Boards Need to be Proactive

Credit unions have changed tremendously over the last 20 years, indeed over the last 10 years. This was a carrot-and-stick evolution. Outside the credit unions, traditional single-sponsors shrank, evolved or disappeared; the financial services industry radically altered; and Americans demanded better and more sophisticated services. Inside, credit unions saw that they provided good deals to the American people and so they changed in order to continue to offer their advantages in the best ways possible. What have emerged have been credit unions of varied business functions with immense size, sophistication, and reach.

 
 

Credit unions have changed tremendously over the last 20 years, indeed over the last 10 years. This was a carrot-and-stick evolution. Outside the credit unions, traditional single-sponsors shrank, evolved or disappeared; the financial services industry radically altered; and Americans demanded better and more sophisticated services. Inside, credit unions saw that they provided good deals to the American people and so they changed in order to continue to offer their advantages in the best ways possible. What have emerged have been credit unions of varied business functions with immense size, sophistication, and reach.

Some operate not only traditional credit unions – taking savings and making loans – but they also in essence operate credit card companies, first and second mortgage companies, business lending companies, debit card companies, check cashing companies and more. Some have more assets under management than the small banks in their communities, or even than all but a few of the large banks in their communities. Even those credit unions that have not moved to these levels of sophistication have nevertheless evolved in this direction. More than ever they have open FOMs or are community charter credit unions, able to serve not just a select few of a community but vast swaths of a community, if not everyone.
Management has had to change in step. Staffs have had to change in step. What has not particularly matched the intense evolution of credit unions has been Boards.

A New World

Volunteer Boards were always essential to credit unions. Before there were staffs there were Boards, the volunteer owners who kept the books, who knew the members, plus their families and their needs, especially their credit worthiness. They would grant loans on the value of a name alone. Because credit unions were cooperatives, Boards were the very essence of local ownership and control for the greater good of the members.

Alas, now Board members have to be masters or nearly so of data processing, Internet banking, accounting, real estate economics, business strategy, marketing, transaction fee economics, human resource management, investments and more. Lee Iaccocca would be hard-pressed.

Nevertheless, there is no turning back the clock. This is the world we live in. Small credit unions that have not changed nor intend to and have their shrinking member base can have their old-fashioned Boards, picking Harry to replace Sue because Harry is a good guy at meetings and won’t rock the boat, but they are going to disappear as they have been disappearing for these last two decades. To survive, credit unions and Boards have to do more.

Boards as Organizational Assets

Boards must now think of themselves as organizational assets. They are more than supervisors of the CEO, which is basically a reactive role. They need to be proactive, and look out over the horizon to where members are going to need value in the future.
Boards need to give much thought and act wisely in choosing a CEO. It is the CEO who then sets the tone for the organization. But this job done, there is no resting on the oars; there is much to be done. Board members have to watch the credit union but not be distracted by credit union practices so as to neglect their higher function of searching for and securing new value for members, wherever that value is to be found. They are the people who have to “think outside the box,” to not limit themselves to yesterday’s solutions.

Accordingly, Board members cannot look to fill empty chairs with persons like themselves, or “who might be good on our trips.” Rather they need to look for sophisticated expertise, professionalism, proven success, and dedication.


Door to the Future


In some respect, credit unions have had an inferiority complex. Its Boards comprised blue-collar workers who represented membership well enough but also understood that they were not corporate manager types. This was a strength, but it cannot be allowed to hold us back. We looked inward at our own select memberships; now we have to look out to all Americans who can benefit from our practices and philosophies. Boards, to be organizational assets, have to be asset managers. They have to acquire, manage and dispose of assets over the assets’ useful lives. These are uncommon skills requiring much thought, imagination, and tough decision-making.

For our members’ sake, for credit unions’ sake, it is not enough to look back to the wonderful and helpful principles of our past. We have a limitless future; we could be the entities that bankroll the new corporations of the new new economy, that bankroll the new Microsofts. But to do so we need Boards with imagination, drive, professionalism, training and resolve to deal with the big pictures and not the small.

 

 

 

June 14, 2004


Comments

 
 
 
  • True, oh so true
    Anonymous
     
     
     
  • This will be hard to do. If you believe a board is a representation of the membership then 90% of credit union members are retired caucasion men. CU's face two problems with boards. 1. Getting board members who have outlived their role to retire. 2. Finding qualified people who are willing to make the time committment to be on the board. A free meal and occasional trip are not big inducements to work that hard.
    Anonymous
     
     
     
  • Expertise can be purchased, leadership and the prioritization of credit union goals is what is important in a board member. I agree that a certain level of sophistication is needed but technical savvy is no substitute for making certain that the leadership of the CU reflects its membership.
    Anonymous