Tim's Blog - TEAM Resources

The Importance of Strategic Planning for Small Credit Unions

The Good, the Mediocre, & the Stopped

by Tim Harrington and Kevin Smith (originally published as an article in CUToday.info.)

There’s a common belief in credit union land that you have to be over $500 million in assets to survive, some even say $1 billion. We say, “That’s a bunch of hooey!” Small credit unions can survive. But to do so, you must specialize. When your entire credit union is the size of a big bank’s individual branches, you can’t take them head on. So what do you do? Specialize and Thrive!

To do this, small credit unions must place greater importance on their strategic planning efforts. It would be a tremendous benefit to them and to the credit union movement. There are 4234 credit unions in the U.S. under $100 million in assets. That’s out of 5785 total credit unions (as of this posting) or 73% of all credit unions. That’s a lot. (“No kidding,” you say).

The Connection Between Board Diversity & the CEO

1May

by Kevin Smith

The topic of board diversity has been bubbling about the credit union industry for quite a few years now, and with good reason. A healthy, diverse board can have a dramatically positive impact on an organization’s performance. But I recently ran across a new angle to this argument worth considering. There is a recent study that suggests the level of board diversity at the CEOs previous position affects performance at your organization. In other words, if you have a newer CEO, who came from another organization, the diversity of his/her previous board will impact current performance. The more diverse the previous board was, the better the performance. The less diverse … the more likely the CEO is to leave the job within three years.

Governance Outside of the Bowls

29March

Board Members – What do You Know? And how do You Know You Know? ‘Ya know?

(Better Title: Governance Outside the Bowls)

Tim Harrington and Kevin Smith, TEAM Resources

Yeah, yeah, we all know (or should) … the board of directors has fiduciary duty in the operations of the credit union:

From the federal regulations:

(a) General direction and control of a Federal credit union. The board of directors is responsible for the general direction and control of the affairs of each Federal credit union. While a Federal credit union board of directors may delegate the execution of operational functions to Federal credit union personnel, the ultimate responsibility of each Federal credit union’s board of directors for that Federal credit union’s direction and control is non-delegable.

(3) In discharging board or committee duties a director who does not have knowledge that makes reliance unwarranted is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in paragraph (d).*

[*These are only excerpts that serve my purpose right now. You should know the full text.]

(Source: http://www.ecfr.gov/cgi-bin/text-idx?SID=013383e49e8441a7f1826edcb8acf395&mc=true&node=se12.7.701_14&rgn=div8 )

The board has oversight of the credit union. And the board has to know what’s going on inside the credit union in order to have proper oversight. So where are you getting your information? What do you read that tells you what’s going on? Surely you’re not hanging around in the CEO’s or the CFO’s office watching thrilling data stream across the computer screen. You get information in your packet once a month, right? (Electronically by now, I hope.)

Board governance includes oversight.

And you read these packets. Which means you know. But how do you know, you know?

Layers of policy create the area where the CEO has the authority to execute the strategic plan.

I know. I’m being obtuse. Let’s cut to the chase.

Credit union directors should have a range of feedback/reporting systems in place to ensure proper fiduciary oversight of the credit union. Your information should come from a variety of sources and should line up to paint a consistent picture. At TEAM Resources we call this “governance outside of the bowls.”

Board Communication and the Staff

6March

by Tim Harrington and Kevin Smith, TEAM Resources

A credit union board chair recently contacted us with some questions regarding board communications. One issue had to do with the board’s communications with the staff. Now ordinarily, this is the kind of discussion that we try to shut down immediately with a simple cliché of “all communications to the staff should come from the CEO.” It’s a cliché that’s easy to trot out because it holds up pretty well under almost all conditions, sun, rain, snow, wind…. But it got us to thinking about where that cliché would begin to break down, because they all do at some point, right? (Thanks. We knew you agreed with us.)

So, the rule of thumb (let’s see how many cliché’s we can get in here) is that the board has one employee, the CEO. And the board speaks with one voice, communicating with the CEO. Individual directors do not give any direction to the CEO, officially or unofficially. The board operates as a unit, within the boardroom, deciding its strategy and communicating that when finalized to its one employee with a unified voice. The CEO then directs the leadership and staff of the credit union with their marching orders.

Board Communication with Staff

Take Responsibility for Your Financial Literacy

21February

Take Responsibility for Your Financial Literacy

(This post is also available in the March 2017 edition of the CUNA Directors’ Newsletter.)

Regulators hold volunteers accountable for understanding key measures and ratios that indicate a CU’s health.

Picture this scenario:

It’s time for the annual exit interview with credit union regulators. You’ve been told they finished your regulatory exam and have requested the entire board’s presence. If this development hasn’t already alerted you to an issue, the six regulators awaiting you in the board room does.

You look around the board room and see anxiety in the CEO’s face, urgency in the regulators’ faces, and a bit of confusion and concern in your fellow directors’ faces.

Houston, we have a problem: Your credit union is losing money. Your net worth ratio is taking a plunge, and you’re losing assets. “And,” they say, “it’s your fault.”

A Book Review: Transformational Governance: How Boards Achieve Extraordinary Change. By Beth Gazley & Katha Kissman

3February

Guest Post by Kevin Smith, Publisher, TEAM Resources

“If you truly want to understand something, try to change it.” Kurt Lewin, often referred to as the father of modern Social Psychology.

If you’re anything like me (and I assume that you are), then you have too many books piling up literally and virtually, too many articles saved, too many emails with links to information that you’re supposed to keep up with these days. Sometimes I feel like I’m drowning in it. So I shouldn’t have been surprised when I stumbled across Transformational Governance: How Boards Achieve Extraordinary Change by Beth Gazley and Katha Kissman a full year and a half after it came out. But I’m sure glad that I found it. (Full disclosure: I hired Katha Kissman to speak at a CUNA Volunteer event several
years ago. She’s cool, yo.)

The Governance Spectrum: Balance Between Too Strong & Too Weak

17January

(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.)

Mind the Gap: Communicating the Strategic Plan

5December

We’re headlong into planning and budgeting season, and after reviewing a few plans, a couple of things have occurred to me about communicating the strategic plan.

Communicating the Strategic Plan

Have you ever noticed that no one ever has a new strategic planning document that simply says, “Just keep doing what we’re doing. Things are going great”? And rightly so, I guess. I mean, you don’t hold planning sessions to envision what you’re already doing. But too often credit unions get caught up in the concept of the planning session and the idea that this is the one place where we come up with new, different, and forward thinking. We all want to be innovative and feel like visionaries. And no doubt our industry is dealing with dramatic change and an environment that often feels like quicksand shifting beneath our feet.

My point is that there are often a couple of large gaps between the plan and the people that derail the process.

Board Leadership: Preparing the Chair

8November

In a recent survey of nonprofits, 51% of board chairs said they “did nothing specific to prepare” for the role of chair. That’s a pretty staggering number. The survey “Voices of Board Chairs” from the Alliance for Nonprofit Management reported on the experience of 635 nonprofit board chairs from across the United States. Of course, this survey isn’t specific to credit union boards and chairs, but we fit in the nonprofit area. And the results of this report align with what I see anecdotally across the credit union industry.

What About Us?! Supervisory Committees: The Stepchildren of the Credit Union World

21September

Guest Post: Kevin Smith, Publisher/Consultant, TEAM Resources

Supervisory Committee & Training

There’s no lack of training opportunities for credit union volunteers, from the exotic to the pragmatic. But if you look carefully at the training, you’ll see that it’s generally not as inclusive as the word “volunteer” is supposed to imply. (Volunteer = directors, ALCO members, credit committee members, supervisory committees, etc.) Those training options are almost always designed for board members/directors. And don’t get me wrong; I don’t begrudge them the opportunities, even in the nice locations, so long as there’s good training on hand, not just sightseeing.