Four Steps to Better Governance

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How a board of directors chooses to govern their credit union determines how effective the organization will be for the members they represent. There is a pretty broad range of approaches in the field. Some have a refined and structured approach while others just do it the way they’ve always done it regardless of how effective it might be.

If I invited you to a high stakes card game but didn’t tell you the rules, or the point of the game, would you want to play? Oh don’t worry, I’d tell you if you win. You have to guess the rules and make assumptions about what it takes to win. What if the hidden rules change during the game?

When the board of directors and CEO take control of the credit union, it is a high stakes game against the market, and with the members’ money. It makes sense to have a good understanding of what it takes to win, and to know the rules. These four simple steps make the outcome more predictable and less risky than the card game just described.

1. End Game or Outcomes

The board should describe in simple terms what constitutes successful outcomes for the members as a whole. It is a reflection of what the members want the organization to do for them. Don’t describe the means to get there, just the desired outcome. The means are described in the next section.

2. CEO Boundaries

There are laws, regulations and rules that limit what can be done in the organization. There are also other limits a responsible board would place on CEO performance. Start with broad language moving toward more specific language and state what is unacceptable. The list of what a CEO cannot do will be much shorter than the list of what a CEO can do to achieve the outcomes. You stop when any reasonable interpretation of what is left is acceptable to the board.

3. Delegation to the CEO

Tell the CEO his or her job is to achieve the stated outcomes and stay within the boundaries. Responsible delegation requires monitoring results. List the reports based on the outcomes and boundaries and the frequency the board expects. The CEO provides these reports to the board.

4. Board Operating Rules

Making up the rules as you go is not an effective way to govern. State how the board will operate and state the role of the board, the chairperson, and individual members. Efficiency is enhanced with role clarity and predictable behaviors.

These fundamental steps can be achieved by stating them in board policies. Just like exercising, anything you do is better than nothing. Some boards have an effective set of governing policies in only 40-50 pages. It’s like constructing a fire escape plan. It’s best done before the fire starts.

Steve Winninger is the retired CEO of Lake Trust Credit Union and a consultant. For more information, see www.stevewinninger.com. He can be reached at steve@stevewinninger.com.

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  • Steve Winninger is the retired CEO of Lake Trust Credit Union and a consultant. For more information, see www.stevewinninger.com.

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