Download - Building a Better Board
Building a Better BoardBuilding a Better Board
Tim Harrington, CPATim Harrington, CPAT.E.A.M. ResourcesT.E.A.M. Resources
7049 E. Tanque Verde Road, PMB 1367049 E. Tanque Verde Road, PMB 136
Tucson, AZ 85715Tucson, AZ 85715
800-788-9542 e-mail: [email protected] e-mail: [email protected]
Worst BoardsWorst Boards
• Interlocking directorshipsInterlocking directorships• Holding NO meetings without the CEO presentHolding NO meetings without the CEO present• No nominating committee in placeNo nominating committee in place• Allowing the CEO to handpick directorsAllowing the CEO to handpick directors• Awarding contracts to family membersAwarding contracts to family members• Allowing management to be overpaid in Allowing management to be overpaid in
compensation and deferred compensationcompensation and deferred compensation• Having too many insidersHaving too many insiders• Too many directors on too many boardsToo many directors on too many boards
BusinessWeek, Annual Corporate Board SurveyBusinessWeek, Annual Corporate Board Survey
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Best BoardsBest Boards
• Independent and interested directorsIndependent and interested directors• Remain on level of Planning and PolicyRemain on level of Planning and Policy• Plan with clear and measurable goalsPlan with clear and measurable goals• Monitor plan status regularlyMonitor plan status regularly• Hold periodic meetings without CEO presentHold periodic meetings without CEO present• Develop effective nominating committeeDevelop effective nominating committee• Avoid Conflicts of Interest and NepotismAvoid Conflicts of Interest and Nepotism• Evaluate CEO based on achievement of planEvaluate CEO based on achievement of plan• Compensate CEO based on achievement of planCompensate CEO based on achievement of plan• Evaluate their own performanceEvaluate their own performance
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What has been said of BoardsWhat has been said of Boards
““Effective governance by a board is a relatively Effective governance by a board is a relatively rare and unnatural act.”rare and unnatural act.” ChaitChait
““There is one thing all boards have in There is one thing all boards have in common…They do not function.”common…They do not function.” DruckerDrucker
““Boards tend to be incompetent groups of Boards tend to be incompetent groups of competent individuals.”competent individuals.” CarverCarver
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““The illiterate of the 21st century will not be The illiterate of the 21st century will not be those who cannot read and write, but those those who cannot read and write, but those who cannot learn, unlearn, and relearn.”who cannot learn, unlearn, and relearn.”
——Alvin TofflerAlvin Toffler
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Keys to a Better BoardKeys to a Better Board
Key 1: Recruit betterKey 1: Recruit better
Key 2: Nominate betterKey 2: Nominate better
Key 3: Evaluate betterKey 3: Evaluate better
Key 4: Govern betterKey 4: Govern better
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Recruit BetterRecruit Better
Don’t WaitDon’t Wait until someone comes to you and until someone comes to you and asks to volunteer!asks to volunteer!
Proactively identifyProactively identify and and recruitrecruit qualified qualified candidatescandidates
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Recruit BetterRecruit Better
• Create an Create an Advisory BoardAdvisory Board– Invite key leaders in your field of membership to Invite key leaders in your field of membership to
periodically attend meetingsperiodically attend meetings• Give them a voiceGive them a voice
• Solicit their adviceSolicit their advice
• Reward them with dinner or gift for serviceReward them with dinner or gift for service– Don’t have to be membersDon’t have to be members
• Establish a Board Mentor ProgramEstablish a Board Mentor Program– Target members on current committees that show Target members on current committees that show
promisepromise• Let them attend meetings with Mentor Let them attend meetings with Mentor 8
Nominate BetterNominate Better
• Establish Establish standingstanding Nominating Committee Nominating Committee– Committee members are assigned to work all year Committee members are assigned to work all year
to identify prospectsto identify prospects
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Nominating CommitteeNominating Committee– Made up of people who understand the boardMade up of people who understand the board– Perhaps board members not running for next Perhaps board members not running for next
electionelection
• Identify skills, qualities and experience Identify skills, qualities and experience neededneeded
• Develop checklists and questionnairesDevelop checklists and questionnaires
• Do not hesitate to eliminate from Do not hesitate to eliminate from nomination prospective candidates who do nomination prospective candidates who do not meet criteria…This is a tough, not meet criteria…This is a tough, demanding positiondemanding position
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Nominate BetterNominate Better
Nominating CommitteeNominating Committee– Must understand how complex credit unions are Must understand how complex credit unions are
todaytoday– Should screen candidates with critical eyeShould screen candidates with critical eye– Should determine how to deal with incumbent Should determine how to deal with incumbent
candidates running again for seatcandidates running again for seat– Should use Self-evaluation results to determine Should use Self-evaluation results to determine
qualificationsqualifications– Should not accept ‘incumbency’ as a qualification Should not accept ‘incumbency’ as a qualification
for nominationfor nomination11
Ways to Improve BoardWays to Improve Board
An existing board can be improved thru
• Election process (doesn’t work)
• Term limits (doesn’t work)
• Self-evaluations (works! But tough to get boards to do this)
– Boards tend to not want to hold themselves accountable. But this is CRITICAL!!!
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Evaluate BetterEvaluate Better
EvaluationsEvaluationsNo better way to improve your board than by No better way to improve your board than by evaluationsevaluations
• Evaluate Board as a wholeEvaluate Board as a whole
• Evaluate individual members by peers Evaluate individual members by peers (Structured Peer Review)(Structured Peer Review)
• Evaluation of Board meetingsEvaluation of Board meetings
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Evaluate BetterEvaluate Better
EvaluationsEvaluations““Self-evaluation is not important to a Board,Self-evaluation is not important to a Board,
Self-evaluation is essential to a Board.”Self-evaluation is essential to a Board.”
John CarverJohn Carver
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Evaluate BetterEvaluate Better
What do you do after evaluationsWhat do you do after evaluations
If they are all good?If they are all good?
• Pat yourself on the back and celebratePat yourself on the back and celebrate
• Check your level of honestyCheck your level of honesty
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Evaluate BetterEvaluate Better
What do you do after evaluationsWhat do you do after evaluations
If they are not so good?If they are not so good?
• Meet with member who is falling shortMeet with member who is falling short
• Explain to him or her what areas they Explain to him or her what areas they are week inare week in
• Help them find education/conferences Help them find education/conferences in that areain that area
• Monitor that area ongoingMonitor that area ongoing 16
Free Board Evaluation Sourcehttp://www.forteamresources.com/board_downloads.html
Free evaluations you can do yourself…or EvalRUs.com
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The Board is where The Board is where
all authority resides all authority resides
until some of ituntil some of it
is delegated to others.is delegated to others.
Govern BetterGovern Better
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Board
Credit Union
Operations
CEO
MEMBERS
Accountability Accountability and Feedbackand Feedback
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• Oversee and guide the credit union so that the Oversee and guide the credit union so that the members’ assets are as safe and productive as members’ assets are as safe and productive as possible.possible.
• Hire and when necessary, replace managementHire and when necessary, replace management
• Provide supportive oversight between hire and Provide supportive oversight between hire and replacereplace
• Remain independent of managementRemain independent of management
The role is to govern, not to The role is to govern, not to operate the credit unionoperate the credit union
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How a Board Governs EffectivelyHow a Board Governs Effectively
• Establishes clear expectations…PlanEstablishes clear expectations…Plan
• Delegates authority to CEODelegates authority to CEO
• Checks whether those expectations have Checks whether those expectations have been met…Measurement and Evaluationbeen met…Measurement and Evaluation
• Responds appropriately to the resultsResponds appropriately to the results
• Links CEO’s evaluation and compensation Links CEO’s evaluation and compensation to long-term success of company to long-term success of company
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Govern BetterGovern Better
• CEO is the single point of delegation from CEO is the single point of delegation from the Boardthe Board– Board has one employeeBoard has one employee– CEO has one boss, Board as a ‘whole’CEO has one boss, Board as a ‘whole’
• CEO is accountable for meeting the Pre-CEO is accountable for meeting the Pre-established expectations (Ends)established expectations (Ends)
• CEO must be delegated all the authority CEO must be delegated all the authority needed to match this level of accountability needed to match this level of accountability (Means)(Means)
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Board Speaks with One VoiceBoard Speaks with One Voice
Board Speaks with One Voice Board Speaks with One Voice
Statements by individual board members Statements by individual board members have NO AUTHORITYhave NO AUTHORITY
Board speaks authoritatively when it passes Board speaks authoritatively when it passes an official motion or makes an official an official motion or makes an official strategystrategy
One Voice or None at AllOne Voice or None at All
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Govern BetterGovern Better
““Whoever is directly responsible for achieving Whoever is directly responsible for achieving the ends must decide which means to use.”the ends must decide which means to use.”
John CarverJohn Carver
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GovernancePolicies,Strategic
Goals and Measurable
Results
The Governance ProcessThe Governance Process
ManagementBoard (and Management)
BoardBoard and Management
ManagementCarries
Out Plans And Policies
ReviewsResults,
Compares toPlan
Evaluation!Reward
ManagementIf plan met or exceeded
Start all over again!Start all over again!
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Governance is workingGovernance is working“Outside the Box”“Outside the Box”
Operations at the Operations at the control of control of
CEOCEOBoard Packet Dash Board External Reports Internal feedback systems
Member survey Staff survey Mystery Shops Fraud hotline
Values, Mission, Plans, Goals, Policies
External Audit, Internal Audit Regulatory Exam
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Credit Union Credit Union Directors NewsletterDirectors Newsletter
““Boards should meet regularly without Boards should meet regularly without management present and should evaluate management present and should evaluate their performance every year. Audit their performance every year. Audit committees should meet at least four times a committees should meet at least four times a year. Boards should be frugal on executive year. Boards should be frugal on executive pay, decisive when planning CEO succession, pay, decisive when planning CEO succession, diligent in oversight responsibilities, and diligent in oversight responsibilities, and quick to act when trouble strikes.”quick to act when trouble strikes.”
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Boards should meet regularly Boards should meet regularly without the CEO presentwithout the CEO present
– Allows candid discussion that may be stifled Allows candid discussion that may be stifled with CEO presentwith CEO present
– Allows Boards to remember and practice their Allows Boards to remember and practice their independenceindependence
– BUT: Keep general minutesBUT: Keep general minutes– Inform the CEO what the meeting generally Inform the CEO what the meeting generally
coveredcovered– This is not a ‘get the CEO’ sessionThis is not a ‘get the CEO’ session
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Micro-Managing Micro-Managing or Rubber Stamping: or Rubber Stamping:
A Difficult BalanceA Difficult Balance
• A zealous, conscientious A zealous, conscientious board can micro-manageboard can micro-manage
• A trusting board can A trusting board can become a rubber stampbecome a rubber stamp
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Remember who Remember who RUNS the Credit UnionRUNS the Credit Union
• Board oversees and governs the credit unionBoard oversees and governs the credit union• Management runs the credit unionManagement runs the credit union• Boards need to define what information they Boards need to define what information they
need to ascertain that the credit union is need to ascertain that the credit union is heading in the right directionheading in the right direction
• But, Boards need to make sure they do not But, Boards need to make sure they do not step into managing the credit unionstep into managing the credit union
• The line is sometimes thinThe line is sometimes thin
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Working Board
Managing Board
Governing Board
Ratifying Board
Failing Board
No CEO or Acting CEO
Board assumes CEO needs help running org
Competent CEO and experienced staff that knows more than board
Board hires a good CEO and stays out of his/her way
CEO controls Board. Board inactive or ineffective
Small CU Board involved in minutiae, manager of CEO
Clear division between Ops and Governance
Organization OK but board in decline
Financial, audit, or ethical issues
Board doing job of CEO
Board assigns tasks to CEO
Focused on Board Work, concerned with values
Board approves what CEO brings
CEO doing job of board
Focus on day-to-day operations
Board hands on and proud of it
Operates on future/strategic level
Out of touch, complacent, delegating Gov.
Looking to the past, way behind staff
Short time horizon Focus on administration & Operations
Delegates Operations to CEO
Stale policies, little accountability
Not strategic, crippled by in-fighting or inertia
Primary role is operations
Primary role is making decisions
Primary role is setting policy and general direction
Primary role is supporting CEO, rubber stamping
Primary role of board is keeping perks
Try something new.Try something new.
You may be surprised what You may be surprised what happens.happens.
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Building a Better BoardBuilding a Better Board
Tim Harrington, CPATim Harrington, CPAT.E.A.M. ResourcesT.E.A.M. Resources
7049 E. Tanque Verde Road, PMB 1367049 E. Tanque Verde Road, PMB 136
Tucson, AZ 85715Tucson, AZ 85715
800-788-9542 e-mail: [email protected] e-mail: [email protected]