Best Practices of Modern Credit Union Boards
Helping CUs and their boards become purpose-based
Every board is different, but reliable and researched “rules of thumb” have been shown to raise the performance of boards. Learn the best practices that are proven across a variety of board sizes and types. It's a great way to ensure you’re working smart and efficiently for your members and your credit union.
Listen to Tim explain how boards can stay relevant.
Interview transcript available below. Don't see the play button? Download the audio file.
More about Tim Harrington
Tim Harrington is a leadership expert and the founder and president of TEAM Resources, a firm that provides strategic planning, training, and consulting for financial institutions. Tim started working with credit unions in 1988. Tim and TEAM Resources have a long history of helping financial institutions move forward with greater confidence, profitability and integrity, to serve their market or field of membership better. He encourages individuals and organizations to live “on purpose.” To do something so someone else’s life can be better. Tim reminds people that if they help others achieve their dreams, they will achieve and even surpass their own.
Anthony Demangone: Hi everybody, I’m here today with Tim Harrington. He is the founder and president of TEAM Resources, a firm that provides strategic planning, training, and consulting to financial institutions and also to our wonderful credit union industry.
He’s going to be speaking at our Board and Supervisory Committee Conference on best practices for today’s credit union boards. So, Tim, welcome and thanks for joining us.
Tim Harrington: Anthony, it’s a pleasure. Thank you very much.
AD: Now, you’ve devoted your career, to a certain extent, on helping boards and credit unions improve. If you’re an attendee and you’re worried about best practices, why does it matter? What makes it so important?
TH: Well, you know, it’s interesting, Anthony. Great question. Because a lot of boards are resistant to change. Why do we need to improve? We’re doing a good job. This comment is going to anger every board member out there for just a second until they hear why I say it. It has to be said. Most management teams function under a very modern model. They’re up with the digital age. Most boards of directors function under a model that was designed in the 1870s. And I mean that! Not the 1970s, not just 50 years ago, but the 1870s. A hundred and fifty years ago. They’ve added some things along the way, but they really aren’t that different.
Where it comes from is most boards function using Robert’s Rules of Order as a governance method. It really isn’t a governance method and never was meant for one, but people use it as that and they’ve attached committees to it. And Robert’s Rules of Order, Anthony, was written in February of 1876, four months before Custer’s last stand. Even though people have modernized it, it still isn’t up to date with modern digital technologies. So, they’re using a method that’s a slow deliberative method in a really rapidly changing world.
So, why does this matter? It comes under relevance and its relevance to two things. Its relevance to the marketplace because the credit union has to be relevant to the marketplace and often, the credit union can’t go a lot faster than the board will let it. And the other is: relevant to the management team. And the management team needs guidance, needs oversight, needs governance by a group who understands the needs and pressures of today and can make good decisions rapidly so that management can move along. And that they understand where operations begins ‒ because that’s where the CEO gets to function with relative freedom ‒ and where governance ends. And that’s where the board stops getting involved in stuff, or they cover it by policies, by values, by vision, by plan, etc.
These are the issues. And so, if a board doesn’t really keep up with the marketplace, they can cause the credit union to fall behind.
One more element. In many organizations where there’s a really effective board of directors, the board is actually leading the charge to greater momentum, leading the charge to more aggressive lending, to serving more members, to really spreading the credit union message farther and wider. So a really effective board can help a credit union move forward and an unchanging board can show the organization down.
AD: I love our conferences when people can take a tidbit, a question, a thought back for deeper discussion at their credit union. What’s something that people can take back from your presentation for their fellow board members?
TH: One of the things that comes right to mind is purpose. And I’m reading an article right now on the ethical impact and how important it is in banking today. Purpose is about what you do and why you do it. Why you’re a credit union, why you’ve chosen this charter, why you even exist in the financial marketplace. It’s typically an ethical question and purpose is how you engage emotionally with a consumer. Some of the most successful companies in America are purpose-based companies because they engage to the consumer, the consumer feels something about the company they’re working with. Starbucks is a great example. Trader Joe’s is a great example. You’d be surprised who these companies are. There’s also Caterpillar and Harley Davidson and SE Johnson & Company. There’s a bunch of them that are purpose-based companies.
And so, one of the questions to bring back is: do we really understand our purpose? Do we know why we exist? And so, the board is the holder of the flame of purpose. Management, the CEO and his or her team, they can do all the operations stuff and do a wonderful job. But why they’re doing it, that can only be held by a board that has come up with a why, that understands it, that conveys it, and that really holds management accountable to it. So, a good question to take back is: do we know why we exist? By the way, Anthony, if you know why, and it’s a compelling purpose, it attracts new members, it attracts employees and keeps employees from burning out. It attracts new directors and supervisory committee members. People who care about your purpose will want to be a part of a purpose-based organization. So, when you’ve got a purpose, you’ve got to put it in your 30-second elevator speech. Here’s why we exist. You want to be a part of this. And people who are interested will be attracted to it. Some will actually be repelled by it and that’s okay. Not everybody loves Starbucks, but it’s an amazing company because it attracts people by its purpose, not by its coffee necessarily. So they can go back and say, “what’s our purpose? How have we conveyed this? Do we have it in a 30-second elevator speech, so we can give it to them and inspire them to want to be a part of this organization?”
AD: Hey, is there a story, a statistic, that you think is compelling for this audience that maybe surprises them, that they could learn from?
TH: I’ll come up with two of them here. One’s the positive side and one’s the negative side. The negative side is I’ve worked with some boards of directors where they’ve struggled. They know that they’re disfunctional. They’ve struggled, they’ve started to improve, they’ve added some modern governance techniques and then, for some reason, sometimes it’s a change in the membership of the board of directors, sometimes they just decide they like their old methods better. And they fall back into their old habits. And the result of that has been two things. One is that in several cases it’s actually lead to the departure of a CEO, a CEO who said, “you know, I just can’t deal with this anymore.” And, the other part is, it’s led to stagnation where the organization stagnates. It’s not really moving forward anymore because they have a hard time attracting and keeping a good CEO, a good entrepreneurial CEO. You see, in this day and age, CEOs have to be entrepreneurial. And people who are by nature entrepreneurial won’t put up with a board who gets involved with the details. And you can inspire people who want to be part of your organization.
AD: Any final thoughts for the people who are going to be seeing you at this conference?
TH: Being a board member is an honor, but it’s not honorary. It’s an important job. And even though most people don’t get paid for it, though some state charters do, if you’re part of an organization that’s doing something that matters, that is really distinctively different and beneficial, that the people can really understand, there’s a great feeling of, “I’m doing something worthwhile.” So, when you’re on a board, you want to do something worthwhile. A new book I’m writing is called, “Living a Life That Matters.” Make sure you’ve living a life that matters right there at your own credit union, in being involved in a progressive, open, pushing the envelope, purpose-based board of directors. It’s a great place to be. It makes the position a lot of fun.
AD: Everybody, Tim Harrington of TEAM Resources and the Board of Directors and Supervisory Committee Conference with NAFCU will be April 27-30 in San Francisco, California. Thank you, Tim. I can’t wait to see you out there!
TH: Anthony, thank you very much. I look forward to it.