Governance With A New CEO

As the incoming leader of Langley Federal Credit Union, Tom Ryan helped his board strike the balance between embracing historic practices and plotting future improvements.

Langley Federal Credit Union($1.7B, Newport News, VA) has over $1.7 billion in assets and serves roughly 170,000 members throughout the Hampton Roads region. Tom Ryan previously worked as executive vice president of Digital Federal Credit Union($4.5B, Marlborough, MA) until about six months ago when he was hired as CEO by the board at Langley Federal.Here, he shares his thoughts on how a CEO coming from outside the institution can integrate with and encourage good governance among an already established board.

What was your transition from Digital like?

Tom Ryan: Digital had a board governance structure that worked well for them. About 15 years ago the board was made up of very busy professionals and they were searching for a better way to do their work. They adopted a policy governance model based on the principles outlined by John Carver. Because the model delineated the CEO’s role and the board’s role, it empowered the CEO, and I believe was a key factor in Digital’s success. Today, Digital is the country’s 20th largest credit union.

When I was in discussions with Langley, understanding the board and how it operates was of great importance. As a new leader at this institution, I believed there were likely many changes that needed to be made and I wanted to ensure I’d have the latitude to execute. I’ve been here six months now and I can say that things have worked out very well. The support of the board has facilitated a smooth transition and I believe this has been a catalyst for our early wins.

How would you describe the governance model at Langley?

TR: The board has not formally adopted the Carver Model,but it operates under most of the same principles. Both the board and the CEO understand each other’s distinct roles. The board sets a broader set of policies and strategic-level direction. The CEO handles the operation of the credit union and the execution of strategy. Through the strategic planning process we established a new vision, mission, and strategic focus. We then identified the key metrics the board can use to monitor and inspect our progress and fulfill its fiduciary responsibilities.

When I arrived Langley was in a very strong financial position. It had more than $1.7 billion in assets and was in the top 100 credit unions across the country.The transition to a new leader was going to be a significant event. Jean Yokum had been CEO for more than 30 years and with the credit union for many years before that. When I came in, I used the strategic planning cycle as a means to learn about the organization and its people, and to explore its potential.This process culminated with the development of a formal long-range strategic plan, annual business plan, and budget for the upcoming year.

The insight gained from this process gave me fresh insight into the organization and how it worked. It also validated what changes were needed. Accordingly, I realigned people and positions to meet the strategic needs of the organization.

Although the board has not formally adopted a specific governance model, nevertheless it operates with the discipline of understanding the distinct roles of both the CEO and the board. We have adopted a very open communication that ensures board members are engaged without having to be involved in operational issues. I believe this relationship sets the stage for our future long-term success.

How many people are on the board?

TR: Seven. I think this is an optimal number. It’s also the same number we used at Digital. Once you get much beyond that number, it becomes more challenging for a board to facilitate meetings, ensure that opinions are being heard,and get important decisions made.

Some individuals have been on the board for longer than others but the board is well aware that one of its responsibilities is to perpetuate a strong board and it is currently active in board succession planning. They know what they are trying to do canbe difficult but they also recognize that a board needs not only a certain strain of continuity but also a healthy amount of new blood.

Part of this process is to develop the right people, to acquaint them with the board process, and give them enough exposure to assess their potential as board members. Identifying potential qualified volunteers is far more complex than a general call for candidates. We are looking for thought leaders in our community that can make a difference as governors of a high-performing organization.

Does the board have committees?

TR: Yes, but not many. There are only two standing committees: an asset/liability committee and a policy and governance committee.

How long is a typical board meeting and who attends?

TR: A typical board meeting lasts about 90 minutes. I have two members of my senior staff who attend with me. Having them there is a conscious aspect of development. They get to see how a board works and what a board/management relationshipis like.

Do you have an annual retreat?

TR: Yes, in the fall. The focus is strategy and education. Board members also pursue their own education through industry conferences and meetings. There is a responsibility for board members to stay current and maintain a level of continuouseducation in order to fulfill their fiduciary obligations. As board members return from an education session they typically provide a debriefing to the board to pass along what they have learned.

How does communication take place between you and the board?

TR: I think we have good and open communication. Some emails are exchanged through the month, and the chairman and I meet ahead of time to plan the agenda for the upcoming meeting.Monthly board packages are assembled and placed on our board intranet site. The board uses iPads to access board packages and policies and has essentially eliminated paper. Most questions are asked in advance of the meeting to ensure we have an answer, but in the event there is something that comes up at a meeting that results in an open-item, we maintain a list and follow-up by email or at the next board meeting.

What type of individuals make up the board?

TR: Langley FCU origins date back to the earliest days of NASA and Langley Air Force Base. Not surprisingly, many of our past directors and some of our current directors have ties to these two organizations. Today, our field of membership is much broader, with hundreds of SEGs, associations, and underserved areas. As a result, our new generation of board members has begun to diversify. Regardless of their background, ourboard members understand they are representing all our credit union members and not a specific group or demographic.

How do you encourage the board to stay focused on its main tasks, rather than wandering into management territory?

TR: I feel fortunate in this respect. Members of the board understand how important their role is and how it differs from mine. We as managers give board members a lot of operational information, so it is easy to understand how a boardcan be drawn into operations.I think the proper balance is struck when you give the members enough information to keep them informed and engaged, as well as build up their confidence so they know they don’t need to help the CEO do hisor her job.

The governance process as it stands has been very helpful to me as a new CEO. It has helped me succeed as a new leader here and has moved the credit union along toward its long-term goals.

March 2, 2016

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