Article

Five Best Practices in CUSO Governance

directors point at strategy table
By Dean Young

4 minutes

These tactics support high performance for a credit union service organization board and closely parallel those recommended for CU boards.

Credit union service organizations play an integral role in the financial ecosystem by facilitating collaboration among credit unions. A CUSO built, owned and governed by credit unions to help them access best-in-class products and services at competitive prices, PSCU delivers benefits to credit unions through scale buying power, partnerships with payments industry leaders, and direct access to the relevant services and solutions they need most to compete.

A unique characteristic of a credit union-owned cooperative like PSCU is that it is governed by a board comprised of CEOs from its owner credit unions who provide a collective perspective on their strategic needs to thrive and grow in their niche markets.

Like a credit union’s board, a CUSO’s board is responsible for directing and guiding the overall mission of the cooperative. A well governed CUSO directly benefits participating credit unions and their members. The CUSO board is primarily responsible for guiding the cooperative’s strategy, its investments and operational priorities in an effort to advocate and deliver the most value to the credit union industry.  

As the financial services industry continues to evolve, the relationship between credit unions and CUSO boards is becoming even more critical to the organizations they serve. Here are five approaches for good CUSO governance, which will support the success of the CUSO, client and owner credit unions, and those credit unions’ members.

1.    Have Diverse Owner CU Executives as Directors

The main objective of a CUSO is to act as an extension of the credit union. It provides member-centric solutions that enable growth for individual credit unions and the industry as a whole. In the CUSO model, credit unions are both shareholders and clients of the cooperative. When governed by a board of directors comprised of credit union executives, a closed-loop system that benefits the cooperative, credit unions and credit union members is created. For example, the CUSO board approves funding of the product development roadmap and prioritizes investments based on both short- and long-term objectives.

The board represents the best interests of its members by considering their differing needs and expectations. To better understand members’ interests, PSCU’s board embraces diversity and seeks to find directors from credit unions with various geographies, sizes, backgrounds, cultures and specializations. Driving diversity of thought in the boardroom allows for sound decisions that best represent all of PSCU’s credit unions and the communities in which they operate. When directors represent diversity of thought, the board can better see other viewpoints and make the most informed decisions. Then, board members use their knowledge of where the credit union—and, in PSCU’s case, the payments ecosystem—is headed to guide the CUSO’s decision-making as it relates to long-term planning and direction.

2.    Gather Committed and Engaged CUSO Directors

Serving on a CUSO board requires commitment and engagement to successfully achieve objectives. To that end, PSCU’s board meets for several days at least four times a year to ensure board members stay engaged on relevant and time-sensitive topics. The agenda includes discussing market direction, the competitive landscape, new products and solutions, business risks, and—always—the cooperative's long-term strategies. It may also include an open discussion time to help encourage dialogue and engagement between the board and CUSO’s executive leadership team.

3.    Have an Effective Chair

The board chair sets the overall tone and structure of the board meetings, ensuring all directors are contributing and heard. An effective bard chair works with the CEO to establish the agenda to ensure a balance of strategic topics with adequate time for active engagement.

4.    Develop an Effective Committee Structure

Driving an effective board structure extends beyond the role of the chair to other committee leaders. Each of the committee chairs should strategically align the goals of the board within the practice and governance of the committee’s responsibilities. Committee agendas should directly support the board’s desired goals and ensure effective structure and processes are in place. Communication and information flow are critical to the success of board effectiveness.

5.    Develop Professional Rapport With CUSO Staff Leaders

What further enables a board to function at a high level is when directors can constructively challenge and enhance the abilities of the CUSO’s management team. Being current and respectful are imperatives; being bold enough to bring independent thought and ask appropriate questions are characteristics of a truly effective CUSO board.

CUSOs should embed these behaviors into the fabric of their governance cultures. Doing so will help them have high-performance governance and better serve their credit union clients and owners as well as those credit unions’ members.

EVP/chief experience officer at PSCU, St. Petersburg, Florida, Dean Young leads the CUES Supplier member’s cross-company collaboration efforts to create the strategy, design, engagement and execution of the CUSO’s brand promise, providing an added focus on service excellence and improvement initiatives for all stakeholders. Young collaborates with many system partners through participation on numerous advisory councils and serves on the NACUSO and National Credit Union Foundation boards.

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