Four Ways to Ensure a Good Merger Fit

Four Ways to Ensure a Good Merger Fit

Four Ways to Ensure a Good Merger Fit

By Deedee Myers, Founder & CEO, DDJ Myers, Ltd.

One factor that credit unions search for when choosing a merger partner is a “good fit.” But what does “fit” mean? It’s not like trying on a pair of shoes where you can tell instantly if the fit is comfortable or not. With mergers, there are several ways to consider whether the fit is good. Here are four criteria to consider.

Cultural Fit

Cultural fit means the two organizations share the same philosophical tenets and are driven by the same vision, mission, purpose, and values.

“If you’re looking at a merger opportunity, you have to be mindful that two institutions are coming together, so you need to consider what that is going to look like from a culture perspective,” says Adele Sandberg, President/CEO of $300 million AEA FCU, Yuma, Arizona, one of the credit union leaders to discuss this topic in “More for Members: Credit Union Leaders Plan Post-Pandemic Merger & Acquisition Strategies,” a three-part DDJ Myers white paper. “If you have clashing cultures, it’s going to be difficult and maybe even disruptive to the smooth operation of the credit union.”

Geographic Fit

There are two ways to look at geographic fit. One is to determine whether the merger will allow you to expand into new markets to widen your geographic reach. Webster First Federal Credit Union, Worcester, Massachusetts, used this strategy to expand beyond its mandated geographic boundaries. “As a community credit union, we were restricted to membership in central Massachusetts and could not go outside of that area,” explains President/CEO Michael Lussier.

Through a series of mergers, Webster First was able to expand all the way to Boston and now has locations in Middlesex, Essex, Suffolk, and Worcester counties. “With our expanded field of membership, we were able to grow from $400 million in assets to $1.2 billion today,” Lussier says

Geographic fit also can be about the type of community you wish to serve. “For example, I’m in a rural community, so I would probably be more inclined to go into other rural communities because we know how to serve them and to serve them well,” Sandberg says.

The Right Size

Because of the effort entailed with a merger, some credit unions set a minimum asset size for merger partners. For instance, $2 billion USALLIANCE Federal Credit Union, Rye, New York, grew with mergers in the $40 million range before cracking the billion-dollar mark. Now asset size generally needs to be more substantial to make strategic sense.

“As a $700 million credit union, moving forward with the merger of a $40 million credit union made sense,” says President/CEO Kris VanBeek. “At $2 billion, it makes less sense.”

Fields of Membership

Credit unions often merge with one another because their fields of membership are compatible. In that regard, $1 billion University Credit Union, Los Angeles, puts primary emphasis on potential merger partners that serve one or more universities or higher education. A nationwide merger strategy is well suited for credit unions with a SEG-based, industry, or association charter, says CEO David Tuyo, especially if regulations defining fields of membership and common bonds are updated to reflect the realities of the digital age.

“Looking at membership based on zip codes or counties is a yesterday way of defining fields of membership,” Tuyo contends. “What we’re trying to identify in a field of membership is a common bond, and that could span zip codes, state lines, and even the entire globe.”

Click the link to download the three-part white paper, “More for Members: Credit Union Leaders Plan Post-Pandemic Merger & Acquisition Strategies.”

Stuck Between Gears – Vision matters.

Stuck Between Gears – Vision matters.

A couple of weeks ago, I pulled my bike off the garage wall, checked the tires, and started for a leisurely ride without a chartered destination. My goal was to spin and explore. My neighborhood is relatively flat, so shifting gears was not necessary. The ride was perfect, the weather clear, and the wind on my face exhilarating. Everything was going great, so why not keep going further, longer!

As I ventured out of my neighborhood, the trail gradually increased its incline. Within a few feet of navigating around a bend, a long hill caught me by surprise. My shift into lower gears in the lower-middle part of the steep hill was way too late, and the ride became a struggle. Making my way to the top of the hill took much more energy and stamina than it would have if I had shifted earlier.

Vision matters. Looking further ahead, planning, and shifting in advance would have made an enormous difference. You can guess what happened next. Keeping my eye on the road ahead, anticipating inclines and declines, engaging the chainring effectively, using my momentum on the incline’s approach, and dropping through the gears quickly and smoothly was the plan of action to ensure an enjoyable ride through the hills. Each hill was more easily navigable with a mindset of looking ahead, strategizing, and improving my shifting.

Looking forward, envisioning, and navigating obstacles is part of leadership. These days, we need to challenge and question whether the approaches we used before and during 2020 will serve us well in unknown future situations. Systematic, systemic, and rigorously creative and dynamic coaching and development programs add enormous value to organizations.  The past few months had heightened opportunities to interact with leaders who seek to enhance awareness and commitment. Their aim is for skilled workforces to envision possibilities, navigate uncertainty and challenges, effectively shift through change, appropriately pivot, and lead others to maximize their potential and continuously learn.

Coaching with a continuous improvement mindset results in engaged and empowered employees, enhanced critical and strategic thinking, and the ability to solve the problem of how to improve their work effectively. Process improvement tools and techniques are incomplete without continuous improvement coaching that harnesses our workforce’s untapped and unused potential. I believe leaders need masterful coaching skills. Coaching competencies that enable one to ask powerful questions in a logical sequence and the pragmatism to create a safe space for one’s team to uncover, explore, and evolve new options and solutions are learnable skills. Developing these coaching skills takes commitment, volition, and a willingness to learn from a highly certified coach who has walked this path before and possesses mastery and skill.

Many organizations strive to be more efficient, do more with less, and fully leverage their workforce’s competencies and skills. A Lean Coaching program using a continuous improvement mindset nurtures, empowers, and harnesses your workforce in innovative ways, encouraging an entrepreneurial mindset. As a result, workers’ initiatives have longer sustainability, individuals and teams are more creative, and higher quality conversations result in new insights, actions, and outcomes.

Board renewal and recruitment: A profound need to modernize the process

Board renewal and recruitment: A profound need to modernize the process

The COVID-19 environmental disruption, the call to enhance and expand member digital services, #blacklivesmatter, and the retirement of board members comprise a profound confluence of opportunities. These opportunities should not become issues with the right actions. Two years ago, a significant percentage of board members (30-40%) declared they would retire in three to five years. In addition, many tenured board members assert that younger generations are not committed to volunteering their time.

These simultaneous transformative disruptions beg questions of each board: What resources are needed now? How does our board’s governance structure take care of our membership in this disruptive and transformative situation? What conversations are needed to understand the board’s obligation to add more strategic value? 

Board members should also self-reflect: Am I the best resource for this board? How will I know? What is my unique value? How do I impede success? Am I willing to step aside? Do I live as a legend in my own mind?

Transformative Opportunity

The global situation and its impact on the industry create a transformative opportunity for the future of credit unions. The call to action involves assessing and updating your board recruitment mindset and process to add dynamically engaged and relevant board members who add strategic value to the organization. The historical source for board member recruitment is no longer viable. This new reality offers an opportunity to move away from the unseen, unspoken, and unheard biases that result in homogeneity when selecting board members.

Diversity

Boards can move beyond talking about diversity and on to effective action in these ways:

  • Make an explicit commitment to search for diverse competencies, perspectives, and thought. 
  • Challenge boardroom language of bias.
  • Move from episodic recruiting to ongoing strategic and intentional recruitment.
  • Embrace constant readiness to recruit versus waiting until three months before the need.

Professional Board Searches

Boards can boldly professionalize their search processes to captivate the best candidates in these ways:

  • Determine the skill gap.
  • Seek multiple perspectives.
  • Professionalize interview skills. 
  • Ask the right questions.
  • Advertise to compel responses from diverse and qualified candidates.

Common gaps in board skill assessments include strategic insight regarding the following:

  • ERM
  • Big data 
  • Strategic growth 
  • Cybersecurity 
  • Entrepreneurialism 
  • Human capital 
  • Balance sheet and investment strategies

Attracting the Best

Attracting the most qualified candidates happens through social media with geographical targeting, upbeat language, and automated friendly responses via an applicant tracking system. Assume you will receive dozens of interested candidates, necessitating a system to effectively curate them.

Be ready to share information about your organization and board. Initially, introductory-level information is appropriate; expect to share more at the final selection stage. 

The missing link in a successful board search is eliminating entrenched practices. Be futuristic in your vision of what members need, and commit to diversity, equity, and inclusion in your actions. Step up practices to professionalize the search and be surprised and delighted at the quality of choices.

Six Mistakes Credit Unions Make When Recruiting Female Directors

Six Mistakes Credit Unions Make When Recruiting Female Directors

… and how to avoid them.

Women make up the lion’s share—or should we say “lioness’s share”?—of membership at U.S. credit unions, but their representation on credit union boards is sorely lagging.

Recruiting more women to fill board positions is not just a matter of checking off a box. It needs to be done well, avoiding mistakes that could lead to tokenism rather than a good-faith effort to find the most qualified women who can contribute to good governance.

By being aware of some of the following mistakes, credit unions can take steps to avoid them.

Mistake #1: They under-recruit for women.

“It’s not new that females, who represent more than half of credit union membership nationwide, continue to be underrepresented in the boardroom,” says Nancy Herbert, Ph.D., who has served as a director for more than two dozen organizations, including two credit unions.

Herbert’s experience in credit unions led her to conduct extensive research on the topic of gender disparity on credit union boards en route to earning a doctorate in organizational development and leadership from Ashford University, San Diego.

“The glacier pace of incorporating gender diversity in our boardrooms precipitated my research about the underrepresentation of females on credit union boards,” Herbert reports. “A historic look at female representation on credit union boards nationwide showed a growth from 25% in 2005 to 36% in 2020, averaging less than 1% growth per year.”

Herbert derived these figures from two reports: Entrenched or Energetic? Improving Credit Union Board Renewal, co-authored by Antonio Spizzirri and Matt Fullbrook of the David and Sharon Johnston Centre for Corporate Governance Innovation at the Rotman School of Management, University of Toronto; and The State of Credit Union Governance, 2020, a joint project of the Johnston Centre, CUES strategic provider Quantum Governance L3C, Herndon, Virginia, and CUES.

A key conclusion of these two reports is that demographic diversity is an integral component of effective board governance, but with female board representation improving by just 3% in the past five years, Herbert notes, “we have not been very successful in moving the needle to address gender balance.”

To help boards develop strategies for greater success in this area, Herbert has launched The Boardroom Sage LLC, a coaching and consulting business in Longmont, Colorado, that focuses on gender diversity, board succession, board recruitment, leadership and team building.

While credit unions in the aggregate have underrepresentation of women in the boardroom, Herbert notes that some boards are bucking that trend with a majority of board seats—and in some cases, all seats—going to women.

A case in point is $180 million Guadalupe Credit Union in Santa Fe, New Mexico, which currently has four women on its five-member board. In fact, women have been in the majority on the board for the past 20 years.

“It helps that we have a CEO who is a woman (CUES member Winona Nava), and our upper management is also majority women,” says Linda Medina, board chair and the 2019 CUES Distinguished Director. “I think one of the reasons we have done so well in attracting women is because we have a culture that emphasizes family—not that men don’t value families, but it helps our credit union be more inclusive of women because of how family-oriented we are.”

One of the primary benefits of gender parity is that your board will have more diversity of opinions on topics that matter.
Caren Gabriel
Caren Gabriel
CEO
Ascend Federal Credit Union

CUES member Caren Gabriel, CEO of $2.6 billion Ascend Federal Credit Union in Tullahoma, Tennessee, enumerates various reasons to strive for more balanced representation of women on CU boards.

“One of the primary benefits of gender parity is that your board will have more diversity of opinions on topics that matter,” Gabriel says. “Women look at issues differently than men. For example, they can provide insight into how certain issues will resonate with young women, older women or single women who are the head of household. When you bring together different viewpoints, the board can make better, more informed decisions for the company and its strategy.”

Gabriel speaks from experience, given that she currently serves on the board of CUNA Mutual Group (a position that landed her on the list of WomenInc.’s 2019 Most Influential Corporate Board Directors).

Mistake #2: They lack a plan for recruiting women.

“Boards don’t need to achieve gender parity overnight,” Herbert says. “A best practice is to develop board succession planning with a focus on the future of the credit union.”

Credit union boards can use several strategies to accelerate their journey to gender parity. “One option that would allow you to fast-track that goal, if your bylaws permit, is to expand the number of members on your board,” Herbert observes.

Another option is to implement strategies that would encourage regular turnover of board members. Though this can be a touchy subject for some CUs, especially in situations where directors have served on the board continuously for decades, one strategy would be to implement term limits.

At Ascend CU, Gabriel reports that term limits have had a positive effect on recruitment because they “required our board to have a succession plan in place to identify and recruit new members who have a different background. There is a process to evaluate the skill sets of board members so they can provide the diversity of opinion our company needs to grow and thrive. Recruiting a person who you don’t know is not easy, but it’s necessary in order to have a high-performing board.”

Mistake #3: Their boards look for professional capital at the expense of social capital.

In her dissertation, Herbert addressed the issue of the deficit of “social capital,” citing 2015 research from Darlene Booth-Bell on the importance of gender diversity in governance as a means for achieving a desirable balance of professional and social capital.

“Professional capital describes the cumulative experiential and occupational expertise useful to the current or future needs of an organization,” Herbert says. “On the other side of the equation, social capital is made up of the demographic and cultural attributes that individuals bring to an organization, which includes gender, age, ethnicity, sexual orientation and geographic diversity that connects us to a variety of cultural and community networks.”

The underrepresentation of women skews the balance of social capital and member representation, Herbert notes. Thus, it’s important for boards to recruit candidates who can fill in these gaps.

Boards don’t need to achieve gender parity overnight. A best practice is to develop board succession planning with a focus on the future of the credit union.
Nancy Herbert PhD
Nancy Herbert, Ph.D.
CEO/Founder
The Boardroom Sage LLC

Social capital also refers to so-called “soft skills,” encompassing such attributes as temperament, relatability and values. “Values are especially important because they help the board determine when considering individuals for board seats whether there’s a good cultural fit,” Herbert says. “A best practice is to strive to have diverse professional and social capital that will best serve the future needs of the credit union, and gender diversity is an essential part of that.”

With women well-represented on its board, Guadalupe CU has achieved a balance of professional and social capital. When recruiting new board members, the credit union looks for individuals who can help maintain that balance.

“We look for such things as enthusiasm and also if they have a specific talent in HR, IT or other areas in which we’re in need of expertise,” Medina explains.

Guadalupe CU maintains its social capital not only by recruiting women but also by recruiting young people. According to Medina, recruiting board members from among millennials and Gen-Xers helps ensure a continuing infusion of fresh ideas.

Mistake #4: They don’t conduct a broad enough search.

According to the Rotman report, credit unions mostly rely on word-of-mouth from current directors and staff to recruit board candidates and/or draw candidates from non-board committees. These recruitment practices typically lead to selecting new directors who are similar to incumbents. On boards that are mostly male, this hampers the movement toward greater gender diversity.

To aid in the quest for diversity, Herbert recommends that boards assess the types of professional and social capital that would best serve their credit unions and design a recruitment plan using that as a base. It is also possible to seek out a combination of diversity markers in board candidates, such as gender, age and ethnicity. “This mostly entails a shift from board members co-opting friends and colleagues to seeking out the specific attributes you need and knowing where to find them,” she says.

Gabriel says her board has done a lot of work on its director recruitment process. Beyond leveraging term limits, her directors “are thinking strategically and made a decision to move beyond finding new board members the old way—like asking people they know to find out if a friend or acquaintance would be interested in being a board member.”

At Guadalupe CU, recruitment of new board members focuses on values. “Basically what we’ve done is recruited from our partner organizations, because they have similar values,” Medina says. Among these partner organizations are Somos Un Pueblo Unido, a state-wide community organization working in support of the Hispanic community, and the New Mexico Association of Government Accountants, which serves professionals in the government financial community by providing quality education and fostering professional development.

Guadalupe CU also spreads the word about board openings through online advertising and direct contact with members during branch visits.

“The [member service representatives] will strike up a conversation and ask them if they would like to apply,” Medina reports.

In fact, it was through an in-branch conversation that Medina herself was recruited to serve as a credit union volunteer approximately 25 years ago.

To avoid pitfalls in recruiting, Deedee Myers, Ph.D., MSC, PCC, CEO of CUESolutions provider DDJ Myers Ltd., Phoenix, recommends that boards do not self-recruit but rather leave the search process to the experts.

“Insist on a diverse pool of candidates,” Myers advises. “Your search firm should already be in the practice of diversity, equity and inclusion.”

Be careful about making the most comfortable decision. Step into diversity.

Mistake #5: They make assumptions based on gender.

Stereotypical biases can creep into a selection process, but they need to be left at the door. Here are several assumptions that can trip up credit union boards, according to Myers:

  • That a woman is unable to have a career and be a partner and/or mother. As Myers explains, “It is her choice and opportunity to step into her oneness, her power.”
  • That the chair needs to be a woman because of the perception that a woman is more nurturing. “The role of the chair is vital to the performance of the board, and the best-qualified person needs to be in that role,” Myers says.
  • That it’s OK to call board members “girls.” Myers stresses: “They are board members; use gender-neutral language.”

Myers recommends a number of steps for avoiding these biases, including bringing in subject matter experts who will help the board see its blind spots. It’s also important for boards to evaluate what questions they should ask a potential board member—even to the point that interview questions are vetted by a third party.

Myers further advises credit unions to schedule a rigorous annual board development workshop or seminar to elevate board performance. “Be careful about making the most comfortable decision,” she cautions. “Step into diversity.”

Mistake #6: They recruit one or two women rather than change their culture.

Recruiting women to join the board requires a true commitment to diversity. Herbert reports that credit unions need to ask: “Is your boardroom culture compatible with a diverse group of voices?”

Having one or two women on the board may not be sufficient to achieve a cultural change, Herbert adds. “To reach the most positive effects of gender diversity, it is gender balance, not simply a gender representation, that is key.”

Myers similarly stresses the need for achieving a transformative change in the organization. “Many boards are looking for a methodology to drive transformational change to be the highest-performing board possible. Invariably, the conversation leads to diversity, equity and inclusion throughout the boardroom, board practices, interpersonal board relationships, and the relationship [with] and oversight of the CEO.”

Achieving transformative change requires much more than implementing a new or revised board policy, Myers adds. “Transformative change includes a holistic, humanistic and dynamic organizing principle to bring about widening perspectives of seeing the whole person versus the color of skin, gender or sexual preference, for example. Unfortunately, when a board member intentionally or unintentionally crosses a line of subtle or not-so-subtle discrimination, too often the transgression goes unnoticed or is not corrected.”

Myers recommends that boards take the time to reflect on how their mindsets and perspectives could inappropriately influence outcomes as it pertains to recruitment. While acknowledging that reflection practices in boardrooms are not standard, she nonetheless encourages it as a means of assessing language and attitudes to encourage more openness toward those who offer diverse experiences and perspectives.

“Boards that practice self-reflection are better able to see people for their oneness, their own competencies and value to add to the board versus gender as the first filter,” Myers concludes. cues icon

Based in Missouri, Diane Franklin is a longtime contributor to Credit Union Management magazine.

Looking Ahead For Successful Succession

Looking Ahead For Successful Succession

Leadership development and continuing education efforts today lead to smooth transitions tomorrow.

Succession and internal development are a “major focus” for $400 million Century Federal Credit Union in Cleveland, says CUES member Sharon Churchill, CPA, CCE, president/CEO of the organization. As such, the CU’s management team is encouraged to attend at least one major industry conference annually and bring back what they’ve learned for sharing. Staff is also urged to take advantage of the credit union’s “healthy tuition plan,” an educational assistance program that provides up to $5,250 per year for regular full-time employees who have completed at least one year of continuous service at the CU, demonstrated competent performance and maintained an excellent attendance record. “Educational assistance is provided to those employees seeking to achieve a degree related to the credit union’s business interests or a course of study that applies to an area within the scope of the financial services industry,” she explains.

All Century FCU staff are also required to take a minimum of six hours of additional training as part of their annual Individual Development Plan to help broaden industry understanding and perspective, Churchill adds. Other IDP opportunities include attending internal programs delivered on site that are either designed and delivered by CU staff or developed by other agencies such as CUES, insurance brokers or benefits providers. Staff may also attend off-site seminars or conferences, participate in computer-based/online instruction delivered remotely, or independently pursue workshops and college courses to fulfill their IDP requirements.

This kind of foresight can help pave the way for a successful transition of leadership, but there are other strategies credit unions should deploy in the effort.

Deedee Myers, CEO of CUESolutions provider DDJ Myers Ltd., a Phoenix-based board development, strategic planning, leadership development and executive search firm, advises that credit unions begin this undertaking no fewer than three to five years out; perhaps even five to eight years ahead of time if other executives plan to retire within one or two years of the CEO. (“We see 30 to 60% of the executive team retiring within three years of a long-time CEO’s exit,” she says.) This should start with a “rigorous assessment” of each internal candidate’s CEO Readiness Plan, which are developed for candidates as part of a structured CEO succession process, Myers says.

Consultants and coaches from DDJ Myers use “an evidence-based model to facilitate a visioning session with the board of directors on deciding the strategic context and competencies for the next CEO,” she explains. “This process can take from a few hours to two full day sessions, depending on the complexity of the organization.” Following that process, the executive coach assesses each candidate and creates a coaching plan.

“We are an avid proponent of the internal candidate working with an internal coach and external certified coach for maximum development,” says Myers. “We suggest the board decide one year out if they are going internal. Some boards decide, even with high-quality internal candidates, to do an external search as part of due diligence.

“I do believe, in many cases, if the board mandates an early focus on succession, [they will find] untapped potential in the organization,” she continues. “Start the succession conversation and development early for the greatest success. More progressive organizations are developing CEOs for the next 10-plus years.”

Pamela Mills-Senn  is a writer based in Long Beach, California.

https://www.cumanagement.com/articles/2019/09/looking-ahead-successful-succession

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