Creating a common vision

Board and management must trust one another and stay true to their roles

During the past decade, Toledo (Ohio) Area Catholic Credit Union, a parish-based credit union, became Toledo Area Community Credit Union.

But the single-word change in the credit union's name doesn't indicate the magnitude of change that took place, explains CEO Patrick McGrady. "We went from serving one parish to serving several. We took in credit unions through mergers and added select employee groups. Two years ago we received the community charter."

Still, there was reluctance among members and the board of directors to change the credit union's venerable name. It was an emotional issue, and it took three years to resolve. "Once we had the community charter, it made sense to call ourselves a community credit union," McGrady says.

The change came about because of a planning process where board and management work toward consensus on issues. "With consensus decisions, everyone participates in the process," McGrady says.

Building board-CEO consensus is one key to establishing a common vision. Other key attributes, officials at successful credit unions say, include:

* Mutual trust and respect;

* Open communication;

* Well-defined roles; and

* Continuing strategic plans.

Actually, trust and respect evolve over time from policies of open communication, clearly defined roles, and an open planning process.

No doubt McGrady and his board were able to work through the change because of their long-term relationship and their planning process. McGrady has been CEO for 30 years, beginning when the credit union had just $2 million in assets. Today it has $164 million. He's also a charter member of the credit union, which held its 50th annual meeting this spring.

Open communication means being able to convey good news and bad without fear of retribution, R.L. "Rod" Shelleman will tell you. Shelleman chairs the $85 million asset Americhoice Federal Credit Union in Mechanicsburg, Pa.

"Our CEO has to feel he can come to me or to the full board and say, 'I have a problem' or 'I blew it' without worrying about losing his job," Shelleman says.

Americhoice Federal, the former IBM Pennsylvania Federal Credit Union, also has gone through a decade of change, evolving to a community charter. In 1992, the IBM plant began to downsize, and the number of IBM employees decreased from 1,600 to 250. However, many of the former employees work for IBM as independent contractors, so Americhoice Federal didn't lose them all as members.

The board and CEO at Americhoice Federal have clearly denned roles and defined parameters on board and staff activities. That's one tenet of board leadership guru John Carver's Policy Governance(R) model.

"My philosophy is the board hires the CEO to run the credit union," Shelleman says. "We don't look over the CEO's shoulder asking, 'Why did you do this or that?'"

The $42 million asset Guadalupe Credit Union in Santa Fe, N.M., also uses the Carver model and a consent agenda for board discussion. (A consent agenda is one where the board approves recurring reports, such as minutes, new loans, and so on, with one motion and without discussion.) The way this works day-to-day, for example, is that management approves the opening and closing of accounts and loans based on board policy, explains Winona Nava, president/CEO. Consequently, board members don't make decisions on individual member accounts.

The board and management also use a strategic planning process to reach a common vision for the credit union. At Guadalupe, that process includes an annual planning session and monthly updates.

Each November, the board and management team gather for a day-long planning session led in recent years by Jim Aho, president of Aho Consulting Group, Omaha, Neb. Board members work on a vision for the credit union. Then management works on goals and action steps to support that vision, Nava explains.

FINANCIALS ANCHOR STRATEGIC VISION

The vision isn't "pie-in-the-sky," Nava says. Financial implications are an important part of the annual planning process. "Years ago, the financial aspects of all our dreams weren't looked at until after the planning session," she says. "A lot of times what sounded really great couldn't be done."

Annual, or strategic, planning sessions tend to occur between August and November in time to feed into the budget process. In other words, the meetings aren't devoted to budget writing. That's management's job.

However, the annual session may produce growth and earnings targets for management. Guadalupe also lists special projects, such as this year's plans for a new main office and a branch.

The amount of detail contained in annual plans seems to depend on the size of a credit union. Boards at smaller credit unions provide more detailed direction, while boards at larger credit unions give more general direction ("Board/CEO relationship evolves").

For instance, the board doesn't consider financial aspects of strategic goals at $1.4 billion Visions Federal Credit Union in Endicott, N.Y. "They're flying at 43,000 feet, saying, 'What are the broad ends we want delivered to the member?'" says Frank Berrish, president/CEO, of his directors' role.

By "ends" he means strategic goals, such as 24/7 service, multiple delivery channels, and improvement of members' financial well-being. "Board members don't get involved financially or operationally," Berrish explains. "All they look for is improving member satisfaction. They measure satisfaction with focus groups, meetings, caucuses, and surveys."

Directors meet members one-on-one at credit union events such as financial fitness fairs and children's Halloween and Christmas parties. "The latter events give board members a chance to network with young parents," Berrish says.

Although Visions Federal's board doesn't get involved in financials, it does set targets: Expenses to assets of no more than 3% and capital in the 10% to 15% range (it's 13% right now). The board also wants Visions Federal to be in the top third of competitive market rates.

WHAT GETS IN THE WAY?

The reason for creating a common vision is obvious. The board and employees look at "the same set of metrics," says Rick Miller, senior vice president of corporate development at Truliant Federal Credit Union, Winston-Salem, N.C.

Miller should know. He started with the North Carolina Credit Union League in 1981 as head of human resource development. He set up a training center devoted to management development and strategic planning. And Miller, who has a doctorate in education, "moved a lot of credit unions through organizational hurdles" before joining $800 million asset Truliant Federal in 1990.

The greatest impediment to creating a common vision is "micromanaging," Miller claims. Directors stray from the policy side to the operational side of the organization. He says this happens not only in growing credit unions, where roles are being redefined, but also when a board's makeup changes abruptly. Miller knows of a credit union where a couple of new directors were elected and decided to be more hands-on.

"The CEO left to look for another job because it stripped the gears of the credit union organizationally," he says. "The CEO refused to be micromanaged. The board's response was, 'We can manage any way we want to.'"

People don't necessarily want to micromanage, says Miller, but it's the natural order for most of us. "We live our daily lives on an operational basis, so if you give someone a job to do, that's how they're going to do it. It's a security thing."

Miller says moving people away from micromanaging is like teaching your child to swim. "The big breakthrough comes when you get the child to let go of the edge of the pool and trust he or she can swim to you without drowning. That's what strategic planning is about. You don't have to go back to the safety of the wall of the pool. You get this idea in your head of what the future's going to be, and you swim toward that."

Sometimes directors stray into operational areas because they have expertise in a field such as data processing, says Edward T. Blommel, chairman at the $717 million asset Wright-Patt Credit Union, Fairborn, Ohio. "Thanks for your advice, but butt out," Blommel tells them. "You're a board member, not a paid employee. Let employees do that."

Blommel and two partners run a commercial insurance agency. He has served on the credit union board for 20 years, the last 10 as chairman. Part of his job is to keep directors focused on policy making and out of daily operations.

That includes directors who may want to give an "attaboy" to an employee who has treated them well. "If management has a problem with this employee, it's going to come back and throw a monkey wrench into things," Blommel says.

BOARD CONTINUITY

Two programs at Wright-Patt Credit Union keep directors on track. One is education. Directors are required to continue their credit union education. Another is an "associate director" program within the credit union.

Members interested in serving on the board first must serve as associate directors, which are nonvoting observers at board and finance committee meetings. They serve about a year until a vacancy occurs. "The program speeds the learning curve," says Blommel. "Otherwise, directors don't understand what's going on until they've been there for six to eight months."

It can take years before a new director is in sync and up to speed, Miller says. That's why Truliant Federal recently started an associate director program.

"One of our concerns, and a concern for many credit unions, is board succession," says Miller. "Much of our board is made up of AT&T retirees. They're the ones who set the direction and tenor for the organization."

Sudden board turnover can disrupt the common vision. Associate director programs smooth board succession and provide continuity.

"Too much board turnover at one time can cause a significant shift in an organization's direction," Miller adds. Members who serve as associate directors learn about the credit union's common vision and shared values before they're elected to the full board.

Such programs also let people know what's required of them and reveal whether they're interested in serving. When Truliant Federal's first two associate directors backed away from serving on the board, Miller feared the program wasn't working.

But a board member told him, "No, it's working well. It's just not having the result we hoped for." The director pointed out it was better the board candidates dropped out before being elected than after being elected to three-year terms.

Miller sees board continuity as another key ingredient to forming a credit union's common vision. Other key attributes include mutual respect, trust, and open communication.

It's really quite an achievement, he says. "How many relationships have you been in where you really can be open and honest?"

Copyright Credit Union National Association, Inc. Jun 2003
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