Is Your Board up to Today’s Challenges?

The demands on credit union boards have never been greater. Many board members view their position as a sinecure that brings both recognition and perks. But they may have not kept up with their skills, which puts them at a disadvantage in executing their responsibilities of identifying strategic opportunities and succession planning. The smartest credit union directors are fully engaged on issues of the day including strategy, technology, director recruiting, board assessments and creating learning cultures that lead to board optimization.

Expectations of board members are increasing. The business environment is rapidly evolving and industry disruption is affecting all organizations. Directors must stay abreast of business trends to make sure management is up to the task. Knowledge and relevant experience are gating factors for oversight of management efforts. Furthermore, when new technologies are constantly emerging that can totally rewrite your business, the days of thinking of strategy as an annual, “review-and-concur” event are over. Waiting for an annual retreat means missing the threats and opportunities.

Our conversations with credit union directors confirm they’re conscious that boards need to do better in overseeing and contributing to strategy. Credit union boards are not alone in grasping this need. A recent survey of public company directors by the National Association of Corporate Directors provided information that is instructive for credit unions as well. NACD found that 71% of directors surveyed felt their boards should better understand the risks and opportunities that affect performance and drive strategic choices. Nearly as many directors (67%) said their boards needed to improve contribution to strategy development and boost oversight of strategy execution.

For credit unions, like public companies, technology is of utmost importance and implementing strategy often depends on technology. Yet, the NACD found that only about half the directors reported discussing the technology investment needed to enable their strategies at board meetings. Moreover, 38% of the respondents felt their companies lacked sufficient metrics to assess the progress of technology-related strategy. Technology solutions and protection against cyber-intrusion go hand-in-hand. Nearly all of the NACD respondents, however, felt some degree of challenge in gaining adequate knowledge of cybersecurity issues. Moreover, only 37% of NACD respondents felt confident or strongly confident that management had adequately prepared for cyber threats. Barely half the respondents had confidence or strong confidence in management’s ability to handle cyber-risk if an intrusion were to occur. Knowledge of and responses to potential cyber-threats are quickly and continuously changing, challenging even the most knowledgeable director.

Robust board engagement with strategy takes time, and boards must make discussing strategy a priority at meetings. Even so, the NACD reported that over half of the directors surveyed felt there was not adequate time for in-depth strategy discussion in their meetings. Well-designed, high-quality CEO dashboards can help. Indeed, effective dashboards are a focus for our clients. Regularly refreshed dashboards allow directors to keep themselves briefed between meetings, staying up to date on strategy and tracking its implementation between meetings. Directors arrive at meetings prepared for thoughtful engagement.

Confidence in management’s assumptions about strategy is needed for oversight and contribution. Concerningly, however, less than half of the NACD’s respondents tested management’s key assumptions that underpin strategic choices. Granted, fast-changing business environments make assumptions difficult to make and examine, but having the ability to ask hard questions around assumptions in a collegial, trusting environment assists management in taking another look and diving a little deeper. Boards need to take on this new responsibility, thinking even harder about future strategies and opportunities.

Smart credit union directors now recognize that board members need a higher level of knowledge and skills than before. Plus, rigorous decision-making depends on your board’s composition. Devoted, long-serving directors must be commended for their service, but their skill level might not meet the current needs of their credit union. Credit unions must ensure director recruitment targets a diversity of backgrounds and the types of skills now required. Moreover, a board culture of continuous learning strengthens every director’s ability to oversee and contribute to strategy. Learning helps create a dynamic culture where directors keep abreast of change and continue to build on their skills. When emerging tools like blockchain technology and artificial intelligence are poised to reconfigure business, and security issues remain a threat, credit unions must give themselves every opportunity to assure their boards are up to the task.  These issues need to be addressed and prioritized with a rhythm of communication to ensure a trusting environment that leads to success.

Stuart R. Levine is Chairman and CEO for Stuart Levine & Associates and EduLeader LLC. He can be reached at 516-465-0800 or slevine@stuartlevine.com.