A credit union’s board of directors is charged with many things, perhaps none more important than hiring and replacing its president and chief executive officer. Should the board look at internal candidates? Should it look outside the credit union’s walls? Or both? Should the board approach the search differently if it wants to turn things around as opposed to staying the course?
“There are thousands of credit unions with distinct memberships, boards, and cultures,” says Deedee Myers, CEO of the Phoenix, AZ-based executive recruitment firm DDJ Myers Ltd. (DDM). “Each needs to determine its own best way to proceed.”
Here, Deedee and DDJ Myers vice president Peter Myers offer advice for boards sizing up the field and preparing to replace their quarterback.
Deedee Myers, CEO, DDJ Myers Ltd.
What qualities should a board look for in a CEO when the credit union doesn’t want to merge but does want to go in a new direction?
DDM:Turnaround situations could mean several things, including a financial turnaround, a cultural turnaround, or a mixture of both. Financial turnarounds require diverse in-depth leadership competencies that differ from those of growth-oriented CEOs. The competencies of discernment, action, and engagement are primary for turnaround situations.
What do these competencies mean in real life?
DDM:Discernment allows the executive to zero in on specific financial and cultural variables — such as values, beliefs, and practices — that need support or divesting.
Action is fundamental to producing effective results. Imagine a futuristic and strategy-oriented executive who is equipped to thrive in the theoretical realm landing a position that requires 60 hours a week of tedious yet necessary tasks. It’s not a recipe for success.
The third element is articulating and maintaining engagement. Engagement is multifaceted and includes conditions of success that will be accounted for. Turnaround CEOs need to be able to articulate standards for success, solicit engagement, and continually develop processes for cultivating people.
What qualities should a credit union board steer away from in that scenario?
DDM:The focus should be on what qualities should receive attention rather than what qualities to steer away from. Research proves that those who focus on strengths are generally more successful than those who focus on weaknesses. The “move-toward” concept generates more innovation, engagement, and cross-functional collaboration.
The board needs to be able to access a strong, credible network to reach passive candidates who might not consider moving until you present an outstanding opportunity.
Any advice for assessing internal candidates?
DDM:A primary element to consider when dealing with internal candidates is what they have done to effect change and develop under the former or current leader. If the prior CEO managed with a heavy hand, did the internal candidate cease all efforts to effect change? Or did the candidate muscle through the authoritarian CEO and do what needed to be done?
If the latter occurred, does the candidate have the grit to respectfully and professionally outline their position in full, assess the options, and recommend a course of action to the board? If the former occurred, the board should look at how the leadership style of the resigning CEO might have restricted development.
Alternatively, what should a credit union look for when it wants to stay the course?
DDM:First, the board should fully articulate the expectation that the new leader needs to maintain the ____; fill in the blank with culture, people, products, services, net worth, etc. In today’s marketplace, innovation is a highly regarded and sought-after skill. Placing an innovative CEO in a maintenance position will inevitably create discord and strain in the most important relationship in a credit union — that between the board and the CEO.
Second, the board should assess a candidate’s history and risk-tolerance. Does the candidate have experience with producing steady results, or does he or she have experience with starting new business ventures that have an element of risk (reward/loss) that is beyond the board’s appetite?
How about internal candidates in this scenario?
DDM:It’s not a stretch to say that volunteer boards may not be fully familiar with what internal potential candidates have accomplished or are capable of. However, boards should give internal candidates their fair shot at the spot.
Boards should not to get hung up on the fact internal candidates already know the organization and the players and have an established relationship with the board.
The internal candidate has a sum of applicable experiences. The board is hiring a person and what he or she is capable of in the future using their current and recent accomplishments and achievements as testimony to leadership competence.
What avenues do you recommend for finding and recruiting candidates? LinkedIn, advertising in trade publications, any others?
DDM: Tools such as LinkedIn are great; however, the process to ensure the credit union has the best candidate pool extends far beyond creating a portal through which applicants can apply.
The credit union might need to hire someone who is not interested in applying for positions yet has a skill the credit union needs. Trade publications and social media will not capture that individual’s attention. If not using an experienced firm, we recommend attending conferences, reading publications, and building the board’s network of potential market players.
Advertising attracts active candidates, people proactively looking for a new opportunity. The board needs to be able to access a strong, credible network to reach passive candidates who might not consider moving until you present an outstanding opportunity.
Be intentional on what you want in your next CEO and reflect those same qualities in the board leadership.
What are some best practices in executive recruitment?
DDM:Even if board members believe they’re in agreement about what they’re looking for, run through “If this … then …” scenarios. Very often, in the initial stages of a search, board members will say they are in agreement about what they are looking for in the next CEO. We then run through our process, which includes some “what if” scenarios, and the board will inevitably discover there is unexplored territory to cover.
Be clear about the expectations regarding the board’s involvement and relationships with staff. Should/will board members ask staff questions and potentially voice their opinions outside of the board meeting? High-quality external candidates will turn down a CEO role where the governance guidelines impinge on the CEO’s ability to effectively lead.
Consider the expectations regarding the board’s involvement with staff compensation. Complete your compensation homework in advance and understand your rewards philosophy with regard to range of salary, incentives, bonuses, retirement, and perquisites.
Revisit your CEO contract as part of the search process. What changes are needed for the next CEO? With a new CEO succeeding a long-tenured CEO, it’s useful for the board members to consider, outline, and share with the potential next CEO their action plan and their typical schedule of events and conversations. They should also express what they will do to ensure a smooth transition.
What should boards avoid in executive recruitment?
DDM:Leadership requirements have become far more complex in the past 10 to 15 years. Boards that actively look for blind spots on what they know and do not know are far more apt to select the best CEOs for their credit unions. Seek top-tier subject-matter experts for support. Conduct strategic succession planning education sessions three or more years in advance of the anticipated need.
Boards that are entrenched will attract a certain quality of CEO; boards that are high-performing will attract a different quality of CEO. Our advice is to be intentional on what you want in your next CEO and reflect those same qualities in the board leadership. If you want a high performer, then be a board that is high-performing.