Best practices for board renewal with a focus on diversity of skillsets, thinking and demographics
Jim Woodrum believes that credit unions have “Hotmail directors in a WannaCry world.”
In case you’re not familiar with these technologies, let’s break it down.
Hotmail was a web-based email service launched in 1996. It was quickly bought by Microsoft and has since been replaced with Outlook.com, though old, active hotmail.com email addresses still exist.
WannaCry is a ransomware cryptoworm—malicious software that cybercriminals use to extort money from individuals or organizations by encrypting valuable data or files so the owner can no longer access them. Victims must then pay a ransom to the attackers to regain access. WannaCry rose to public consciousness in 2017 during an attack that affected hundreds of thousands of systems globally, including those of FedEx and Honda.
Back to credit union directors. CU boards are, generally, aging. What was once cutting-edge technology (e.g., Hotmail) when baby boomers began volunteering for board service is now obsolete, and not everyone of that generation or even Gen X is keeping up with the latest technology developments and threats (e.g., WannaCry).
Why Does Your Credit Union Need Next-Gen Directors?
Woodrum, president of Alinni LLC and retired clinical professor at the Kellogg School of Management at Northwestern University, presented “Improving Your Board’s Performance with ‘Next Gen’ Candidates” at Directors Conference in December. For the purposes of his session, he defined “next gen” as people born between 1975 and 1990—those currently 32 to 47 years old. (Xennials, if you will, give or take a few years.)
As highlighted above, a major reason to search for younger board members is tech savvy. But it’s not the only reason. “It’s about finding people with skillsets and knowledge related to ecommerce, data analytics, etc., that are rarer in older board members,” Woodrum explained. This helps “builds capability for the future.”
It’s also about demographics. Seeking out next-gen directors means the board will more closely resemble the demographics of its member base. “It creates opportunities for other types of diversity at the same time—not just age,” Woodrum added. “Today's workforce is more diverse (women, ethnicities, etc.), so qualified board members in the next gen cohort are also more likely to be diverse.”
5 Step Process for a Board Refresh
Woodrum recommended following these five steps for a successful board renewal.
1. Assess the skillsets needed on your board. Finance, banking, back office, ecommerce, digital marketing, real estate and risk management are key examples.
2. Make room on the board. Age, Woodrum said, is a “poor, blunt instrument” for determining when a director should step down. Tenure managed through term limits is an option, though having hard conversations is likely the most effective approach. Conduct board evaluations to determine effectiveness and which directors have needed skillsets.
3. Segment/target/position. Start the recruiting process by brainstorming profiles of potential candidates, said Woodrum. Examples might include:
- business school professors
- retired tech entrepreneurs
- small business owners
- friends of your children
“Who is ‘ridiculously impressive’?” Woodrum asked. “Determine which groups have the most promise.”
Then, create a pitch tailored to the above audience. If you’re targeting younger, mission-focused candidates, emphasize that being a board volunteer is a chance to give back. “Include clear and concise examples of why your credit union matters and what its impact is,” said Woodrum.
Credit union board membership can also be positioned as a development opportunity for candidates aiming for a future spot on a Fortune 500 board or other large corporation that pays its directors, he noted.
Lastly, “a nonprofit board opportunity that does not include fundraising” might be appealing, Woodrum quipped.
4. Assess “fit.” The right candidate has the skills your board is looking for, is willing to put in the time, is a team player and listens better than they talk. (Be very clear about time expectations, Woodrum stressed.)
If you’re gravitating toward a particular candidate, consider the reasons why. “Is ‘fit’ defined as finding younger people that think exactly the way you do?” Woodrum asked.
5. Onboard. Share an intro package with new members that includes the bylaws, charters, strategic plan, financial statements and member satisfaction scores. Set up introductory meetings with senior management, and make time for each board member to meet with new recruits informally. Allow new directors to spend time “in the field” at the credit union, and offer outside educational opportunities for director development. Have new board members attend a debrief with the chair after their first meetings.
Things to Remember
Next-gen board candidates want to give back, said Woodrum, but they also want to be recognized for it. These individuals are earlier in their career and family life cycle, so time is at a premium. In short, “the best candidates may not be interested.”
That may necessitate change in how the board currently operates to make volunteering more appealing. The use of paper board materials and long and/or short-notice meetings won’t help make your case.
Some session participants voiced concern about replacing tenured, knowledgeable board members with young, inexperienced directors. Other attendees suggested recruiting associate board members to share opinions without the power to vote until they become full members. Others outlined their use of advisory boards to help develop future board members.
One participant explained that his credit union asks for a two-year commitment from its advisory board. The 12-member advisory board is presented with problems—for example, improving digital delivery—and then brainstorms solutions to present to the board of directors. “Some [advisory board members] have rotated off,” he said. “Some have joined the actual board.”
Another audience member shared this reminder: Having younger board members “is something that is needed” for credit unions to prepare for the future, but these new directors aren’t governing alone. “You’re not turning the board over solely to this person. The other members are still there voting.” cues icon
Danielle Dyer is an editor for CUES and an xennial who previously owned a Hotmail account.