When Is It Appropriate to Intervene in CU Operations?

Background: Organizational, staffing and personnel situations that appear to be improperly managed or could be considered discrimitory, such as increasing staffing to match a large CU when asset is in mid size range. Available information says for the BOD to hire a good CEO but not when to intervene in operation issues? When is the appropriate time to step in and review the CEO practices?

My question is about organizational, staffing, and personnel situations that appear to be improperly managed or could be considered discriminatory - such as increasing staffing to match a large CU when asset is in mid-size range. Available information says for the Board of Directors needs to hire a good CEO but does not spell out when it is appropriate to intervene in operational issues. When is the appropriate time to step in and review the CEO practices?


Filson: Most credit unions have some form of governance monitoring process. At the most simple this is a budget with expense and bottom line goals. The nature of the intervention is crucial. It should not necessarily be about the specific issue, but why the CEO not within the policy limits set by the Board. If the Board has not set policy limits then that is a different issue. Generally an individual on the Board should not attempt to raise policy issues without the full support of the Board.

Cardwell: For effective Board/CEO relationships there needs to be clearly delegated authority, the latitude to perform, mutual support, and a good two-way feedback cycle. Although staffing and organizational design is a CEO-driven issue, I am sure the CEO would welcome a phone call or visit from any Board member at any time on the reasoning behind this decision. Just as you do not want to be surprised at a Board meeting... neither do they. In kind, just as you want to be respected for your point of view, so do they. In approaching the CEO, be positive, and listen with an open mind. There must be a reason for the CEOs organizational staffing decisions. You might ask: What is the strategy behind this move? How will this decision impact our members? Will these moves impact the financial health of the Credit Union in any material way? The Board’s role is oversight. The CEO's job is to run the Credit Union.

Wilson: This matter should have become apparent during the quarterly CEO performance appraisal. The importance of operational issues should dictate oversight by the BOD. If the BOD has given the CEO a budget to support the hiring of additional personnel there would not likely be a red flag to the BOD during the CEO appraisals. However, as a matter of protocol the CEO generally includes in their monthly report to the BOD any new hires. But if this is not in the CEO's operating procedures and guidelines the CEO has toreport such hirings in a verbal or more direct way. It does seem out of character for a responsible CEO to have the budget and authority to do what may be perceived as excessive hiring without the knowledge and authority of the Board. If there is within the senior management team a feeling that the CEO is making indiscriminate hiring decisions it should be a topic of discussion at their weekly meeting. If the explanation and validation for such decisions is not supported by the senior management team then it might be recommended that the senior management team member of HR bring it to the attention of the Board member who oversees such decisions. This could then lead to discussions by the BOD to open the issue at the next Board meeting or have the Board Exec discuss the issue with the CEO. This would seem to me to be the best approach. I always recommend that the issue of hiring, and the budget to support such, be succinctly spelled out in the CU's annual goals that are approved by the BOD and carried out by the CEO.




Feb. 23, 2004


  • Our Board is having a problem in growth - we have grown in five years some over 60% From 17 Million to over 31 Million in assests and from 13Million in loans to 28 Million it has caused many problems in Capital and Delinquent loans
  • The frequency of typos is quite a distraction from the content.
  • I would wager that the problem is not growth but rather the management of the credit union. Sixty percent growth over five years is a reasonable rate of growth. It is my experience that many credit unions are not operating a sound lending program. That leads to high delinquency and loan losses. The primary source of net income is net interest income. Poor lending performance leads to poor capital growth. I know good management leads to good lending and good lending is the cornerstone of good credit union performance. At my credit union, SAFE Credit Union, credit is our middle name. Make it work and your credit union will have good performance and high member satisfaction. I would give management ninety days to come up with a plan to fix lending and then 12 months to improve performance. My guess is that if performance has been sub-par for a long time you probably need a new CEO.