a guy with opinions.

The struggle is real.

 

Bikeshedding

Recently I came across the concept of Bikeshedding, or Parkinson’s Law of Triviality. This is a well-researched cognitive bias, “Our tendency to devote a disproportionate amount of our time to menial and trivial matters while leaving important matters unattended.”

The story goes that Parkinson was a British Naval Officer who explained this through a metaphor of a financial committee with three things on the agenda:

  1. A proposal for a ￡10 million nuclear plant
  2. A proposal for a ￡350 bike shed
  3. A proposal for a ￡21 annual coffee budget

Item 1 was too difficult and complicated and the committee would look past it, giving it short shrift, moving quickly to item 2 and spend vastly more time on it. Finally, they would spend the most time on item 3, the most trivial of the group.

 

The Aha!

It dawned on me (maybe a bit too slowly) that this might be part of the explanation as to why boards fall into the weeds so quickly. Our brains are wired that way. Bikeshedding happens, “because trivial tasks are easier to comprehend than more complex issues; consequently, we feel more comfortable working on and discussing the simple issue.” The majority of directors that I have met don’t show up for credit union service with a great understanding of governance nor a background in board work. More often they have little or none and have to learn (often on the job). And for professionals used to living their working lives in the heart of operational things, focusing here can feel like where we are actually being productive. It takes learning and practice to function at the strategic level if you’ve never done it. And it’s a very different kind of work.

 

Some History and DNA for Good Measure

Eureka! We have reason why boards fall into the weeds. AND it’s based in brain science.

But there may be more going one for us credit union people. When doing governance training, I like to talk about the history of credit union boards and their evolution. We have to remember those great stories of people starting credit unions in factories, schools, police stations, etc. with 7 or 8 people and a cigar box. (It always seems to be a cigar box.) The point I’m trying to make is that it wasn’t so long ago that the board was the group of people literally running the credit union. So that feature is in our DNA. It was the operational work. And we don’t change our board members all that quickly. So that slow turnover can create a climate of “that’s how we’ve always done it.” This is another blog I did some time ago. Take a look here.  Another strong reason why the focus on the operational can be sticky with boards.

 

Fine. Now What To Do About It?

Reasons are fine. Excuses are not. It can be helpful to acknowledge our tendencies, but this is no reason to throw up our hands and accept our inclinations toward the trivial. We have to fight it and work together to do what is infinitely more important, even though the complexity can make us resist it. (And heaven help me here, if I don’t help the CEOs, leaders and colleague board members who have to deal with this on an ongoing basis.) We’ll fight the good fight.

  • Awareness is the starting point for dealing with Bikeshedding. Talk about it. Understand it. Share examples. Laugh about it. But don’t ignore it.
  • Another way to help nudge in the right direction is to make sure there aren’t too many items to tackle at a time. Sometimes, items that are major and complex may demand their own meetings with a strict focus.
  • It can be helpful to assign someone to pay particular attention to make sure we’re not getting in the weeds or spending too much time on the trivial. (Too often the CEO is the default gatekeeper here, which is not fair.)

 

BTW – There is Some Awareness

By the way, this effort to stay strategic is high on the radar of virtually every director and board I’ve met. They are always very well intentioned. But too often, those who insist they stay out of the weeds are not aware enough of what is really going on. I’ve been in the rooms where in one breath a director brags about how strategic they are, and in the next hear them dive into operational minutia with zero awareness. At that point I have eye contact and signals with the CEO to make sure they know, that I know, and will try to help.

I get it. It IS difficult. Particularly when our brains work against us. But it’s important.

Acknowledge. Understand. Learn. Practice.

Oh … and for extra credit: Ask Tim Harrington to tell you his story of being board chair and his colleague directors calling him out for being in the weeds! J It’s a great story. And a great equalizer. We’re all guilty and we’re all part of the solution

As always … tell me your tales. We want to hear from you

How Many Committees Does the Board Really Need?

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Committee work on credit union boards is a slippery slope into operational territory. Boards should limit committees to as few as possible and maintain their focus on governance work. Committees of the board should not include staff, but only directors. We recommend the following four: Governance, CEO Relations, Nominating & Recruiting, and Supervisory/Audit.

By Kevin Smith

You might not think it possible, but I’ve gotten into some very interesting, and sometimes slightly heated discussions recently regarding committees. I know, I know. There are only so many governance nerds in the world willing to get fired up about committee work, but it does happen on occasion. And it’s usually because Tim Harrington and I push very hard that credit union boards only need four committees, at most. (Some boards can get away with fewer.) We recommend Governance, CEO Relations, Nominating & Recruiting and Supervisory.

Why So Few?

John Carver, the creator of Carver Policy GovernanceTM argues that committee work is a slippery slope into operational work and that the board should remain at the strategic level of governance and not meddle in the weeds. We tend to agree. This is why we suggest with a very heavy hand that board committees should include only board members as no staff. If staff are included, the committee has already slipped into operational territory which should be avoided at all costs. It’s not where the expertise of the board members’ lies. For you dear readers who are about to demand that I explain what to do about the Asset-Liability Committee, please have patience. I will get to that forthwith.  

With the average credit union board being seven to nine people, in general, you should be able to get things done with the whole group. And indeed, having the full board should bring in an adequate number of voices and points of view on most topics, which really is the point of having a board in the first place.

The Reason for Committees

The reason to have committees on the board is to get more “stuff” done. When there is too much work to do, or there is a topic that needs research and a proposed governance/policy solution, then a committee of board members is appropriate. The committee’s work results in a summary presented to the full board along with a recommendation for action to be voted on by a quorum of the board.

Committee Recommendations

Governance Committee

The TEAM Resources approach is that of strategic governance that the board manages via written policy to establish the values of the board and the credit union, driven by a strategic plan with measurable outcomes. This policy-based approach requires some significant work, particularly when you first implement it. The governance committee:

  • Develops Governance Policies for board approval
  • Keeps Governance Policies up to date
  • Ensures board members obtain necessary education
  • Ensures board evaluations and self-evaluations are completed annually
  • Maintains Governance Calendar and keep board on schedule
  • Holds directors accountable for their self-improvement

CEO Relations Committee

 This committee is necessary because of the increased complexity and ongoing evolution of the CEO’s role in credit unions. I’ve heard too many stories of credit union board who start to sweat and panic about Halloween because they suddenly have about three weeks to gather a full year’s worth of data and come up with a CEO “annual review” and raise. And I still hear from CEOs who have never, that’s NEVER, had an annual review. This is unacceptable. At the organizational level, employees are well past the age of once-a-year annual reviews. The HR world recognizes that regular check-ins (quarterly at a minimum, or monthly) with feedback and measurable goals are state of the industry. This should apply to the CEO too, and the board is the “boss” here. This suggests ongoing work throughout the year in order to make this manageable. The committee:

  • Remains in touch with CEO on important issues
  • Ensures the board evaluates the CEO at least annually
  • Monitors and plan CEO Compensation issues
    • Salary via comparison or other process
    • Retirement
    • Deferred Compensation – Golden Handcuffs
    • Incentive compensation – best if linked to Strategic Plan
  • Works with CEO on Annual Strategic Planning Process

Recruiting & Nominating Committee

We used to call this simply the nominating committee, but that’s not enough these days. Succession planning at the board level is critical and more complicated than it used to be. The emphasis here is on a recruiting plan that will involve the whole board to some degree. Our approach also suggest that a sitting board member must qualify for re-nomination. It’s not automatic. (See the blog and downloadable checklist on renomination here.) The committee:

  • Actively identifies and recruits potentially qualified candidates
  • Reviews evaluations of board members
  • Annually review potential board candidates
  • Recommend qualified candidates to the board for nomination
  • Responsible for orientation of new board members

Supervisory/Audit Committee

Federally chartered credit unions are required by regulation to have a supervisory committee. Some states require this as well, but even if it isn’t, it’s a good idea. This is the watchdog function for the board and the organization. And this isn’t a committee that is made up fully of board members with the same mission as the committees discussed above. So, we won’t go deep on this here. It does need acknowledgement however.

Yeah, but … what about?!

I know where the argument is going, and thanks for your patience. The question is about the Asset-Liability Committee (ALCO). It seems to fly in the face of everything I’ve said so far: It’s got board members and staff members, AND the NCUA seems to want to see the board’s heavy hand on this. You’re certainly not shocked to hear that I don’t agree with everything that the NCUA does or suggest. But frankly, they have waaaay more authority than I do. Take that into account. I follow Tim Harrington’s wisdom on this (and many other) fronts. He suggests that one or two board members attend the ACLO meetings … as guests there to learn. He calls ACLO the “rocket science” of credit union work. As such, it needs the most expert involvement that the credit union can muster. This is not what director’s bring to this committee most of the time. It is, though, a great place to get an education and understand the complexity of the credit union more thoroughly, which board members should pursue enthusiastically. Listen to the experts and their recommendations. The NCUA wants you there to keep an eye on risk, and directors tend to be pretty risk averse in this industry.

Ad Hoc – If You Insist on Others

Like I said, there are some who are adamant that there is other committee work that’s appropriate for the board. I generally disagree, but I’m not willing to carve that in stone. If the right reasons arise for board work that you will accomplish via committee, then please make it an ad hoc rather than a permanent committee. Write into its charter the goals of the committee and a general “sunset” clause for disbanding the committee when you meet the goals. Many of you out there have admitted to me that there are ongoing committees that only really exist because “that’s the way you’ve always done it.” Committees should have strategic/governance goals and should be made up of board members. If your committee just “reviews” things, but never has any other goals, really ask yourselves, “Does this need to happen?”

Charters

All committees, permanent or ad hoc, should have a charter that establishes the purpose of the committee, its measurable goals, the scope of its authority, and, if appropriate, the end of the committee. The charter maintains the good governance practices of the board by providing clear, written guidelines and prevents mission/committee creep.

IT Committees (or any other hot topic committees)

Recently at an event, I was almost persuaded by a director of the value of an IT Committee with board participation. I said “almost persuaded.” My first question is always, “what value do you bring to the committee?” He indicated that he does, in fact, have an IT Security background and that’s partly why he was recruited to the board. (Kudos to the board for getting that kind of expertise represented. But here’s where it gets tricky.) It can feel like this is a good idea. But it’s not the board’s job to do staff work. His argument to me is that he needs to participate on the committee so that he can translate to the rest of the board and make sure the board understands that the staff are doing what’s necessary. He also admitted that this is a way to help rationalize the high IT budget to the board, by having an expert voice. This is what almost convinced me, because I really value the board understanding and supporting what’s happening there for the security of the organization. But here’s where it feels like it echoes our advice about the ALCO. He is “participating” in the committee meetings, not simply learning, which means he is doing staff work under the guise of translating to the board. You can fill in any hot topic that’s very complex and make this argument. (Is the A.I. committee next?) This feels like a communication and a trust issue rather than real “stuff” that board members need to do. Directors have enough to do. Stay in your lane and be efficient there.

(Not) Executive Committees

Here’s another sticky area where I’ll put my two cents in. For the sake of redundancy, I’ll remind you that we like the four committees listed above. We don’t see the need for an executive committee. But here’s where it gets more complicated. Many boards that I have dealt with have an “Executive” committee, but the role that it serves is almost a perfect overlap of what we call the governance committee. Naturally, I don’t have an issue with that. The roles and the goals are most important. Names matter though. The reason this is significant here is that, historically, the executive committee of a board consisted of the officers. Beyond that, this committee was given significant power and authority to wield in the absence of the full board. It was a concentration of power. This is problematic these days. Boards needed this historically when there were emergency decisions for the board to make, but it was difficult to communicate with the full board (and that might be 25 or more people). These issues don’t exist for us now but there are still some boards that have aggregated power in the executive committee. It’s a recipe for problems. Make sure you’re reviewing the charter and the bylaws to make sure they are up to date and there’s nothing that the board is taking for granted.

There. I’ve said it. I’ll step off of yet another soap box.  But Tim and I believe that this approach works best for the board and for the CEO. It allows more time for strategy and learning. As always, I’m eager to hear your thoughts and approaches. I’m always up for a scrappy argument. I learn a great deal when I do.

Your Budget is a Statement of Values: Treat it with the Appropriate Diligence and Respect

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The annual credit union budget is a statement of its values, the things the organization thinks are important. The values in that budget should reflect (and be directly tied to) the strategic plan that the board and senior management has developed together. It is critical that the board have a clear understanding of how the budget has been shaped, and takes pains to make sure that it’s appropriate.

Kevin Smith

I’m pretty sure that the fact that I’ve picked May to write about the budget is some sort of Freudian avoidance of trauma approach given what I’ve been through. I’ll be curious to hear about how you feel about the budget cycle. You’ve gathered some insight as to my feelings. Here we are in May, headlong into the 2023 budget but pretty far from next year’s budget development. That feels pretty safe. But come November things get a bit more messy.

Politicians from all sides and businessfolk like to spout the aphorism, “A budget is a statement of values.” And I agree with this. Where you’re putting your dollars reflects where your priorities are. But I’m not always sure how closely board members follow this idea even when they agree.

Stereotyping

Here’s my broad stereotype from lots of experiences in this area: The board and senior management do their strategic planning sometime in the fall. Then not too long after, the CEO, after some voodoo, witchcraft, and pencil chewing with the staff in a secret room, submits a draft budget to the board that they will finalize by January. The board reviews the draft budget mostly by looking at the big round numbers on the right side of the page, and the amount and percentage that they went up from last year’s number. They ask a few questions for clarifications and it’s off to ratification/approval.

For Instance

Let’s play the “for instance” game. For instance, your strategic plan suggests that the organization is going to have to build a new focus on wealth management services for your older membership to keep them at the credit union. Building that out as a new service is going to require funds. The board should make sure that’s reflected in the budget.

For instance, the strategic plan involves a shift from front line staff to a heavier call center approach, but also a focus on sales and service. I’ve seen this one play out in a variety of ways where directors completely understand the amount of $ that goes to technology for the call center, but not get why the training budget has doubled and salaries for call center staff have to be raised. (Sales and service skills require a LOT of training and proper rewards.) Here’s the curve ball – six months later one rogue director yells after a trip to the lobby, “what do you mean we don’t have any money for MSRs?!?!” Because he hasn’t internalized the values that the budget reflects and are tied to the strategic plan.

What Should Board Members Do?

The review of the budget should be an exciting event, not a perfunctory task once a year met with a yawn. (I know. Some of you are skeptical.) The board’s efforts here are to ensure that the values of the organization are given the priority that you have discussed and agreed upon. To make sure that the budget is tied to the strategic plan in a noticeable way. It sounds like I’m inviting the board into the operational weeds to nitpick. Nothing could be further from the truth. This is a call for thoughtful analysis of the budget at a strategic level.

  1. Don’t underestimate the pain and suffering that may be involved when the staff creates a budget. Respect the process and the analysis they give you.
  2. Ask thoughtful questions about how the budget is tied to the plan, not just “why did line 12 go up so much?”
  3. Reel in your rogue directors if they aren’t getting this. (I know that some of you are thinking about how you understand this but there’s that one director on your board who just doesn’t.) It’s your job to hold them accountable and make them understand, for the sake of your CEO and staff.
  4. Make sure you incorporate ranges for results. The budget is not a crystal ball. This also means that you need to know how to adjust when the environment has changed along the way.
  5. Be prudent with the members’ money, which is not the same thing as being cheap with the members’ money. Support thoughtful investment and make sure that you understand what it costs to do business these days. (Versus comparing everything to the value of your first car, house, candy bar from decades ago.)

The annual budget is as important as the strategic planning process. In fact, they are intertwined. Often the budget gets short shrift. Don’t let your eyes glaze over in the volume of numbers in the spreadsheet. Get excited about the promise of value to the members that you instill in the budget and provide support to the CEO to execute this vision.

Playing the Dandelion Card, or Keeping Meetings Out of the Weeds

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Staying at the strategic level and avoiding operational micromanaging is a significant challenge for most boards. This can and should be addressed with systems to prevent it from happening and wasting valuable meeting time.

By Kevin Smith

Some of you have heard me talk about the E.L.M.O. card. If you haven’t, you can go here to catch up. But essentially the acronym is for: Enough. Let’s Move On. It’s a way to stop conversations that are repeating and no longer useful, that are simply taking up time. By playing a card with our furry red friend’s picture on it, you inject some humor into the process and (hopefully) not hurt anyone’s feelings. It keeps things moving.

I’ve been thinking about this and I think it’s time to add another card to our repertoire, and to our board packets: the dandelion card. You see where this is going, don’t you?

An Issue for Most 

A significant issue that many (most?, all?) boards face is the slippery slope where conversations migrate from the strategic and the big picture to the operational and into the “weeds.” I’ve been to my share of board meetings and I facilitate a lot of strategic planning sessions as well as board training sessions. And I’ve yet to attend one that didn’t drift into the weeds at some point. Some dramatically worse than others, but every one of them at some point or another. It takes a great deal of diplomacy and gentle directing to keep things on track. It’s not easy, because board members head that direction very quickly.

Board members and CEOs, and committee members, and staff members, and board liaisons all warn me about it ahead of time, and complain about it during breaks. And some groups are more self-aware of it than others, acknowledging that they have this tendency “on occasion.” I can respect that and work with it. It’s the groups that tell me that they never get into the weeds that I watch out for, because they are usually the worst offenders. They don’t recognize when they’re doing it.

Playing a Card

That’s where the Dandelion Card comes in. Much like the E.L.M.O. card, everyone on the board would get one laminated card with a picture of a dandelion on it to go in their board packet. When the conversation takes its slide into operations, a member can throw the card to call that out. And I’m going to make a controversial addition to this by saying that the CEO should have one (or six) to throw as well. Why is this controversial? Because many CEOs I work with tread lightly on this territory, never wanting to step on any director’s toes with this, even though they desperately want to. It takes a lot of trust in the room for the CEO to be able to do this.  

If there’s an issue, then the people involved need to do something to address it. Things don’t just go away on their own. Most that I deal with take this slide into the weeds as just something to grit their teeth and suffer through, taking it as inevitable and the cost of doing business with a weird group known as a “board of directors.” But it shouldn’t, and doesn’t have to be that way. I’m encouraging YOU to do something about it. Put systems in place to address the circumstances.

No Magical Solutions – But Progress

Now, a laminated card with a dandelion on it is not a magical solution that will make these conversations dissipate and go away. I’m not that naïve. But what it does is bring the topic to the table for discussion. It gives you permission to talk about this as something that can be or is a problem. You push for agreement about what the parameters are for strategic versus operational. Write this agreement down and use it for reference. This goes a long way towards improvement. And hopefully, using a silly card will bring some levity that makes it easier to deal with. I see too many people who are unwilling to say anything about topics like these for fear of hurting the feelings of their colleagues, which is very nice and noble, but not very helpful for the efficiency of the organization.

It also won’t go away overnight. It will take some time. But it moves you forward.

(BTW – I had to stick with the word “dandelion” here rather than weed. You can guess what happened when I did an image search for “weed.” ;-) )

Now, let’s do a poll to see how we rate on this topic!

[socialpoll id=”2878813″]

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