Performance assessments at the staff level of a credit union are commonplace. They take place at most organizations at least annually. But what about assessing the performance of the CU’s leadership, namely the board of directors? While it may be less common, board assessment is no less important.
In the webinar “When and How to Assess your Credit Union’s Governance,” presenter Michael Daigneault, CCD, discussed best practices in board governance. Founder and CEO of Quantum Governance, L3C, and a CUES strategic partner, Daigneault spoke about the importance of assessments and how to perform one.
Why Perform an Assessment?
The term “board assessment” is widely used in the credit union industry. And those assessments take a wide range of forms as well: individual skills assessments, peer-to-peer assessments, group assessments that gauge performance of the board as a whole.
Daigneault throws in another option for assessing the board: Don’t only assess the board.
“Note that the title of this presentation is not ‘When and How to Assess your Board.’ It’s ‘When and How to Assess your Credit Union’s Governance,’” Daigneault pointed out. “When assessing the governance of your credit union, you don’t want to just assess the board; you also want to assess the board’s relationship and efforts with senior management and the work of committees, in particular your supervisory or audit committee. I think there are different legs of the stool you want to pay attention to.”
Daigneault is quick to point out that this broad look at governance is aimed at the same goal of any assessment. “The idea of even assessing your board at all is geared toward helping your individual credit union and your colleagues throughout the country to evaluate their governance and leadership to be as effective as possible.”
In his work with credit unions, Daigneault has seen assessments be effective. “Overwhelmingly in our experience, credit union boards, even credit union boards that have been working side by side for many years, have not explicitly talked about how we want to govern the credit union. ... A lot of times people will take for granted that’s the way it’s been in the past and that’s the way it will be,” he said.
When to Assess?
Assessments are often triggered by times of change. A new board chair or CEO may encourage boards to undergo the process. Or a board that experiences very high turnover—or, alternatively, very low turnover. A credit union that is planning a strategic or governance change may undertake an assessment to set a benchmark before the transition begins.
Credit unions that grow significantly are often good candidates for assessment as well. Whether through organic growth or a merger, a credit union that sees its assets spike may want to stop and take inventory of how the board governance structure is performing along the way.
Daigneault noted that credit unions that have not done an assessment in the last three years should also consider doing so at some level.
Who is Involved?
There are three legs of the governance stool: 1) the board, 2) senior management, and 3) the supervisory/audit committee, he says.
Most common is the board-only assessment where all board members and, usually, the CEO participate in the assessment process. Daigneault cautions that this is only a portion of the governance picture. Committees of all kinds can also be assessed.
“We urge you to look perhaps a little more broadly about who should be assessed than might be typical in the more traditional approaches that have been used in years past,” Daigneault suggested.
Laura Lynch is CUES' products & services manager.