BY JOHN GREGOIRE, PARTNER KNG, INC.
In 40+ years working with credit unions, I have had the opportunity to work with literally hundreds of Boards. The most valuable experiential lesson of those years has occurred in the last five. My epiphany occurred during a CEO succession discussion. In this case, the CEO had given the Board a time-certain for their retirement. This made the succession discussion “real time”.
The Board asked me to assist them in developing a plan for assessing potential candidates for the CEO position. This was essentially a “pre-search” process. All Board members understood the enormity and importance of the task ahead – choosing the next CEO. Their task was even more challenging since they were charged with replacing the current CEO, a long-term veteran in the Credit Union movement, revered by staff, management, the Board and members of the credit union.
During discussions with the Board, a longtime client, I told them that I would provide them the tools and perspective to maximize their potential for success. The process began with a meeting with just the Board. Considering my relationship with the credit union, the CEO trusted me to meet to with the Board in an executive session. It was during that session that I had my epiphany.
This was one of the first times that the Board met with a consultant without the CEO. They moved from somewhat uncomfortable to very open and candid in a short period of time. Their candor led to a realization that most of their time in Board meetings was spent reacting to the initiatives of the CEO. This is entirely understandable since the CEO is the only one immersed in the complexity of the organization and the increasing competitiveness of the financial services industry. However, during the discussion each Board member sated a belief that they owed the members more productive engagement at all Board meetings.
Now, this board is tasked with their single, most important responsibility. Choosing the next CEO for a complex financial cooperative operating in a fast changing and increasingly competitive world. This is one decision where the CEO can offer some guidance and perspective, but the ball is squarely in the Board’s court.
The session began by asking if any individual was interested in the position. The point being that any potential candidates cannot be a part of the process. It took less than five minutes for a unanimous response that no one was interested. Next, the discussion centered on whether there were one, more or no potential internal candidates from their perspective. That led to a lengthy discussion about the process to handle internal candidates. This will be a topic for another article.
The epiphany: credit union board members are intelligent, committed individuals who are challenged in their ability to assimilate, much less stay ahead of, the issues facing the financial services industry today. They come from a variety of backgrounds, which may or may not, prepare them for their Board responsibilities. Even the most dedicated board member is challenged to commit more than a couple of hours to their Board tasks beyond attendance at monthly meetings. This begs the question, “How do Board members gain the necessary information, and in some cases skills, to productively discharge their responsibilities”?
We, at KNG, have exhaustively studied not-for-profit Boards and attempted to juxtapose their responsibilities with bank (for profit) Boards. While credit unions clearly qualify as not-for-profits, they are still required by regulators to maintain the demeanor of bank Boards without necessarily having the functional experience required of bank Board members.
Imagine the challenge of building a Board where the only required qualifications are reaching the age of 18 and not having caused a loss to the institution (essentially being “bondable”), that must be able to respond to regulators who presume that they will be equally qualified to read and understand a balance sheet, stay abreast of issues, regulations and the future of the financial services industry. Welcome to the Board of any credit union with significant scale and complexity.
The primary task for this Board was to clearly define the key attributes required of the next CEO. This requires a solid understanding of the future strategy and potential of the organization. This was most likely, and understandably, provided by the current CEO. However, the decision required a level of engagement and understanding far beyond that required in the past. It also required a sound understanding of and support for the key success indicators supporting the organizational strategy. This information was included in each monthly Board package but was understandably given minimal time and attention at the meetings.
This particular group of Board members became almost brutally candid in admitting their lack of true engagement in the past. It was a seminal moment that led to a great series of discussions resulting in a very well-considered internal hire for the next CEO.
We were proud to be a small part of this process, assessment and discovery by the Board. It made the challenge of being a productive Board member clear to me.
This experience and “epiphany” have led us at KNG to develop an Institute dedicated to the advancement of strong Board governance. The objective is to develop a strong collaborative working relationship between the CEO and Board that insures a strong return to the members of the credit union.
Based on our work and surveying of Boards and CEOs our Institute will focus on the answering the following questions:
- What are the most important skill sets required of Board members?
- How have the key attributes of Board members changed over the past several years?
- At what level of credit union sophistication do the key attributes and requirements of the Board change?
- What is the role of the CEO in the definition, growth and maintenance of the necessary Board skills and abilities?
- What are the key concerns of Board members and how can they be productively discussed and addressed?
- What are the key concerns of the CEO, related to the Board, and how can they be productively discussed and addressed?
- The tenure of CEOs of many of the largest credit unions has brought about a renewed focus on executive succession planning. Equally important is the question of Board succession planning?
- How do Boards insure diversity of thought and perspective among their number?
- How do Boards move from a reliance on the former sponsor organization to a broader reach that is reflective of their new field of membership?
- How do Boards hold themselves accountable for excellence in governance?