We are entering the timeframe when most credit union Boards are completing the annual CEO evaluation. This will be the first in a series of articles focusing on the value, methods and best practices in the CEO evaluation process.
We all realize the uniqueness of our current times. Most of our clients have reconstituted their budgets for 2020. That will also result in a recalibration of CEO performance metrics and organizational targets as they prepare for their 2020 CEO evaluation.
Several of our clients have asked for assistance in grading their credit union’s reaction to the current crisis. While the questions have come in a number of ways, suffice it to say that the consistent message has been, “We believe that it is more important now than ever to show that our credit union lives by our values. All of our key communications from our Vision and Mission Statements to our Values documents state our strong commitment to the well-being of our members as our primary virtue and driving perspective. How do we grade our credit union’s performance in our response to the Virus Crisis?”
We have reviewed a multitude of Vison and Mission Statements and, as expected, the Member’s best interest is front and center. Even the NCUA has acknowledged the need to help members. For example, the six-withdrawal limit has been suspended for certain types of savings accounts.
After attempting to quantify the result of excellent performance in balance sheet results, member satisfaction scores etc. we decided to address this issue with a straightforward question. We have defined various levels of performance using a BARS (Behaviorally Anchored Rating System) to provide further clarity as Board members rank their perception of performance.
The question is titled a “Strategic Initiative”. A sample follows.
This question is being used by some of our clients as a singular element of the CEO evaluation.
Others have given it substantial weight, even more than the usual financial performance metrics, well beyond the 4% demonstrated in our model. The reason for this high weighting is that the financial performance has been subject to the largely unknown pace of economic recovery. Additionally, many credit unions have taken action to support members in ways that have had clear and significant detrimental impact on the balance sheet. Such actions as waiver of fees, emergency loans with low rates and minimal credit standards, payment skips combined with diminishing loan activity will all negatively affect the credit union balance sheets for at least 2020, and probably beyond.
We have also been asked to provide guidance to Boards as they react to any future occurrences, similar to the pandemic, in considering and potentially revising previous budgets, forecasts, targets.
We prepare a Plan Document which is an important part of our material developed for CEO evaluation clients. Our newest addition to that document speaks to policies providing guidance to the Board in allowing recalibration of targets and metrics, how to restructure the CEO evaluation “scorecard” and the comparative Member Value provided in these trying times and long-term.
The relevant item is as follows:
As outlined in Rule 4, the Board reserves the right to amend and/or modify this plan, the financial metrics or its goals based on any occurrences (uncontrollable events or windfall) that might occur during the plan year that are deemed to be out of the control of the CEO. Such events may necessitate a modification to the budget and subsequently require changes to the financial metrics of this plan. Examples could be a national recession, national disasters impacting our region, pandemics, economic instability, detrimental foreign influences, and other like occurrences. For this to apply, the Board and the CEO must agree (as soon as appropriate) that this event/incident qualifies as an item for plan modification. If this should happen, the Board will engage the consultant to work with management to develop any recommended changes to the plan. The recommendation(s) must be presented to the Board for approval and plan inclusion before the end of the plan year.
We hope this information is helpful to Boards and CEO’s seeking to bring clarity and structure to this year’s CEO performance evaluation. If you have any questions or are interested in any assistance in your credit union’s CEO Performance Evaluation and Compensation, please contact me at 608-239-3449 or firstname.lastname@example.org.