By Karen Hodgkiss and Laura Lynch
Ideally, credit union boards reflect the diversity of the membership and the community served by the organization. Having different strengths, experiences and voices at the table should pay off in terms of better decision making and a well-informed strategic plan. However, translating this expertise into effective leadership is not always as easy as it may seem.
A recent report titled “Tracking the Relationship between Credit Union Governance and Performance” by the Filene Research Institute and Clarkson Centre for Business Ethics and Board Effectiveness, and commissioned by CUES, examines the relationship between good governance and financial performance. There are four main issues credit unions can address to improve board performance. They are:
- Time management. Boards frequently waste meeting time dealing with operational details rather than focusing on strategy. Streamlined and consistent administrative practices and prioritized agendas would help make meetings more effective.
- Director evaluations. There is a tendency to allow a lot of leeway when evaluating the performance of volunteers, but it doesn’t do them or the organization any favors. A formal feedback process is a gift to board members in that it identifies opportunity areas for future growth, which will ultimately benefit the organization.
- Continuing education. The report emphasizes the importance of training by noting, “Through continuing board education, exceptional credit union boards can further deepen their industry-related knowledge regarding financial institutions in general, as well as peer-group practices. Ongoing education can also be used as a tool to help credit union boards avoid common obstacles that have been difficult to navigate in the past.”
- CEO evaluations. “The board/CEO link drives financial performance. The only governance practice that yielded a strong positive correlation with actual credit union ROA performance was whether boards felt they had an effective CEO evaluation in place,” the report notes.
One of the key report findings is that good practices cannot compensate for having the wrong people on the board. A board is an organic group that evolves over time as members leave and join, which creates opportunities to fill gaps. The report authors suggest implementing a skills matrix, as it “…allows boards to visually measure areas of strength, weakness, and redundancy with respect to the board members’ capabilities. We believe a skills matrix is a highly effective and low-maintenance tool that can help target board member recruitment and continuing education.”
With a multitude of important obligations, changes and decisions vying for your directors’ attention, having a solid foundation of knowledge on board governance and responsibilities, as well as your credit union’s history and mission, is invaluable. Supporting these key volunteers with the necessary resources to boost performance is an excellent investment for any credit union.
Karen Hodgkiss is a freelance writer. Laura Lynch is a products and services coordinator for CUES.
CUES’ Director Tool Kit™ is a reliable, all-in-one resource for boards interested in improving their governance practices and generating greater returns for their credit union. The recently released 5th edition includes 14 tabbed sections with topics such as the basics of board responsibilities and financial ratios, as well as guidance on strategic planning and committee structure. Order now.
