The Need for Evolution: One of Today’s Central Governance Challenges

businesswoman with hand on her chin gazes up with arrows pointing up behind her
Jennie Boden Photo
Quantum Governance L3C

4 minutes

If your credit union has grown have you re-considered the balance of authority between your board and CEO?

I spent the morning interviewing another credit union board chair. It’s one of my favorite parts of the job. I always learn something new, and I leave every encounter feeling a little in awe that they candidly share what’s on their minds … and most importantly, how they think their credit union’s governance could be improved.

Sometimes our interviewees don’t actually know much about formal governance best practices. At other times, given the long tenure of most credit union directors, I’ll note a resistance to change.

But this morning’s interview was different. Yes, the chair was a long-tenured board member—even serving on the credit union’s supervisory committee as a precursor to board service. In fact, their service had started when the credit union’s assets were just about $125 million, and today, they are cresting $2 billion. It’s safe to say that this chair had seen a lot of change during their tenure.

When I posed one of our standard questions, “What would success look like for you?” they were clear: “I think that we all need to get on board...What are our jobs as board members now? And what will they be as we continue to grow? Sometimes, we get bogged down in the little things. That might have been okay when we were checking the repo lot, but not anymore. Now, there are just bigger fish to fry.”

“I’m sorry,” I interrupted in disbelief. “Were you actually on the board when they were checking the repo lot?”

“Yes,” was the short answer. (Well, the supervisory committee to be precise.) And when they checked the teller’s drawer monthly and reported to the board the number of envelopes that they stuffed the previous month. “We were a lot smaller then,” the chair explained. 

A lot smaller to be sure.

But here they were, still vitally contributing to the life and governance of the credit union and identifying one of the most prevalent governance challenges that we see today: the need for governance evolution.

In our State of Credit Union Governance, 2023, we reported that mid-size (with assets between $500 million-$900 million) credit unions identify their governance as above average, with a score of 3.2. Critically, that same study found that as credit unions’ assets grow, their board members’ sense of governance effectiveness diminishes. Credit unions with assets between $1 billion-$2.99 billion reported only an average score of 2.8 when asked about their governance effectiveness, and the score dropped even more (2.7) for those credit unions with assets of $3 billion or more.

So, what’s at play here?

As we reported, those mid-sized credit unions are “seemingly sitting in their governance ‘sweet spot,’” with “few prepared for the governance changes that occur at the next level of growth—where the board’s focus shifts in earnest from not only the fiduciary to encompass strategic issues, but also generative questions to ensure continued relevance and efficacy.”

But it goes beyond merely the board members’ focus; if your credit union has grown like my interviewee’s, have you re-considered the balance of authority between your board and CEO? Are you still overseeing the compensation and benefits of the senior management team? Have you considered potential, needed changes in your board-level committee structure? While still addressing your fiduciary responsibilities, have you turned the corner to spend more time on where the credit union should go, rather than how things are being done?

The good news is that if you haven’t been asking yourselves these questions, it’s not too late, and you are definitely not alone.

Take note, however. This is one of today’s most central governance challenges. As you grow, whether from $125 million to $250 million or $750 million to $1.5 billion, ask yourselves this central question: How does the board need to evolve to most effectively govern at this new level? And what are we doing to get there?

Jennie Boden is CUESolutions provider Quantum Governance’s CEO.  

Quantum Governance provides credit unions, corporations, nonprofits, associations and governmental entities with strategic, cost-effective governance, ethics and management consulting, facilitation and evaluation. With more than 50% of Quantum Governance’s clients representing credit unions, the organization fields more engagements in the credit union community than in any other. Quantum Governance is a CUES partner in the field of governance and is home to more strategic governance experience than any other practice in the country.  The firm is a unique L3C organization that integrates the best elements of both the for- and non-profit communities into one practice. It is a low-profit, limited-liability service organization dedicated to the public good and one of the very first such legal hybrid organizations in the United States.


Compass Subscription