The Board of Directors is the heart of an organization. The people sitting around a boardroom table make decisions that can and should enhance your company. Board member diversity can ensure the inclusion of a variety of perspectives to make more informed decisions with more positive impacts on more people.
Traditionally, credit union board members are homogenous, long-tenured, and often share similar stories. This dynamic may have worked in the past, but it risks stagnation and can leave little room for new ideas and perspectives. Over the last 15 years, I've noticed a growing push toward diversifying these credit union boardrooms. However, acknowledging the fact that more diversity is needed is not enough — change often only occurs when bold moves are made.
True diversity leads to more innovation and better outcomes when it extends beyond ethnicity and gender to also include background, age, and modes of thought. Diversifying thought, however, can be a challenge: The longer you work with a team, the more you understand how they think and approach decision-making. Introducing new players adds an element of unpredictability to the process. To fully embrace diversity of thought and ensure the continuous evolution of an organization toward a more dynamic and forward-thinking future, leaders must also consider the necessary steps to make that shift successful.
Term Limits and Transition Strategies
To effectively implement changes to a board's composition and structure while ensuring a smooth transition, leaders need to do preparatory work that sets the stage for the transition, including term limits. At our credit union, we decided to reset the clock for all of our existing board members. Presently, they have the opportunity to serve four three-year terms, resulting in a total term limit of 12 years.
Appropriate term limits ensure that longer-term board members are permitted to cycle off the board in order to introduce the inclusion of new board members. To successfully create a smooth transition, stagger your current board member's remaining terms based on their tenure. Longer-tenured board members might cycle off sooner, freeing up space for new board members. Having newer and younger board members with a variety of professional backgrounds aids in providing an evolving range of perspectives in the decision-making process.
Laying the Groundwork
In essence, the role of a board member is to ensure the organization is moving in the right direction for the good of the membership, which includes managing the CEO, establishing a vetting process for new board members, and deciding upon their governance style and structure. Leaders need to plan for the time and effort involved in allowing the board to agree to a different governance approach.
Our credit union brought in third parties to facilitate and document our board's conversations and decisions so management could begin to create an action plan. It has been a five-year process involving slow and deliberate progress toward our goals.
Laying the groundwork for this type of change requires curiosity and self-assessment. Board members must look at their strengths and competencies, meeting agendas, and strategic sessions to compare the current state of the board versus the desired state — then identify the gaps between the two.
Start with self-assessing whether or not all of the right technical expertise is represented on the board. For example, is there anyone on the board who understands cybersecurity or emerging technologies? Then, have your board self-assess their individual competencies to examine which skill sets are missing. Do we need a growth mindset? Are we resourceful as a board? After identifying any needs, you can determine how those gaps can be closed most effectively, through training and/or introducing new members.
Go Deeper
Your board chairperson should spearhead an effort to take the conversation deeper. Explore whether the board operates from a groupthink mode or if there is a healthy level of individualistic thinking. How diverse are the perspectives? Is there much debate? How much time is spent in thought-provoking, strategic conversations? When board members themselves identify these gaps through self-assessment, it helps gain greater buy-in and engagement to make change happen.
Our Board Governance Committee meets monthly to discuss the current state of the board's governance practices. They talk about various topics derived from the board and decide upon what the entire board should be discussing and brainstorming for the good of the credit union. They encourage our management team to provide them with education and enlightenment to further enhance their ability to hold meaningful conversations and ask me hard questions. Having a deeper board makes me a deeper CEO.
Embracing Servant Leadership
Leading cultural change takes great self-awareness and humility in the form of servant leadership. With humility, servant leaders encourage their boards to be unafraid to question them. JPMorgan CEO Jamie Dimon put it like this: "I think the most important strength is that you're trusted and respected by people...That you know you don't know everything...That you're willing to change direction." When a board defaults to rubber-stamping every idea, they are not doing the organization justice.
As a CEO, I welcome being challenged by my board and my management team. The more our internal and external leaders are prepared to question me, the better I become as a leader for all of them. In turn, our organization benefits.
Creating diversity on your board takes time and intention, but it can also create a more secure, collaborative, and innovative environment for any organization. Modernizing a board can feel like a heavy task, but it's necessary to actualize the change we're looking to create.
