Three high-impact areas that can benefit from a governance refresh
CEOs, presidents and other executives all create 100-day plans as they embark on a new assignment, or they may devise a hundred-day refresh plan as they move downstream and feel the need to recalibrate. Could your board commit to a “100 Day Refresh” of governance as you move into 2018?
Here are three high-impact areas that are easily refreshed by the board of directors. In my work with 75 credit union boards, I’ve yet to find one who couldn’t benefit from a review of these areas.
Dashboard tracking systems. Since publication of the “balanced scorecard” literature in the early 1990s, boards as well as operating units have incorporated this method for easier tracking of key performance indicators. High-performing boards typically design dashboards for three areas of organizational performance: financial, member service and culture. Some boards also apply dashboard tracking to monitor board development, community service and/or innovation.
The application of a dashboard is in choosing the key performance indicators within each category that the board believes it should monitor as part of its fiduciary responsibility. The balanced scorecard literature suggests 7-10 KPIs per category; however, many boards find they desire to track a few more financial indicators than that. Once a board determines the KPIs, the executive team creates a graphic that displays actual performance—usually coded “green” for on mark, “yellow” for off mark and “red” for trouble. These graphics provide the board a quick visual review of performance that usually reduces the need for lengthy conversation as long as the indicators are in the green. By reducing oral reports on key indicators, which can go on and on and frequently get off into the weeds and into operations, the board is able to repurpose governance time for more strategic issues.
Be careful of putting operational metrics in the dashboard versus outcome metrics. Outcome metrics identify desired ratios, amounts, on-time indicators and accomplishment rather than reporting on activities. Too many board dashboards track operational activity, and that is not the board’s business. Focus on higher-level outcome measures that your board believes indicate good enterprise health.
Agile Meetings. The credit union board meeting hasn’t changed much in fifteen years. There are still too many oral reports, lack of consent agenda, discussions of operational management reports and conversations that get off track.
Today’s modern agenda shoud look like this:
• Convene and assure attendance and minutes are approved.
• Consent agenda.
• Fiduciary items—financial performance, regulatory performance, possible enterprise risk management.
• Strategic issues—every issue and conversation that focus on future possibilities and performance are strategic.
Rather than oral reporting, reports to be considered by the board are submitted in “executive summary,” one-to-two page format to be digested by the board ahead of the meeting. Then when the issue comes up for conversation, the board starts in discussion format rather than listening. This saves time and frustration and helps keep a board out of the weeds.
It’s usually the CEO that resists this executive summary report ,believing that their oral report of the last month is crucial to good board relations. I haven’t found that to be the case, and if your CEO can’t write a clear executive summary report—if you even need one—then something’s wrong. Anything else the CEO needs to comment on will fall within the key agenda items outlined above. If she is itching to talk about new merger opportunities, that falls under strategy.
Strategic Focus. The modern meeting focuses on strategy as much as possible—I suggest upwards of 70 percent of board dialogue be future-facing rather than regurgitating and debating history. Succession planning for new board members and board development are strategic in that they focus on a future state for governance. Progress on mergers and acquisitions and new partnerships are also future-facing. Review of progress on current strategic initiatives, updates on changing business conditions and discussing benchmarks from other credit unions are also important future-state discussions.
Reviewing disruptors in the financial industry, technological advances and educational updates about the business environment are strategic topics as well—they help boards see beyond their own provincial setting and discover new strategies or refresh old strategies.
Most board surveys over the last 10 years have reported that boards want more strategic discussion. They actually want dialogue about strategy rather than lectures from the executive team. Hmm, you might want to think about that when you are your next planning retreat. Most billion-dollar credit unions have two strategic meetings a year. They realize that in this complicated and competitive environment it takes a lot of discussion to keep strategy successful.
If you find you do need to attend to these governance opportunities, you will be in line with corporate boards everywhere, including international business. Surveys from Board Source, Association of Corporate Directors, McKenzie and others all suggest these are currently hot pressure points for governance.
Have a good 100 days!
Les Wallace, Ph.D., is president of Signature Resources Inc. and author of Principles of 21st Century Governance and co-author of A Legacy of 21st Century Leadership. He is a frequent speaker and consultant on leadership and governance.