A health crisis.
Demands for social justice.
2020 has been called the year of crisis, cubed. Each of these crises are the worst of their kind in at least 50 years. Coming one on top of another, they are far more than just three times as challenging as they might ordinarily be. And, now, they’re compounde d by the most contentious election in living memory.
All of this puts a strain on society, on credit union members, and on credit unions themselves.
Add the demands of technology and digital delivery, the threat of ambush litigation, perpetual cyber-attacks, the looming presence of megabanks, the challenges of fintechs, and rapidly evolving consumer expectations and you have a set of dilemmas beyond anything the credit union governance model was created to address.
It’s not just credit unions, either. According to a recently published piece from McKinsey, modernizing governance at for-profit companies is fast becoming a focus of activist investors. Arguably, credit union member-owners should be activists, too.That’s part of the point of a cooperative.
There are many detailed models of what ideal credit union governance should look like, but in the face of today’s demands, representing member-owners and setting strategic direction need the most reconsideration.
The idea of representation is multi-dimensional. There’s the democratic aspect of electing a servant-leader a concept deeply embedded in the credit union model. Traditionally, there is also the fiduciary obligation, the general protection of member interests, and the responsibility to manage agency that is, to make sure the hired guns running the credit union are doing their jobs. Beyond these basic duties, effective boards will also be vocal on issues of credit union purpose, the scope and nature of products and services, and the credit union’s role in its membership’s communities.
In recent years, governance experts have started advocating for a minimum level and breadth of professional expertise among board members as well. Equipping boards with a cross-section of practical knowledge about complex subjects like law, auditing, technology, cyber-security, and other critical matters sounds good, but it’s not a substitute for hiring qualified professionals to address these issues. Finding such board members can also be tough, especially for a small or closed-FOM credit union.
The critical value and importance of visible diversity across race, creed, gender, age, sexual orientation, and other arbitrary distinctions is also becoming increasingly clear. People of different backgrounds and characteristics can have vastly different experiences in society and will bring those perspectives and understandings to the boardroom. Visible diversity also meets another important goal a board that looks diverse implies stronger, smarter, more transparent, and more capable governance to member-owners, regulators, and others.
The Challenge Of Diversity
Diversity can present challenges as well as benefits. Ideally, leaders with different professional expertise or life experience will complement one another and be less susceptible to blind spots and confirmation bias. Unfortunately, they can also struggle to communicate and collaborate. The objective of diversity, therefore, shouldn’t be regulatory compliance or an ideal of multi-socio-professional-culturalism. The objective should be to build an inclusive team that works together effectively on behalf of the membership.
But being truly inclusive is tough, even when a team isn’t diverse. That’s why diversity expert Dr. Steve Robbins says ensuring a culture of inclusivity as the group works toward modernizing governance is even more important than the drive for diversity. If a group isn’t culturally, intellectually, and behaviorally inclusive, diversity can make existing communications, teamwork, and relationship problems worse.
Strategy is another rapidly evolving area of focus for those modernizing their approach to governance. Too often in the past, strategy has been management’s job. The board’s role was to review and approve it. And, too often, strategy has not been strategic. It’s been tactical and concrete rather than broad and aspirational, rarely stretching beyond three years.
Modern strategy development is a collaborative effort between board and management, and the board’s role is crucial.
In a complex and rapidly changing world where sustainability requires organizations make huge investments now for results a decade or more into an uncertain future this model is no longer adequate.
Modern strategy development is a collaborative effort between board and management, and the board’s role is crucial. The board brings a unique and invaluable perspective on executing the credit union’s mission and evolving its place in the lives of members and their communities. And because a board can influence a credit union’s direction and investments for a decade or more, strategy might be its most impactful role.
Modernizing credit union governance is a matter of relevancy, sustainability, and, eventually, survival. To make it through our challenging times, and to thrive once we do, credit unions need a modern governance model built on a diverse, knowledgeable, and representative board that can act inclusively, collaboratively, and with strategic vision.