NAFCU Services Blog

Jun 13, 2024

Blind Spots in the Boardroom

By Peter Myers, Senior Vice President, DDJ Myers

Blind spots exist everywhere; everyone has them. For boards, the key is to learn in what circumstances there might be a blind spot because, when left unchecked, there can be consequences. This article outlines the five most common blind spots in the boardroom and how to shine a light on those strategic opportunities.  

Seeking out blind spots can create unfamiliar tension. It would be unusual if at the onset of strategic CEO succession planning or a longitudinal strategy development and deployment process, a board and executive team said, “Let’s get comfortable in the uncomfortable conversation.” However, the most memorable outcomes can be when long-held and unchallenged assumptions become apparent, the absence of institutional or team competencies is revealed, or the time is taken to face the unaddressed strategic or cultural variables that have impeded progress. Said differently, even more meaningful progress occurs when blind spots are recognized and attended to. 

To proactively frame the opportunity, the most common blind spots in the boardroom fall into five general categories: 

  1. The need to elevate board development and succession practices 
  2. Ensuring CEO succession is strategically (not transactionally) executed 
  3. The absence of a clear strategic direction 
  4. Addressing risk management from both a strategic and an opportunistic perspective in addition to oversight 
  5. Approaching mergers one-dimensionally 

Below are examples, context, and unintended consequences of how those blind spots might appear in your boardroom. 

Board Development & Succession 

In the last four years, two boards that launched succession planning programs had two directors pass away before the process gained momentum. Boards engage in development and succession programs because they are two of the most strategic variables an organization will encounter. Left unaddressed, they will generate the need for fitful actions. On the lighter side, proactively addressing development and succession needs creates opportunities to upskill and enhance the board’s portfolio of skills. Learning and acquiring new skills, by its very nature, is engaging and leads to better and more fruitful conversations. 

CEO Succession 

Approaching the planned (and unplanned) succession of the CEO position is one of the most strategic opportunities a credit union has. Unfortunately, it remains a blind spot for many boards (and frankly CEOs) and the specifics of how to capitalize on this event are outlined in webinars, podcasts, and white papers. Because of the significance of this transition, especially for tenured CEOs, the blind spots that exist are multi-faceted and nuanced. A few examples of how the blind spot persists include the following: 

  • “Our CEO won’t leave us. And when they do, they’ll give us plenty of notice.” 
  • “We will (or won’t) promote from within.” 
  • “We’ll hire a recruitment firm to give us resumes when the time comes.” 

Then there is one of our favorites: “We want top-tier talent (and we’re willing to pay below market price for it) because we’re a great institution (and it’d be a privilege to work here more so than elsewhere).” 

Strategic Direction 

More frequent than most people realize, a blind spot in the boardroom is the need for a clearly and comprehensively defined and embraced strategic framework that every conversation is framed against. 

What if the champions of the strategic framework were the boards? Said differently, what would the effect be if, whenever a director or executive proposes a new idea, project, or initiative it was positioned against said framework for further exploration or assessed as a distraction? Consider that, versus directors who intend to operate at the governance level going into problem-solving and action-planning mode. When a director responds with, “Great idea but it would likely deviate from or dilute our strategy,” or, “We’ve offered the suggestion to management and we’ll delegate the action conversation to management,” strategic CEOs are thrilled. This is not to be confused with structure to discount new or innovative ideas; it is more about how boards can self-regulate and go deeper into the relevant strategic conversations. 

To road test this in your boardroom, run a pop quiz. Question, “What is our strategy?” and see what answers emerge (hint: outcomes are not strategies). 

Risk Management and Opportunities 

Boards, and sometimes executives, need to be properly equipped with the education and tools to oversee and mitigate risk effectively. Those table stakes are widely known but the blind spot is not uncovering the nexus of underlying risks and opportunities. There’s a liminal space between risk and reward where being too safe as stewards, or the absence of taking risks (and growing), is neglecting governance (strategic) responsibilities. 

It might sound like, “We want to serve a broader population and we understand that it comes with risk,” or, “With new strategic growth comes risk that we need to plan for.” The blind spot is when some of those risks do not turn out to be rewarded, even though it was anticipated or priced for, or when everything does not run perfectly, and boards get cold feet and pull back on the strategy.  

Boards that develop the right skills and clearly understand the strategy will frame the current state against the backdrop of the declared go-forward strategic framework and positioning of resources. Pulling back is different from refinement and how those assessments and declarations are communicated to management matters. 

Another risk/reward blind spot is focusing on a few key ratios, which the CEO often feeds, and not understanding the significance of their performance within the broader industry context. “Our high net worth ratio means we are safe and sound,” meanwhile, total assets and membership are shrinking. Conversely, “We’re really excited about our huge asset growth,” while the returns are not keeping pace. 

Obtaining the right skills and revealing the blind spots in the boardroom will elevate the sophistication of the strategic dialogue. 

Mergers 

Being in a planned merger used to be a taboo topic and against the credit union unwritten code. The tone then shifted to, “What if we could? Would we? Should we?” Now, in many boardrooms, the conversation is, “What happens if we don’t?” 

The relevant blind spot is viewing mergers and acquisitions through a binary win-or-lose prism. Recently, during a merger posture development session a director said, “I assumed we’d be the hunter and not the hunted.” That lens made sense based on that director’s background within a large corporation that had gone through numerous mergers and acquisitions. There are many reasons why mergers in the not-for-profit realm are different than publicly traded organizations. Not just because of the statutory and corporate structure of our organizations, but also because of the people and relationships we have and the commitments we share.  

When we replace the prey or predator mindset with a go-forward partnership perspective, the conversation, and how you go about seeking partnerships, will change. How the board and executive team approach and decide on what is important to them, and the membership, about a merger could change. This proactive posture development conversation reveals those blind spots and puts things in perspective—even if pursuing a merger is ultimately not the best move for your organization, the board will know that it was done with open eyes. 

Everyone has blind spots. Embracing that reality empowers a board to put in place practices to check themselves regularly and rigorously. Having an informed and astute board, and one committed to elevating the governance impact, is a compelling strategy. 

Additional resource: Online Training Center 

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