As credit unions struggle to compete and succeed in the ever-changing financial services landscape, the composition of the credit union board takes on even greater significance. To paraphrase one credit union chief executive, credit unions are “non-profit,” not “not-for-profit.” This distinction and the implications for the board are important.
Boards that adopt a “not-for-profit” approach to governance can hinder the organization’s effectiveness. However, a board that appreciates the unique advantages a credit union is afforded by being “non-profit” in a competitive marketplace can help guide its credit union to deliver significant value to its members.
Selecting Stars for the Board
Best practice board governance begins with the selection and appointment of the board members themselves. According to an Ernst & Young corporate governance study, the board Selection Committee should first define a “statement of contribution” expected of all directors and then articulate the skill sets and experiences desired in a director. The primary focus should be on the personal attributes, experiences, and value an individual can bring to the credit union.
According to one credit union executive who wished to remain anonymous, “there is so little time available to complete what we need to accomplish that we cannot tolerate low performers for long.” An evaluation checklist, therefore, allows the committee to hire strong individuals and avoid potential non-contributors. According to the executive, a checklist allows us to “weed out candidates before we even hire them.” It also helps the committee to identify those individuals who can complement the skills and experiences already present on the board.
Given the complex and dynamic nature of the financial services industry, it is important that board members remain current on the latest issues and trends facing the credit union. According to a number of credit union chief executives interviewed for this article, board education is one of the most challenging yet important issues relating to board governance. Since credit union directors are volunteers, many of whom work outside the financial services industry, there is often a steep learning curve they must overcome. Trade publications, conferences, and making use of external consultants and trainers are some of the ways credit unions seek to keep their board members current.
Credit union board members not only need to stay abreast of the latest trends in financial services; they also need to be trained in effective board governance. Frameworks such as the Policy Governance Model® developed by board expert John Carver help educate volunteers as to their appropriate roles responsibilities and define their relationship with the chief executive.
Credit union executives and boards alike need to appreciate the changing circumstances of the marketplace and learn to adapt to the new order of things. By ensuring that the board is comprised of professional volunteers with the values, skills, and experiences required, credit unions will be better prepared for the challenges that lie ahead.