This article was originally published in the 2Q 2011 edition of Credit Union Strategy and Performance (CUSP). Subscribe today for online access to this issue for more tips and insights.
Lake Trust Credit Union ($1.5B, Lansing, MI) is a recent aggregation of NuUnion and Detroit Edison credit unions. The first had its roots in teachers and state employees and the second with utility employees. Lake Trust now has a community charter and serves 155,000 members in 35 counties across southern and central Michigan. Brian McVeigh, SVP of Corporate Services, spoke with CUSP about the role of the Board in the credit union's strategic planning.
How does your Board interact with management?
BM: We use the Carver Policy Governance model of board policy governance. The Board’s policies lay out the desired “ends” and limit the acceptable “means.” The Board specifies the ends; management interprets the ends and means. The CEO is responsible for submitting monitoring reports to assure policy compliance. The roles of both the Board and the CEO are pretty well defined and are distinct.
Do you have a Board retreat?
BM: We have not done one since the merger and we have operated well. Our credit union is the result of merging NuUnion with Detroit Edison last year. Detroit Edison had Board retreats but NuUnion did not. Future retreats are still under consideration. Our Board meets twice a month – though only once officially – and we find this is fine for our needs.
Describe the roles of the Board and management.
BM: The Board works out what the ends are going to be. Then it holds the CEO responsible for achieving them. The CEO examines the document the Board has drawn up about ends and interprets what the Board is telling him (or her) to do. The CEO reports to the Board how he interprets what the Board is telling him to do. If the Board believes these interpretations are reasonable, then the CEO can put the employees to work on the operations meant to meet those ends. The Board is the final arbiter of “reasonable” interpretations; the CEO develops the plan (the operations, the products, the services) that will achieve the ends.
“A continuous dialogue takes place between the senior management team and the vice presidents about what targets and metrics the credit union should use to measure progress and success.”
– Brian McVeigh, Lake Trust Credit Union
Explain how the CEO works to implement strategy.
BM: The structure is very empowering to the CEO, who – after input from his senior leadership team – rolls out the strategy to the rest of the organization. The CEO uses a Balanced Scorecard to articulate his strategic statement and vision to the entire staff. The senior management team is charged with helping the CEO accomplish his job. At this time the CEO lays out four Perspectivess by which we will guide ourselves:
What do we need to do for learning what members need, and how do we do it?
What are we going to do to make sure members get what they want?
What does any action, product, or service look like to a member and are we attracting new members?
Is all this going to come together in such a way that produces acceptable financial results?
The CEO puts these four major Perspectives in the hands of the senior leadership team, which cascades responsibilities to the vice presidents. The vice presidents are charged as a team with executing the credit union's strategy. A continuous dialogue takes place between the senior management team and the vice presidents about what targets and metrics the credit union should use to measure progress and success.
How often are the metrics reviewed?
BM: Formally once a quarter using the Balanced Scorecard. We take a hard look at progress and where we stand. Discussions arise: Why are we short here? Why are we doing better than expected there? If we are in advance of a goal, we might set another, higher one so we don’t slip backward.
The Board stays out of this level?
BM: That’s right. The Board members are not involved in this level. They keep their eye on the industry as a whole, watch what others are doing, and talk to members to see how they are feeling. Board members use these observations and findings to craft new instructions to the CEO. In the Carver Policy Governance model, this is an endless process. The Board might see one end satisfied and then concentrate on another.
Do you have other tactics by which the Board directs management?
BM: We set a schedule by which individual Board members take a single aspect of strategy and – outside of meetings – thoroughly examine it. These individual Board members then report on how that aspect of the policy could be improved. This process is a way of keeping our overall direction fresh.
How detailed does the Board get about ends?
BM: The Board can be as detailed about an end as it wants to be. It can even specify the products and services it wants. But the CEO still has to interpret what the Board has laid out and respond to the Board how he is interpreting the Board’s directives. On occasion, we bring in third party presenters to tune-up our process and to make sure we are using the model in the most productive way.
How do you determine metrics?
BM: Generally the CEO determines the metrics, which he understands should have Perspectives in two directions, up toward the Board and downward into the staff. The CEO tells the Board what metrics he is going to use to assure he is complying with the Board’s policy – that could be ROA or member growth or the like. But metrics also have to move downward in the organization to the employees. Here the CEO, by means of the Balanced Scorecard, makes additional metrics or divides what metrics go to the Board into sub-metrics that are more detailed and can be more useful among the staff. The CEO knows what he has promised to the Board, so he gives specific direction through his policies and the Balanced Scorecard to say “this is what we need to do and here are the boundaries.” Then different departments make up their own Balanced Scorecards and lay out what their own goals are, how they are going to accomplish them, and how they are going to measure their progress. The governance model has had a huge impact on how we approach strategy. It has worked well for us, but we are always looking for ways to raise the bar.
Brian McVeigh is the senior vice president of corporate services at Lake Trust Credit Union. Previously he served as the SVP/CFO of NuUnion Credit Union and the SVP/CFO of State Employees Credit Union in Michigan. He is on the Board of Credit Union Student Choice, a student lending CUSO, and is the past chairman of the CUNA CFO Council.