This illustration can help directors and CEOs define their roles.
This post is adapted with permission from the authors’ book, “A Credit Union Guide to Strategic Governance.”
A key element of good governance is knowing who is responsible for doing what. Simply put, the CEO’s realm is operations, while the board’s realm is guiding the overall direction of the credit union and the CEO.
One way to think about this is with the image of a set of nesting bowls. The CEO’s realm is the area inside the rims. This is day-to-day credit union operations. The board defines the size of the bowls and its realm is outside of them.
In other words, directors should focus on developing policies, strategic plans, executive limitations and statements of value. The board assists in establishing the credit union’s purpose, mission, plans and goals. Then, it delegates authority to the CEO to execute on its vision within the parameters it has set—that is, “inside the bowls.”
Notably, the board’s delegation to the CEO doesn’t mean that its job is done, nor that it releases control of the credit union’s direction. The board must always maintain high-level oversight for efficiency and transparency. Importantly, the board must stay informed about how the credit union is progressing toward its goals. This happens through a variety of mechanisms.
1. Essential internal information provided by the CEO
• Monthly reports
• Dashboard of key ratios
• Strategic updates
• Competitive analysis
2. Periodic inputs from independent outside parties
• External audit
• Internal audits
• Regulatory exam
3. Other sources
• Member survey
• Staff survey
• Mystery shoppers
• Fraud hotlines
It is extremely important that the board frequently monitor the progress of the credit union using information from a variety of sources. This range of sources will corroborate and cross check information to make sure that the data is valid.
Tim Harrington is CEO and Kevin F. Smith is publisher of TEAM Resources, Tucson, Ariz.