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Strong Board/CEO Relationships – Keys to Credit Union Success

by on April 27, 2019


Without a great leader, your credit union is doomed to ungreatness. And a CU’s Board members are instrumental  layers in ensuring outstanding leadership. With a focus on CEO evaluation, this first in a three-part series reveals  proven methods that will help you and your Board build a stellar leadership team.

What is the difference between credit unions that succeed tremendously and those that merely exist? The answer in  all cases is leadership. Think of credit unions that have weathered financial storms, change of sponsor, employment  disruptions.
Once you have that list, you will find one common denominator: a strong CEO and an informed, engaged Board of  Directors.
Hiring, and inspiring, a great CEO is job number one for any Board. Interestingly, there is an appalling lack of  training on this important subject for credit union Board members.
This article is the first of a three-part series dedicated to strengthening credit unions through proven methods of  building great leadership teams. We believe that a Board’s ability to recruit, retain and inspire great CEOs is the most  important contribution it can make to its credit union. The series will focus on three key issues: CEO  evaluation, CEO compensation and CEO succession plan/recruiting.

The CEO Evaluation
In our experience, the CEO evaluation is a consistently weak part of the credit union Board/CEO relationship. CEOs  we have interviewed have told us candidly, but unfortunately often anonymously, that they lack a clear  understanding of their Board’s perspective of their performance. In some cases, there is a reasonable “scorecard”  with very quantifiable measures. In nearly all cases, however, the more subjective issues such as Board relations,  community impact and leadership are left largely to conjecture.
Experts in the field have concluded that “Organizational performance will, over time, deteriorate without clear  communication between the Board and the CEO on these (see above) issues.”

So how do Boards ensure that this “gap” is corrected in their credit union? The first article in our series So how do  Boards ensure that this “gap” is corrected in their credit union? The first article in our series will detail methods to  make certain that your organization excels in this key skill.
Most, if not all, Boards understand that their only employee is the CEO. It is through the CEO that all credit union  operations are delegated. This may seem like a basic and simple proposition; however, there are libraries full of  books on the art of delegation. The extent of delegation and performance is most clearly described in the CEO  evaluation/review.
Ask any HR expert and they will say that one of their biggest challenges is the performance review. Many in  management consider this task a “necessary evil” and a departure from their daily tasks. This is true even where the  distinction between responsibility and performance is clear, such as the CFO evaluating the Accounting Manager.  Imagine how much more complex, and therefore difficult, it is for seven or nine individuals with varying  backgrounds, which are normally inconsistent with running a not-for profit financial institution, to provide clear  perspective on the performance of a CEO.
In order to accurately grade a CEO’s performance, the Board members must have a strong understanding of the  organizational focus and strategies. They must also have a firm grasp of the credit union’s performance against peers  to provide perspective on how well the credit union is actually performing. Many Boards assess performance  primarily against budget. Without a peer comparison, most Boards are unlikely to have the experience necessary to  determine whether the budget was overly conservative or represented a real organizational stretch to achieve. For  example, one organizational target may be ROA. The goal may have been set at 0.75. The credit union may have  achieved a 0.54 result, which would appear to be sub-standard performance. As the recent recession demonstrated,  however, the economic environment may change quickly, largely impacting the credit union’s ability to reach  previously set goals.
In this example, the peer performance may have averaged 0.24 ROA. This would be an indication that the credit  union significantly outperformed its peers. Achieving a 0.54 ROA probably required management decisions and  performance that would be “bonus worthy.”
Contrarily, the economy may have been booming. Peers may have performed at an average 0.89 ROA. In this case,  the credit union seems to have under performed its peers. It would be incumbent on the CEO to provide rationale for  the 0.54 performance. This is where strategies specific to a credit union may come in to play.
For example, if you decided to engage on an aggressive building project, hire additional staff in advance of a new  strategy or put away additional capital to buffer the impact of a significant SEG or sponsor’s potential decline, the  0.54 performance is clearly appropriate.
The same dynamics apply to most credit union metrics. That is why Board orientation and training should include a  clear understanding of the organization’s primary strategy and performance metrics. Beyond quantifiable organizational performance metrics, the CEO should be evaluated on Board relations as well as leadership and  external relations with the credit union’s membership and community and with the credit union community,  including regulators. This assessment is usually more subjective and even more difficult for Board members. There  are a number of methods to provide substance to this task.
We will cover those options in our next article.

john-gregoire_smallJohn P. Gregoire is a partner in Koker, Nelson and Gregoire (KNG), a consulting firm dedicated to executive  compensation, succession planning and performance management in credit unions. With more than forty years of  experience in the financial services industry and having held senior management positions in state and national  trade associations and credit unions, his is a broad-based perspective reaching to board governance, team leadership, CEO appraisal, score carding, succession planning, mergers, and the alignment between executive  compensation and organizational strategy.
John also founded the ProCon Group Ltd., now in its twentieth year of serving a client base comprising over forty  percent of credit unions with a billion dollars or more in assets. A founding member of the Filene Research Institute, he was instrumental in the development and publishing of the report on Board Responsibilities and Work Styles in  Effective Credit Unions. He has authored a variety of articles on strategy, the balanced scorecard and governance. John earned his master’s degree in management from the Claremont Graduate School – Peter B. Drucker School of Management Program, working directly with Drucker on topics of executive management. He is a former board member of the National Credit Union Foundation. You can reach John at 608-239-3449 or

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