A Direct Line Blog

From the CUNA Compliance & Risk Council Whitepaper: Being on the Board: An Exploration of Governance 

Term limits are one approach to ensuring engagement and making room for new members; however, there are other methods for accomplishing the same goal.

Building an Effective Board Succession Plan

Key considerations for building an effective board succession plan include knowing the future direction, strategy, and credit union needs and creating an established process for the routine assessment of the board’s composition and effectiveness, cultural alignment, and diversity.

For succession planning, vital information for the board includes:

• Knowing who is coming up on their limit and how many board members may need to be replaced at the next session
• Encouraging open communications for anyone planning to depart from the board
• Maintaining a pipeline of potential board members (possibly already vetted)

The first step in maintaining a pipeline of qualified board candidates is knowing your membership. The search for potential board members usually starts in the community the credit union serves, through Selected Eligibility Groups (SEGs), community groups, or other open or closed fields, where relationships already exist. The goal is to identify strong candidates based on their skills, qualifications, and services on related committees or boards.

Seeking New Board Members

Finding new board members for succession planning is not necessarily an easy process. Diversity and inclusion are important considerations for succession planning. Diversity should go beyond the standard demographics of sex, race, and age to include diversity of experience, income, education, and even economic strata.

Other diverse aspects to strive for with prospective board members include:

• Their own member/customer base and sphere of influence
• Depth/variety of their business experience and accomplishments
• The types of products and services they offer
• Level of community engagement and involvement
• Visibility in the community and industry
• Having adequate training opportunities available for potential board members who are not familiar with the credit union environment (regulatory expectations, financial structure, and risk profile)

Result of Poor Planning

Succession planning is an ongoing process that is vital for a credit union’s long-term success. Inconsistent or poor succession planning reduces the effectiveness of the board. Without having qualified board members with proper training moving into open roles on the board, good governance will falter.

Poor succession planning often results in a board that lacks the skills and experience needed to propel the credit union forward, meet strategic goals, and ensure proper governance in decision-making. These credit unions find themselves reacting to vacancies, rather than being proactive in finding ideal candidates. This results in a situation where the nominating process often lacks direction and does not have enough time to identify and recruit high-quality candidates in short-term situations.

More Information

You might be wondering where you can start. We have a few suggestions.

In 2019, the CUNA Volunteer Leadership Committee released a whitepaper on Board Succession Planning. It includes some ideas for building your bench, including an associate board member program. We also have a partnership with Yvonne Evers and her SUCCESSIONapp program. It includes a workflow to manage succession plans for management, boards, and high-potential leaders.