Credit union directors face a daunting challenge this year as you consider the annual review of your credit union’s CEO. Many or all of your standard metrics will need to be thrown out and replaced with criteria that is specific to the context of the year.
By Tim Harrington and Kevin Smith
One of the significant functions of the board of directors is to perform the annual review of your CEO. Many of you will face this soon, before the end of the year. So what emoji adequately captures your thoughts on getting ready for that? Confusion, fright, thoughtful, scared, face-palm, nausea, challenge? It’s all of the above, right?
The most likely scenario is that whatever you set up last year as part of the strategic plan for 2020 you need to fully or mostly throw aside and you will have to start over.
At TEAM Resources we have been working on this issue. We found it challenging as well. We have done research about what other industries are doing. Do you know what we found? Very little, many are stumped, and what advice IS out there is impossibly vague. Not helpful.
Consider this: Your CEO may have worked harder than ever before this year. In previous years, a less-than-stellar CEO in a good economy may have reached numbers that meant a very large bonus. This year, despite all of the hard work from a great leader, the credit union might lose some money. Thanks to his/her hard work, the credit union not only still exists, but the loss of money could have been a bloodbath, but it’s not. Is it fair to not reward this because the organization “lost” money? (We’re facing a Gilligan’s Island moment, believe it or not: “If not for the courage of the fearless crew, the Minnow would be lost, the Minnow would be lost.”)
At the same time, you will have to consider how much the credit union is struggling, or whether there have been layoffs or furloughs in the face of the pandemic. This may not be the time to be handing out bonuses despite how hard your CEO worked, and how much they rose to the leadership challenges throw their way.
So, What Annual Review Criteria Do You Look For This Year?
Now is the time to reflect on your values as a credit union and as a board. Review all that has happened. What were the notable things that happened that are in line with the clear values of the organization? Things like:
- Members helped;
- Staff health and wellbeing preserved … or notably inspired;
- Difficult decisions made under duress that helped; or
- Innovative products created;
Or … the opposite of all of this. What if the CEO didn’t rise to the crisis leadership challenge? This cannot be glossed over either. But judging that on outdated financial targets/projections is not the way to assess that.
Part of what you can do is let these values guide you and your discussion throughout the process. But what we want to caution you about is turning this review into a purely subjective response.
Considerations of the CEO Assessment
Boards also need to consider are the implications to not getting this annual review right.
There are significant downsides of not being able to reward the efforts, recognize the dedication, loyalty & achievement. This is true in any year, but may be more so in a year of crisis.
How do you handle this? Like all good complex questions, the answer is “it depends.” You will need to ask your CEO for different kinds of information that aren’t on your standard metric reporting. Ask for measurements of things that did happen this year that were in line with your values and goals for the credit union.
Can you compare to expectations, or to peer? Well … maybe, but both of those options require some significant analysis of the context to make them realistic and valuable.
We have created a webinar on this topic to dig in further. We invite you to have a look: https://forteamresources.com/webinars/ for more information.