More Effective Board Governance with Less Work

For some very good reasons, credit union boards have been drawn into managing the credit union, and it has become a distraction from the governance process. Governance is the process of taking the wishes of your members and distilling that into a set of policies given to the CEO. Those policies answer the fundamental question of “what should this organization achieve for the members as owners and customers” and “what would success look like”. The management process is taking those policies and operationalizing them, or turning them into reality by interpreting the language, delegating tasks, and making it all happen. I have seen this problem before in other organizations and it is common to a group of well meaning people stuck in a system that is not serving them well.

Your board policies may contain a lot of procedures that could be controlled by management. Policies in organizations are owned and controlled by the Board. Procedures must be consistent with Board policies, and further define how things are to be accomplished. Guidelines are just that, suggestions that can be modified for the task.

As we all know, the regulators are charged with ensuring the credit union operates within the laws, regulations and rules that apply, and also operate in a safe and sound condition. When those conditions are not met, credit unions are in danger of losing their charter, and boards and management teams are subject to removal.

BIG PICTURE SOLUTION

Board policies that contain these four sections provide the best oversight, provide real information instead of just data, and enable boards to focus on the their true task.

Ends or Outcomes: This is typically a one page document that articulates the desired outcome produced by the credit union. It does not specify any means to those outcomes, only the answers to these questions: (a) What should the organization achieve on behalf of the members as owners and customers. (b) What does success look like in the end.2. Executive
Limitations or Boundaries: There are many paths down the mountain, and some are deemed unacceptable by the board. When these boundaries are properly set, the CEO can choose means within those boundaries that achieve the desired outcomes. The list of boundaries is a far shorter list than the list of acceptable means.
Board-Management Linkage: This set of policies detail how the Board delegates to the CEO and calls for CEO accountability. It sets up a schedule for monitoring other board policies.
Governance Process: This set includes job descriptions for the board members and chairperson, code of conduct, committee structure and governing style.

While this may look like a lot of words, I find that most boards can do this in around 50 pages. This becomes a much more manageable piece to maintain. Once set, these policies rarely need changing or updating because they are so comprehensive. They begin with very broad language with further refinements until the Board reaches the place where any reasonable interpretation of what is left is acceptable.

BENEFITS

Better Board oversight: These policies create an acceptable path for operating the credit union, and the monitoring reports bring information backed by data that demonstrate compliance with board policies.
Risk Management System: The Executive Limitations policies provide an effective and simple risk management system, and the monitoring reports demonstrate policy compliance or non-compliance. These control the bigger and more critical risks.
Role clarity: Boards that manage create stress for CEOs. Boards that don’t govern cause the CEO to govern. That role reversal is not only stressful but counterproductive. When roles are clear, everyone knows what to expect.
Clear delegation: Once delegation is clear, management can move more quickly to achieve desired results and not spend a lot of time trying to determine if a given path is acceptable to the Board. Management teams find this level of agility provides opportunities for creativity and improved member service.
Fewer policies and less board work: The board spends less time looking in the rear view mirror and more time looking forward with the assurances provided by the monitoring reports the organization is on track.
Quicker identification of unacceptable performance: Clear policies with monitoring reports that specifically address the policies provide improved oversight and advance warning of developing problems.
CEO Performance Evaluation: The monitoring reports provide an ongoing documentation of organizational performance. Organizational performance equals CEO performance.

HOW DO WE GET THERE?

Building this set of policies takes a lot of Board work. I have a template that is designed for credit union use. The template is only a guide, not something that can be adopted in it’s current form. Policies are a reflection of board values and those can vary between credit unions. The process of finding and articulating those values is unique and personal and cannot be done by someone else. Building the monitoring reports is also a sizable task. Once the policies and monitoring reports are built they are quite easily maintained. Boards will find that, because they are well thought out in advance, perhaps only one or two modifications are done in the course of a year, and sometimes no changes are necessary at all. The monitoring reports provide an ongoing documentation of organizational performance. Organizational performance equals CEO performance.

Please contact me for more information.

Steve Winninger