Term Limits Build Governance Prowess At A Minnesota Credit Union

Affinity Plus Federal Credit Union ($4.2B, Saint Paul, MN) is reaping the benefits of board governance changes it instituted in 2019. That’s when the Twin Cities cooperative established term limits for its nine volunteer directors.

“Term limits had been a topic of discussion for us for quite a while,” says Dave Larson, president and CEO at Affinity Plus. “We would go to conferences and people were speaking in favor of it but at the same time and place were honoring people who had been on their board for 45 years. It was counterintuitive.”

During a fall planning session in 2018, a board governance expert — Professor Richard Leblanc from Canada’s York University — told the credit union board anyone who had served more than 12 years needed to leave, Larson recalls. After that, the board created a policy for term limits — four three-year terms for a total of a dozen years.

Uncomfortable Tension. Then, Celebration!

At the time, Affinity Plus had some long-tenured board members —  including directors with 39, 22, and 18 years of service.

“There was an uncomfortable tension in the room,” Larson says.

One of them resigned the next day; another one left after the next annual meeting, with a year left in his term. They were not pleased with the board’s decision; however, not all the feelings from outgoing board members were negative, nor were they unceremoniously shown the door. In fact, Affinity Plus held a celebration at its fall board meeting to express appreciation for their service. Amid heightened emotion and a few tears, the group shared stories about the outgoing directors and recognized the successes the credit union enjoyed during their tenure.

The board did briefly consider advisory status or emeritus roles for long-time directors, Larson says, but Leblanc had made it clear that 12 years is plenty for an organization the size and structure of Affinity Plus. Ultimately, the board agreed.

“I think the board managed the process effectively,” Larson says. “As people have termed out over the past few years, they told us they enjoyed being on the board and none said we should change that decision. They believed it was the right move.”

New Continuity, New Perspectives

Today, the board’s most veteran member is at 11 years; another is at seven. They are helping to preserve continuity and institutional memory while turnover helps to bring in new perspectives on a regular basis. That’s helped the board provide more engaged, dynamic representation for a member-owned cooperative riding a long wave of change itself.

When Larson became CEO in 2013, membership at Affinity Plus was dominated by state employees in the metro area, Larson says. Today, however, the credit union’s membership spans the state. And since the term limits, the board has added members from south and north Minnesota as well as the metro area.

“Our board is now far more diverse in geography, background, work experience, industry, and professional roles,” Larson says, noting four of the board’s nine members are from traditionally underrepresented communities. “We’re benefiting from a lot more diversity in the thought they bring.”

Mark Your Calendars! Discover more best practices and learn from the successes of this dynamic cooperative in Anatomy Of Affinity Plus Federal Credit Union, coming soon to Callahan clients. For more in-depth credit union case studies and other exclusive client content, visit the Callahan Client Portal today.

Tapping A Talent Pool Numbering 260,000

The new board governance effort also includes biannual evaluations of the board and the CEO.

“They use a governance consultant to help them take a look at their performance individually and collectively, and of mine,” Larson says.

Although Larson is not privy to those interactions, discussions with his chair indicate board evaluations include skills assessments and matrixes that help identify areas of strength and needed improvement for the board. For example, the need to find directors with marketing or artificial intelligence experience.

To source potential new directors, the board is casting a net that extends far wider than a newsletter or word-of-mouth to include postings on social media such as LinkedIn.

“We have more than 260,000 members,” Larson says. “Within that, there’s a lot of talent and people who want to serve. Now, we’re finding the best ways to find them.”

According to the CEO, the response has been much more expansive than in the past, which has helped the board’s nominating committee build a strong list of candidates to ensure a good fit for the credit union as well as the board.

New Skill Sets, Better Engagement

When new directors join the board, they have a mentor that helps onboard them and provide a thorough understanding of the credit union’s not-for-profit business model, strategies, values, and principles.

“We want them to be mindful of who and what we are and aren’t as a member-owned financial cooperative,” Larson says. “From a governance perspective, the results have been impressive. The board is a lot more engaged in looking at governance policy itself and at specific committees, including adding some.”

One new committee, for example, is looking at how to create board packets for more successful meetings, whereas another is looking at how to refine executive leadership elections for the board.

“They’re trying to look at it from both a governance and strategic view,” Larson says. “That’s something we’ve not done before.”

Why Change Things Up?

According to Larson, some other credit unions have reached out to ask about his credit union’s experience with term limits and are considering whether it’s something they want to do themselves.

“I feel like it might be kind of a drum beat for it, but I’m an advocate for them,” he says.

That’s despite the natural inclination to not fix what isn’t broken.

“Back in 2019, we were doing well and having a lot of success, so you’d think, ‘Why change things up?’” Larson says. “But I can tell you our board conversations are now a lot more rich, a lot more dynamic, and with a lot more inquiry and curiosity. I think that’s positive.”

— This article originally appeared on CreditUnions.com on March 25, 2024.