As credit unions kick off 2017, management teams have spent the last several months putting the pieces in place for the new year. The budget has been completed, the strategic plan is finalized with specific objectives and employees are accountable to achieve their individual or department goals. Throughout the year, management will be evaluated on how well they are executing. It should be clear if goals and objectives are being accomplished and if the credit union’s financial performance is meeting or exceeding expectations. Beyond internal measures, key metrics are available to help determine how the credit union is performing compared to peers. At the end of the year, management and employee performance evaluations will document success and failure. While there are always important qualitative attributes, quantitative measures will ultimately determine a managements team’s success or failure and this information is readily accessible.
What is much more opaque, is how the credit union’s board of directors contributed to the performance. Did the board play a critical role in setting the direction of the strategic plan and selecting appropriate goals that would drive performance? Or, did the board simply serve as a spectator, or worse, an obstacle in achieving results. We know from experience that the clear majority of boards and their directors have the credit union’s very best interests at heart. But beyond intentions, board members need to be performing at the best of their ability for the continued success of the organization. The role of credit union board member is now so complex it requires total engagement. If not, eventually that weakness will negatively impact the credit union. What should credit unions be doing now to ensure long term success?
Governance best practices are continually evolving but there are several fundamental responsibilities. Board members should understand their role, typically outlined in a job description. Board education should be provided on fiduciary and legal duties and the board’s role in risk oversight. There should be a process in place for a regular (typically annual) formal board assessment and individual Director evaluations. Part of the assessment process should include board succession planning to ensure an optimal mix of tenure and qualifications. And finally, the board needs to be sure it has a strong process in place for the CEO’s performance evaluation and CEO succession planning. A credit union board member carries a lot of responsibility and individuals need to be up to the task. The payoff is that a highly functioning board almost always ensures a high performing credit union that truly benefits the membership and community it serves. It’s a high calling and thankfully the credit union movement is fortunate to have talented and committed stewards in these important leadership roles. If Rochdale Paragon Group can assist your credit union in improving your board governance, please let us know. Or, please stop by our booth (#552) at CUNA GAC!
For more information, contact Jeff Owen at (913) 890-8011, jowen@rochdaleparagon.com.