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When I Worry About Credit Union Board Members …

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Credit union board members are dedicated volunteers for the credit union movement. They are the embodiment of the CU adage, “People helping people.” As the job gets more difficult and more complex, it’s my job to worry about directors and to figure out where they need help and how to help them. I look around to get help in this endeavor myself.

By Kevin Smith with a little help from some trusted friends.

I worry. I’m a worrier. It got so bad in my early days of grade school that my mom set an ultimatum. She told me, “You’re not allowed to worry about something unless I tell you to.” It didn’t really take, but she was trying hard. Those lines on my forehead (that I try to hide in my pictures), showed up very early in my life. So, yes, I’m a worrier. And naturally, since I care so much about credit unions and credit union board members, I worry about you.

Now … this blog post comes off as negative here. And some of you are going to get your feathers ruffled and clap back with, “I/we don’t do that! How dare you?” Please keep in mind that I’m painting with very broad strokes. I’m generalizing. I’m not calling you out specifically. But I spend time with hundreds and hundreds of board members each year, and some things show up as trends. If my worries below don’t represent you, huzzah! Celebrate. But keep your eyes open, and don’t get complacent.

You’ll also notice that I have included some other people’s worries as well. I reached out to a handful of people that I like and respect to see what they had to say on the topic and have included them (with their permission) as well. (I don’t want you to think that Worry-wart-Kevin is the only one who thinks about this and has concerns.)

When I worry about board members, I worry that …

  • They’re not always honest with each other about performance.
  • They aren’t willing to have difficult conversations (see above).
  • They don’t understand the financials and business models of credit unions well enough.
  • They underestimate the challenge of CEO succession planning.
  • They will judge their members’ use of credit and other products rather than serve the actual needs of the membership. (“I would never overdraft, or let my credit score drop, so why would they?!”)
  • They don’t put in the appropriate effort to do the job (because they’re just volunteers).
  • They don’t have a clear enough understanding of the complexity of the business.
  • They don’t separate their own professional backgrounds that are sometimes less complex than CU business.
  • They undervalue ongoing education about the industry.
  • They don’t make enough, or the right targeted effort when trying to recruit new directors.
  • Sometimes the response to problems is “we’ve tried absolutely nothing and we’re all out of ideas. (see recruiting)
  • They don’t spend enough time on the job (that gets more complex everyday).
  • They don’t share the absolute passion that they have for credit unions far enough.

Tim Harrington, TEAM Resources

  • They don’t get the urgency for change.

(I don’t need to introduce you to Tim. But he was my first mentor in the credit union governance space and I owe an awful lot to him.)

Don Arkell, CU Lending Advice, LLC, https://culendingadvice.com

  • That coming into an economic downturn, they will overreact to ordinary credit losses.
  • That they will come back from a conference and derail a plan for the business that was previously agreed upon with management.
  • That they will look to the wrong metrics to measure success.

(Don is our “go-to” guy when we have questions about lending or if we need to refer people who need some help. He’s fantastic. He really knows his stuff. He’s been tremendously generous with his knowledge.)

Steve Rick, Chief Economist, CUNA Mutual Group (And credit union board member) www.cunamutual.com

  • That as the baby boom generation of board directors retire, the turnover/churn rate of directors is rising.  The new board members do not possess the same level of institutional memory of the credit union nor the commitment to the credit union that the prior generation may have exhibited.

(I used to work with Steve at CUNA and he was instrumental in my learning and understanding the complexities of the CU movement and the greater economy. I can’t tell you how much I learned from him while working with him on the CUNA Economics & Investments Conference and then bullying him into doing a monthly video series.)

Matt Fullbrook, Ground Up Governance, https://groundupgovernance.substack.com

  • That they don’t all walk into the boardroom with a clear and common understanding of what good governance even means, let alone how to be a great director.

(I stumbled across Matt’s name in a report by Filene.org years ago and made it a point to follow him and read as much as he would print. He’s helped me add tremendous layers of nuance to our governance approach and my understanding. Matt has a new thing going with Ground Up Governance. You HAVE to check it out. It’s tremendous, and often very funny! Who knew you could do that with non-profit governance? And BTW … he’s a hellva bass player. You need to look up his band too!)

Mark Arnold, On the Mark Strategies, https://www.markarnold.com

“When I worry about credit union board members, I worry about three issues:

  • Alignment—do they believe in the direction senior leadership is taking the credit union? Please note there is a difference between consensus and alignment. A healthy board does not agree 100%. But a healthy board is aligned.
  • Clarity—does the board know where the credit union is going and does the board know what makes its credit union different (without using the words service, member or community). If the board does not know the return it is getting from marketing, they should consider conducting a marketing assessment. 
  • Communication—how well does the board communicate with each other and with the CEO? And how much time are you spending communicating about strategic rather than tactical items? Successful boards communicate about strategy and don’t spend much time discussing minutia.” 

(I’ve known Mark since way back. I hired him a couple of times for CUNA programs and quickly learned how sharp he is. He’s the kind of guy that I’d ask for an email with a couple of sentences of advice and he’d set up a call and talk to me for an hour. When it comes to marketing and branding, that’s who we turn to and refer to. He’s a mensch. I hope that as a Texan he knows what that means. 😉 )

What do you worry about when you worry about credit union board members? We want your input as well, those of you who are out there in the trenches experiencing this on the daily. Share your stories, because we will learn from it. We will help each other to get better all the time.

Don’t Go Back: Boards Returning to In-Person Meetings

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After Covid forced boards into virtual meetings, directors learned to adapt. But just because we can, doesn’t mean we should require everyone to meet in person again. There’s value in keeping flexible with virtual and hybrid meetings. Make sure you’re doing what it takes to make them work effectively.

By Tim Harrington and Kevin Smith

We recently received several questions on the topic of hybrid, in-person and remote board meetings. Running a two-day governance workshop recently, this topic popped up and became a lively discussion in the room with 36 directors. Coincidentally enough, we received the same question from a director via our website almost at the same time. It’s certainly bubbling about in the air these days and our approach to this may surprise you.

What We’re Seeing

Here’s a synopsis of what we’re seeing:

  1. A few boards are moving back to in-person only. But they are the minority.
  2. Most boards are using hybrid meetings where members can choose how they attend: in-person or virtual. This requires the board meeting room to have cameras, screens, microphones and speakers that allow all to hear and be heard. 
  3. Some are moving most meetings to in-person with several, scheduled virtual meetings per year.
  4. A few are moving to mostly virtual meetings with a few in-person per year
  5. We don’t know of anyone who is remaining totally virtual.

The most common we see is the hybrid option. Along with this method, boards are adding a policy requiring directors to be physically present for several meetings during the year and at the planning session. This is to allow for the human interaction that can only occur in near proximity. 

A few boards who are going hybrid have actually scheduled several required, in-person meetings. This means that at two or three meetings per year, all of the directors are present in-person.

This is the Modern World

We strongly recommend that the boards go hybrid. This is the way of the modern working world where employees meet regularly via virtual meetings. If you want to attract and retain younger directors, we believe this is a requirement. Otherwise, they will see the board as not meeting their needs. 
Digital and virtual are the new norm in the world. It is important for boards to recognize this and embrace it.

How to Make This Work

Don’t misunderstand us. We know that as the world has worked, in general, face to face meetings generally yield better results. We agree with that. But as a practical matter going forward, hybrid meetings offer a lot in the way of flexibility for board members. This is good for diversity, for recruitment and for boards in general when you can make it work.

And here’s the deal – you have to make some effort to make this work. It’s not going to happen by accident. And you know very well by now that simply plopping things into Zoom or whatever hybrid approach you’re taking, and running things like you did in the “good old days” of the beforetimes is a recipe for failure. Hybrid meetings require adaptations so that everyone can get the most out of them.

Considerations for improving hybrid meetings

  • Spring for decent equipment: cameras, microphones, displays, etc. (Don’t simply “make due” with what you have or get the cheapest options held together with duct tape.)
  • A great big monitor in the boardroom (or at your desk) can let you continue to see body language and facial expressions from participants on camera.
  • Set expectations for learning and using technology. No, it’s not perfect. But we’ve all been in the meeting with the one guy who still can’t find the mute button and know how frustrating it can be. Everyone must take the time to know how to do this smoothly.
  • Part of these expectations are about giving your full attention to the meeting as if you were there. We’ve heard too many stories of people making dinner during the hybrid meeting, or having people in and out of the room. These are unacceptable.
  • Adjust your approaches for having discussions –
    • Hold up a post-it note if you want to talk (and avoid talking over each other)
    • Get a sense of the room with 0-5 hand votes. (“How comfortable are you with this proposal? 0-5. Everyone votes on the count of three.”)
    • Make sure to bring in the voices of those not there in person. Being hybrid is not a license to be silent.
    • Participants – be broad with your head nods for yes and no, you’re thumbs-up or down, and your palm to the camera for “wait.” Don’t be subtle here.
    • Get presentations done before the board meeting in writing or on video and set the expectation that everyone will be prepared and submit questions ahead of time. Be efficient with your meeting time.
    • Be flexible in the time of day for meetings.

The Chair’s Job

Much of this is under the heading of meeting facilitation which we generally put on the shoulders of the board chair. This is appropriate. Chairs – this is the job you signed on for and it takes a bit more work in this setting. However (comma) we don’t believe that ALL of this HAS to be on the chair’s shoulders even if technically that’s where it lies. ALL directors should take on some responsibility for holding each other accountable and for making an effort to make this work.

Removing Limitations

We believe that with a little effort that hybrid meetings can be just as effective as your old-school in-person events. We caution you about rushing back to strictly enforced all in-person events simply because it’s what you know and are comfortable with. Your adaptability will have an impact on who you can recruit for the board and flexibility for how you get things done.

Cognitive Bias in the Boardroom

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Cognitive bias in the boardroom is a danger to decision making. Boards can (should) mitigate the effects of this by understanding it and calling attention to where it can and does come up in the board room. As a group, directors can hold each other accountable and address bias. A learning board will create systems to counter heuristics that can introduce “sever and systematic errors.” 

By Kevin Smith

Boards of directors are not immune from the effects of cognitive bias any more than any other humans. In fact, the group dynamic of the board room of equals my just up the ante on this issue. Do you know where you’ve had cognitive bias in the boardroom? It’s time for some reflection. 

What is Cognitive Bias

Here I’m going to use the definition from Gleb Tsipursky, PhD. (There are many similar definitions with nuanced differences in this fairly new area of science.) Cognitive bias is “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.” This comes from The Bind Spots Between Us (2020).  This is different than social bias, which is learned and is between different groups and is specific to societies. Cognitive bias is common to all of humankind. It’s hardwired in our brains.

The idea of cognitive bias was introduced by Amos Tversky and Daniel Kahneman in 1972 and grew out of their experience of people’s innumeracy, or inability to reason intuitively with the greater orders of magnitude. Tversky, Kahneman, and colleagues demonstrated several replicable ways in which human judgments and decisions differ from rational choice theory. This discovery grew and developed the science of Behavioral Economics. It’s a relatively new and still unfolding.

https://en.m.wikipedia.org/wiki/Cognitive_bias

The Benefits … may have mostly wanedCognitive Bias Codex

The mental shortcuts, or heuristics, developed as part of our brain’s evolution. In simpler times they helped us make quick decisions that kept us from dying. But that was a different environment than our very modern and complex societies. Nonetheless, our brains are still wired this way, which can push us to decisions that are not supportive of our goals.

There are How Many Cognitive Biases?!

As of a 2020 Wikipedia page, there’s a great illustration of 188 cognitive biases. (Included here. Click it to make it larger.) There are surely more by now. Rest easy. We’re not going through all of them here. But this demonstrates the wide way that these biases can impact our lives and decision making. And studying these can provide great insights to decision making issues in every facet of our lives. Understanding these can help you to counter their negative effects.

What Do Directors Need to Pay Attention To?

So, what is it that directors need to pay attention to in the context of the role of the board of directors? Well, if you listen to Matt Fullbrook of Ground-Up Governance (and you certainly should!), his definition of good governance is “actively creating conditions that are likely to result in an effective decision.” So directors need to examine these biases, understand them and then reflect on how they have, or could, or will, come into play in the board’s decisioning. Identify where you may have already been guilty of succumbing to bias. Then ask what can be done to prevent this going forward.

A Truncated List of Cognitive Biases

Of course, we can’t go through every cognitive bias here. And some of them will be more relevant than others or not relevant at all to the credit union board space. But I’ve identified a short list here that I invite you to review and reflect on. These are things that I see coming up regularly as issues in the credit union space based on the number of board rooms I’ve been in, the number of planning sessions I’ve led, and the number of directors I’ve talked with over the years.

Anchoring Bias

The inability of people to make appropriate adjustments from a starting point in response to a final answer. It can lead people to make sub-optimal decisions. Anchoring affects decision making in negotiations, medical diagnoses, and judicial sentencing.

The Bandwagon Effect

The tendency for people to adopt certain behaviors, styles, or attitudes simply because others are doing so. (Fashion trends are a good example; or remember the GameStop stock event?)

Blind Spot Bias

Recognizing the impact of biases on the judgment of others, while failing to see the impact of biases on one’s own judgment.

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms or supports one’s prior beliefs or values. People display this bias when they select information that supports their views, ignoring contrary information, or when they interpret ambiguous evidence as supporting their existing attitudes. The effect is strongest for desired outcomes, for emotionally charged issues, and for deeply entrenched beliefs.

The Framing Effect

Where people decide on options based on whether the options are presented with positive or negative connotations; e.g. as a loss or as a gain. (Think of marketing that says “95% Fat Free!” rather than “5% Fat.”)

Frequency Illusion (Baader-Meinhof Effect)

After noticing something for the first time, there is a tendency to notice it more often, leading someone to believe that it has a high frequency of occurrence. It occurs when increased awareness of something creates the illusion that it is appearing more often. Put plainly, the frequency illusion is when “a concept or thing you just found out about suddenly seems to pop up everywhere.” (It’s happened to everyone who’s bought a car and now sees that car everywhere!)

Sunk Cost Bias

People demonstrate “a greater tendency to continue an endeavor once an investment in money, effort, or time has been made.” Such behavior may be described as “throwing good money after bad.” (This bias plays on at least five other psychological factors at once.)

Zero Risk Bias

A tendency to prefer the complete elimination of risk in a sub-part over alternatives with greater overall risk reduction.

This last one plays heavy on my mind as I work with credit union boards. We are a very risk averse movement. But sometimes we don’t help as many people as we can because of this aversion.

And I have my favorites: the frequency illusion or Baader-Meinhof Effect. This fascinates me. I also think that the Dunning Kruger Effect is a big deal. No. That’s not on the list above. I’m going to make you look that one up.

What to do About This

Awareness is key. Simply knowing and understanding these can mitigate the effects. But you can also put structures in place for your board meetings and decision-making processes to call attention to these. Before making a big decision, call some of these out and make a conscious check that you are not falling prey to your minds subconscious heuristics.

Here’s my challenge to you: At the start of the next board meeting, ask the room, “have you ever heard of Sunk Cost Bias? Do you think we’ve ever been caught by this?” Then have a conversation.

Resources

I refer to Dr. Tsipursky’s book above.  He makes some recommendations for De-baising Techniques:

  1. Identifying cognitive biases & making a plan to address them
  2. Delaying our decisions & reactions
  3. Probabilistic Thinking
  4. Making predictions about the future
  5. Considering alternative explanations
  6. Considering your past experiences
  7. Reflecting on the Future & Repeating Scenarios
  8. Considering Other People’s Points of View
  9. Getting an External Perspective
  10. Setting a policy to guide your future self
  11. Making a Pre-commitment

And I follow Graeme Newell (Better Decisions Through Brain Science). He does a great job of explaining these things in a way that helps you take action. Check out his work here.

 

Boards Behaving Badly

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We’re doing things a bit differently this month. It’s time for some audience participation. Click on every example of board bad behavior that you’ve experienced. And fill in any that we missed below or in the comments. We hear about a lot of these privately. But we don’t hear about these being called out and addressed. That’s a problem. 

Make sure you click the “Vote” button at the bottom. You’ll be able to see the results as well. 

 

So, how do you tackle these behaviors? Yes. Some of these are worse than others. This is a governance issue … for the whole board. Sure, we’d like to see the chair handle some of these with private, one-on-one conversations. But you’ve heard me harp on it before: written policy to address norms and expectations requires the board to discuss, then vote. It’s then easier to talk to an individual about these issues. (But I’ll also point you to last month’s episode about being too nice in the board room, which can be deadly.)

One of our readers suggested this approach should address things like the definition of a “prompt” response to an email or voicemail. Yes, these things sometimes need to be spelled out. People have different definitions. Our characters above, like Ivan Idea and Mum’s-the-Word Mary, don’t see a problem with what they’re doing. Calibrate!

The Board of Director’s Education Policy

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Ad hoc or lassaiz faire approaches to director education are no longer good enough. The board must have a formal approach, codified into governance policy. The benefits are many: transparency, higher expectations, tracking and accountability among others. The credit union world is complex, requiring directors to have ongoing education to keep up.

By Kevin Smith

Do you have a formal, written policy that covers the education requirements for directors and committee members? (Some of you do. I’ve seen them. Great! But you’re not totally off the hook yet.)

Tone in the Room

At one credit union, I asked about director education. There was no written policy and the approach was only verbal, “If there’s a conference you’d like to go to, just come and ask.” And I never quite got clarity about who was asked. The chair? A committee? And it felt a little like a kid coming to ask a parent to go to the movies. As a result, some people went to conferences, others never did, and never asked. And that was the end of it.

At other credit unions that I have visited, I’ve witnessed a “culture” of training and education, and a general “expectation” that directors and committee members would attend training. Which was working out okay, because people talked about it regularly and that set the general tone of the organization. But the only formal part of this approach for many is the conference fee and travel budget allotment. This is better, but not good enough for our times.

Write it Down

It’s time for boards to have a formal, written governance policy that addresses the training and education expectations for the directors. Directors should discuss this, like everything else, and come to agreement about what this means, beyond a dollar amount.

The education policy should set the expectation that every director or committee member will be required to do some training and education each year as part of board service.  Ideally, this program is customized to the experience and background of each director. But it is also a good idea to establish a standardized curriculum for new members. This approach helps guide their entrance into the industry, speed their onboarding process, and it takes some of the decision-making complexity out of the rookie’s hands, making this easier.

Getting Buy-In

By writing this down, the board must have discussion and buy-in, enough to get the motion passed. This buy-in is very important in establishing a standard and expectation. The written piece then becomes a way to hold each other accountable for doing the work of professional development. A verbal, and cultural “expectation” is not enough. Too often this can be sidestepped, ignored or misinterpreted.  

This is also valuable for new directors. This establishes the tone formally. Newbies know clearly what they are expected to do. The alternative is generally that new directors spend a year or more “absorbing” the prevailing culture and fuzzy expectations. (We don’t have time for that anymore.)

Setting Expecations

So what are the expectations? Well, like all fun things, the answer is “it depends.” And it needs to be customized. I’ve seen this handled in a variety of very effective ways.

It could be:

  • Everyone goes to at least one conference, local or national.
  • A minimum number of directors go to GAC every year.
  • Requirements to go to the state league annual meeting, or acceptable substitute.
  • Require a certain amount of course work online to “earn” the travel and training budget for conferences.
  • A standard list of sanctioned credit union related events as options. (Pre-approved)
  • Events beyond the pre-approved list need to have a clear rationale and an outlined benefit to the director’s service. (Don’t overly limit what a director can pursue, but ensure the connection and value. For example, I’d love to see more chairs taking courses in facilitating difficult conversations, which is not on the CU conference agenda. But the local university or training group may be offering outstanding options.)

This list could be endless. But the bottom line is that each director should pin down what training they will pursue each year. It can be flexible.

I’d like to say that credit union directors everywhere understand the importance of ongoing education and training. But I can’t. It’s great to go to conferences and to speak to directors about these topics, but often I’m preaching to the choir. There are too many directors who don’t think they need to do this. Many who “learned everything” 20 -30 years ago when they started and don’t keep up. Some who simply don’t know what they don’t know. It’s dangerous for organizations and for the movement. What we do is far too complex and dynamic these days. We must have educated and curious strategic visionaries at the board level. A discussion and a formal written policy can be enough to nudge things in the right direction.

New Rules and the Board’s Role for Succession Planning

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New Rules and the Board’s Role for Succession Planning

New Rules and the Board’s Role for Succession Planning

The NCUA has proposed new regulations for succession planning in credit unions. These would make explicit the tasks that credit unions must do at the board, committee and leadership levels. This includes formal, written succession plans for board leaders, committees and the operational leadership of the credit union, which must be tailored to the size and complexity of the organization, and be updated at a minimum annually.

By Kevin Smith

Yes. I know. We don’t like new regulations or for people to tell us what to do. But there are new (pending) rules and the board’s role for succession planning will be impacted. So let’s not just have a knee-jerk reaction to the fact this has been proposed and take the time to examine what’s going on, and why. After all, we acknowledge that not all regulations are bad. After all, we’re pretty happy to have the NCUA insure our deposits up to $250,000, not being eager to revisit the great crash of 1929, right?

What the Proposal Says

Here’s what the NCUA has written (emphasis mine):

(e) Succession planning. (1) General. A Federal credit union board of directors must establish a process to ensure proper succession planning to include officers of the board, management officials, executive committee members, supervisory committee members, and (where provided for in the bylaws) the members of the credit committee, as described in Appendix A. 
(2) Board responsibilities. The board of directors or an appropriate committee of the board must: 
(i) Approve a written succession plan that covers the individuals described in paragraph (e)(1) of this section; and 
(ii) Review, and update as deemed necessary, the succession plan and policy in accordance with a schedule established by the board of directors, but no less than annually. 
(3) Succession plan contents. The succession plan must, at a minimum, identify key positions covered by the plan, necessary general competencies and skills for those positions, and strategies to identify alternatives to fill vacancies. 

*Full language of the proposed rule is here.

What I’m Paying Attention To

It may not always be the case, but the NCUA is giving some pretty clear guidance about what they expect from boards. It establishes who’s covered, that it must be written and updated at least every year. And it is item (3) above that’s most interesting to me, and clarifying. This is explicit direction: identify key positions, the necessary skills and competencies, and strategies for alternatives. These are marching orders and the work to be done if you haven’t already. (I know from personal experience that many of you have not. Don’t try to con me!) The first, to ID key position is pretty straightforward. But let’s look at the other two.

Necessary Skills and Competencies

The regulators are making sure that the succession plan is thorough enough, by making sure that the planners are looking at the capabilities needed for the organization to thrive. The next logical step is clear development and training plans. Your candidates don’t necessarily have to currently have those skills, but you need to make sure that they will. This is growth and learning, and isn’t revelatory in its approach. Let’s use a “for instance.”

For instance, perhaps you’ve identified your CFO as a candidate for CEO in a couple of years. Forgive me for insulting CPAs, but the bean counters are always know for their impressive communication and human leadership skills. (I know I’m stereotyping. After all my colleague, Tim, is a CPA and one of the best leaders and communicators I’ve ever met. But you can see some truth, n’est-ce pas?) Perhaps this candidate’s development path requires the leadership training to get to the next level. Too often, board members are satisfied with the achievements of a candidate thus far, without thinking ahead to the gaps for a higher-level position. This can (and does) have severely negative consequences.

For Instance, perhaps you’ve identified the CMO, chief marketing officer, as the candidate for CEO. She’s shown remarkable strategic thinking and success. But here we might have the flip side, where she needs to buffer her knowledge in the financials, and in the work of the asset-liability committee to make sure she’s ready for the top spot.

These examples hold true for the board planning for its own future. It’s critical to identify the skills that you have, the skills that you want and then the gaps between. Board members and candidates can level up or you can recruit those with the skills. But paying attention to competencies and training not only important but the difference between competence and incompetence.

Strategies for Alternatives

By requiring that succession plans have strategies for alternatives, the NCUA is making sure that it’s harder for you to cop out on a plan with one candidate or approach. Let’s face it. There’s a war for leadership talent. It’s a tough hiring environment and your perfect candidate might get poached, or simply change course. This is far more common today. You need to be ready to pivot and have options available. Yes. This is work and it’s complicated.

Why Is This Necessary?

According to the NCUA, “analysis found that poor management succession planning was either a primary or secondary reason for almost a third (32 percent) of credit union consolidations” (emphasis mine). I have encountered this myself: boards that have dropped the ball on succession planning (typically for the CEO) throw up their hands and accept merger as their exit plan. Too many healthy, vibrant credit unions, and those with unlimited potential are going away because of absent succession plans. That I’m not a fan of. There are always legitimate reasons for merger, but this isn’t one. For that reason, I support this proposed regulation, a position that’s rare for me. The trades, predictably, don’t support a new (or any) regulation. I disagree in this case. Their argument is that the NCUA already has mechanisms for handling this, but the evidence and the data suggest that this in not enough.

Short Term and Long Term

In the short term, the recommendation is to look to your disaster recovery program and not to recreate the wheel. Use what you’ve already developed. The interesting twist to this is the suggestion that CUs consider mutual assistance plans for emergency situations. I love this. The sixth cooperative principle: cooperation among cooperatives. But this will need some substance to the plan.

For the longer term, that advice is more detailed and practical:

  • ID Key Positions – more than just the CEO, also key contributor, specialized skills, size, complexity, location
  • Conduct Position Analysis – location, services, relationships, culture, mission, competencies (for future), written job descriptions, identify the gaps
  • Develop Succession Plan – strategies to overcome gaps, ID candidates, assess skills, training to reduce gaps, write down plan: training, with whom, resources, timeline, report to board
  • External candidates – Where, budget, timeline. Should CEO be involved? Do candidates have right experience? Outside firm?
  • Monitor, Evaluate, Revise – everything changes. Annual review (minimum)

Boards: Take Care of Yourselves and Monitor the Rest

Let’s be clear – the board isn’t involved in creating the leadership succession plan, but it does have to make sure that it’s being done carefully and that it’s written. But be clear on the wording from the NCUA, “The Board envisions that the examination program would confirm the existence of a succession plan and training.” The inclusion of “training” here is significant.

The board does need to take care of itself. This is real work for the board that is more difficult than it used to be, as credit unions are more complex. I appreciate that the NCUA is recommending the use of associate director programs. At TEAM Resources we are big fans of these. This is a training program where the associate director can get training and education about board governance and the industry before they have to vote. It’s a better way to onboard and to find out if the associate is a good fit for the board. We can no longer afford to have new board members without any experience waiting for a year or two to learn before they add their voices. But the associate director program is but one tool of many that you can use.

I haven’t said all that I’d like to on this topic. But I believe that I have covered the significance of the pending regulation. There is a great deal of complexity and challenge in this area for our movement. I implore you to dig in, to learn, and to do what’s required necessary.

Engagement on the Board (and Committees)

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Board Engagement

We can do hard things.

When there’s no boss in a group of peers, and there’s no paycheck tied to performance, how do you maintain engagement on the board (and committees)? Peer directors must hold each other accountable for the work that they do. But the real key is making sure that the work is meaningful and participants understand the impact they are having on the organization to fuel excitement.

By Kevin Smith

It hasn’t come up in a while, but recently at a board training engagement, I heard an old question. “Why do we use the term ‘volunteers’? Doesn’t that make this sound less important?” I’ve been through this debate a hundred times with people trying to name products and services for this audience. If you only say “board” it leaves out the supervisory and other committee members. So “volunteer” is the catch all term. But doesn’t this feel a bit like we’re filling boxes at the food pantry, or building houses with Habitat for Humanity? This is by no means any disparagement to this kind of work. It’s valuable and fulfilling work. But it really is a different kind of volunteering. Food pantry volunteering doesn’t have an oath and legal fiduciary duties.

What does it mean to be a "volunteer" at a credit union?

Sidebar: Unpacking the word “volunteer.”

And why am I bringing this up? Well, I’ve been approached several times recently to talk about how to get unengaged directors and committee members to step up their games. I’m hearing about volunteers that are not coming prepared, not being fully engaged, and worse.

So, what to do? After all, doubling the pay doesn’t have much kick. And there’s not really a boss. (No, the board chair has no more authority than any director.) You can, of course, remove a director, or ask him or her to step down. But let’s be honest, very few want to go this route. This requires a board vote that can be awkward.

There are rarely quick fixes. Here’s what we recommend you try:

Outline the expectations for the position in writing.

Make sure there are clear repercussions for not being engaged. This is a cultural issue. When the expectations are clear and written down it’s easier to hold each other accountable. And this doesn’t have to be confrontational or in front of the group. It’s usually up to the board chair to take on difficult conversations, but it doesn’t have to be. Have this discussion one on one. Empathize with the person. Find out if there are circumstances that are causing the disengagement and how the board can assist. But ask about and confront the situation from a place of caring. This helps to avoid anyone becoming defensive and angry.

Utilize board self-evaluations.

Self-evaluations set a tone that the board should always be improving, learning, and that you need to hold each other accountable. Set ground rules for this process: it’s not a “gotcha” session; the focus is improvement; and in general, when one or more directors says that they want to hear how they can improve, others will follow suit.

Be active and vocal about creating the right culture in the board room. 

The culture of a group will be absorbed by the participants. Don’t take anything for granted, and don’t let this be a passive element. Put it on the agenda and talk about it.

Remember:

  1. You may get what you tolerate.
  2. You have to have hard conversations sometimes. Keep it framed as the good of the credit union and the membership.
  3. The regulators are going to see this and it can be a problem for the credit union.
  4. Recruiting new directors should have a high bar with clearly written expectations. (And sitting directors must be living up to those expectations. No lip service!)

Unengaged volunteers are why the subjects of term limits and paying credit union directors comes up. These are two roundabout attempts at a solution for this problem. Both of these approaches can be problematic and very divisive. Create the culture that you want. It will not happen overnight, but the sooner you start, the sooner you’ll get there.

Dedicated to YOUR Success . . .

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