The Governance Spectrum: Balance Between Too Strong & Too Weak

(From the forthcoming TEAM Resources publication: A Basic Credit Union Governance Guide for Credit Unions, by Tim Harrington and Kevin Smith)

In our experiences, there is a range of board member behavior, from too weak to too strong. This represents the Governance Spectrum. The left side of the spectrum represents boards that are too strong, too involved and not making the best use of their time. On the right are boards that are too weak. They have abdicated their responsibility and their authority. What you want to strive for is a balance of oversight and forward thinking. This is a tightrope to walk sometimes, looking for the Goldilocks moment where your actions are “just right.”

Governance Spectrum

(Click the image above to download a copy of the Governance Spectrum for your own use.)

Working Board
The working board is often a holdover from the “Old Days” when there was no staff, no president, no CEO and the board was running the operations completely as volunteers. This sometimes still happens today with very small credit unions, but it is increasingly rare. Working boards lose sight of the mission, vision and strategy of the credit union because they are focusing on minutia.

Managing Board
The managing board is more common than it ought to be these days. It’s not uncommon for the board to be made up of managers, CPAs, executives, foremen, who are used to “taking care of business” and getting practical, tangible things done in their daily lives. That carries over into their board work. These directors may not feel like they are getting anything done unless they are doing something operational, with immediate results. The managing board it too “hands on” though. They need to step back and focus on strategy, delegate and trust that the CEO will handle authority properly.

Governing Board
Ah… just right. The governing board strikes the proper balance between oversight and strategy. This approach means that everyone has enough information to make sure they are asking the  right questions and that someone is measuring goals . Here there is accountability. The governing board also keeps its focus on the future of the credit union. These board members understand where their role of governing stops and the CEOs role in operations starts.

Ratifying Board
This is also known as the “Rubber Stamping Board.” The ratifying board has turned over too much authority to the CEO and, perhaps, too much trust. These directors do not have enough information to be sure about what’s happening in the organization. They may be relying only on information provided by the CEO without any other verifying sources. The ratifying board has little accountability, and stays too far away to be effective. They are mere figureheads of the organization.

Failing Board
Finally, the failing board is troubled in some way. Often there is mistrust, between board members, or the board and CEO, or with staff. In these situations there is conflict sometimes open, sometimes simmering beneath the surface and unaddressed. In a failing board, the opportunities for manipulation or fraud are significant. Sometimes, members are “bought off” with perks. But there is no accountability and this becomes an existential threat to the organization.

In terms of the Governance Spectrum, you should strive to be a Governing Board, right in the middle. It may not be simple, but you can accomplish this. If you find yourself feeling pulled by both sides of the equation – compelled to get more involved, or worrying you are not getting enough information – you are probably on the right track. When you are thinking about the pull from both sides, you are conscious of the balance. You are paying attention to the tightrope, and, chances are, you are on the right track. You will need to make constant adjustments.