No one would dispute that credit unions have changed since the movement began. Things were a whole lot simpler back then.
In the past, the key element in deciding whether members would get loans was character, not credit score. Boards of directors didn’t worry about overwhelming government regulations, and the government didn’t worry much about CUs, either. If one got into trouble, members’ deposits could be lost, since no government insurance covered losses.
While a lot has changed, some things aren’t very different—like CU boards.
“The history of the composition of credit union boards, based on their cooperative, democratic spirit, is to draw enthusiastic amateurs from the membership and ask them to serve on the board,” says Michael G. Daigneault, CCD, CEO of Vienna, Va.-based Quantum Governance L3C, a CUES strategic partner. “They look out for the membership.”
Who could object to a tradition characterized by such words as “cooperative,” “democratic” and “enthusiastic”? Perhaps some people can, now that the simple times are over.
“The stakes are higher,” Daigneault says. The cycle time for making decisions is shorter, and the number of regulations is close to overwhelming.
There’s a clear and heavy impact on board members—and on the search and training efforts when it comes time to name new directors.
“Historical thinking is so deeply embedded in credit unions, it’s not easily changed,” Daigneault says. But he believes there needs to be a way to begin the evolution of CU boards to have a substantially larger say, while avoiding micro-managing.
In fact, last year Daigneault called some 20 financial experts and asked how they thought boards should be composed in the future. Their answer surprised him.
The consensus was that CUs should seek experts who could increase the ability of the board to think on a strategic level, not on an operational level. They should be not just “regular” members of the board, but directors with considerable expertise. The resulting “hybrid” board of generalists and specialists can help the entity reach a higher level, Daigneault says. Otherwise boards risk getting mired in daily details.
That’s the advice Daigneault now shares with boards. “It’s ... normal practice in other, larger organizations,” he adds.
Some boards embrace the idea, he says, while others are concerned and critical because the approach differs from the past.
“Some find it threatening,” Daigneault says. They don’t want to see board members who might be considered outsiders, people whose families haven’t long been members.
And, whether you decide you need an expert or a generalist, you still need an individual who is committed to credit unions.
“You have to be careful of who you bring on,” Daigneault says. “You need people who will become enthusiastic champions of credit unions and credit union ideals. You need to get the very best people to move forward.”
Associate Board Members
So, how do you perform that little trick? Many are turning to associate boards—what you might call boards-in-training. This allows them to attract and ready potential directors who are exactly the people they believe the board needs, and to find out whether the fit is as good as they think it will be—for both parties.
Generations Federal Credit Union looks to its Onboarding Associate Board Member Program as a recruit pool, says CUES Director member Rose Rangel, chair of the $604 million, San Antonio-based CU. The effort began half a dozen years ago as a “very basic program” and has been updated and strengthened, says Rangel, whose board is a member of the Center for Credit Union Board Excellence. “We knew we had to do outreach.”
Generations FCU started life as City Employees Federal Credit Union. It changed to a community charter to grow and improve services to its membership, and merged in three smaller CUs in the $5 million to $10 million range. The Onboarding Associate Board Member Program grew out of discussions of leadership options amid the mergers. Directors of CUs that merged in were offered the chance to become members of the associate board for year-long terms.
As time goes by, Generations FCU strives to have a board and supervisory committee that reflects its membership, Rangel says. This includes building awareness with millennial members who have shared their reasons for joining a credit union. “Some of these include good interest rates, lower fees, referral by a friend, parent or employer, and that they trusted their credit union more than banks,” Rangel says. “Their perspective as a potential board or committee member could be vital to the movement’s future sustainability.”
While associate board members have no voting power, they sit on committees, says Rangel, who also chairs the National Association of Credit Union Chairmen. Associate board members gain experience and expertise. “They may serve on adhoc committees, attend financial/investment committee meetings and, of course, make recommendations or express their point of view on small business lending, board training, financial literacy programs, leadership development, or other board agenda items.”
Special projects for associate board members can include planning fundraisers, contributing community-specific networks and promoting the CU’s products and services to local potential volunteers and potential members.
“I see it as a testing ground—are you committed to be a working volunteer?” says Rangel. “There’s a passion that you have, or you don’t.” She doesn’t want any directors who are simply looking to add a line to their resumes, she adds.
There’s a lot of rivalry for volunteers these days, Rangel notes: “In the past, there was not as much competition.” Part of the reason, as she sees it, is that younger people are more mobile, and may not be in the area long enough to commit to serving the credit union.
Generations FCU is beefing up its efforts to publicize the opportunity to become an associate board member. Its marketing department is putting together an outreach program directed at the whole community. An important component will be promoting it on the Generations FCU website. A committee of the board will review the effort.
The board is strong now, and the credit union wants it to remain that way. “The Generations board brings together various backgrounds and cultural belief systems that enrich our board with a wide range of styles, thought processes and new perspectives,” Rangel says. “All board members are required to utilize their continued educational training, Volunteer Achievement Program modules and CUES educational classes, as well as attend (industry) conferences to participate in problem-solving discussions on economic and financial trends affecting credit unions and their leaders. These conferences are also utilized as opportunities to network with our credit union peers.”
Don’t Forget About Now
David Hilton, CEO of Woodlands, Texas-based D. Hilton Associates Inc. cautions credit unions about looking too far ahead and attempting to piece together a board that reflects a membership that doesn’t yet exist.
“The board should reflect current membership,” Hilton says. “When the future comes along, then you can make changes. After all, that future may never come.” Changes don’t always develop as expected.
He points out that when mergers occur, seats on the board of the surviving credit union can be a matter for negotiation. “If the merging credit union can get a seat on the board, that’s great—go for it,” Hilton says, but, he notes, “It’s a give and take.”
He says there’s a larger problem that’s a lot more common: Credit unions that have a defined field of membership and a board that’s no longer part of it—for instance, a teachers credit union with board members who are no longer teachers, or a military CU whose directors are no longer in uniform—or, for that matter, a one-time military credit union with a military board, that now has a community charter.
“A little bit of ego goes with serving on the board,” Hilton says. The result is that often, people don’t want to get off the board, with the result that over time, none of the directors reflect the overall membership—demographically, job-wise, or by gender.
“I’m straight with them,” Hilton says. “I tell them, ‘If you don’t look, feel and sound like your field of membership, leave.’ But it’s very difficult to get them off the board. It’s not an easy sell.”
Charlene Komar Storey is a veteran credit union writer based in New Jersey.