SECU and OpenAI, What Went Wrong!

An Unbalance Between Board Involvement and Leadership Autonomy

Before I discuss this dysfunction between the board of directors and leadership at OpenAI and SECU, we must understand that today, a credit union is a technology company, not just a place to make deposits and take out loans. Almost everything in a credit union is built on multiple technology platforms and applications.

The recent happenings at OpenAI and SECU have a lot of similarities. Both organizations demonstrate the dysfunction resulting from the board of directors interfering with organizational autonomy. In the fast-paced financial services and technology world, companies often find themselves at the intersection of innovation, differentiation, and corporate governance. While a board plays a crucial role in guiding an organization’s strategic direction, there are instances where their involvement stems from not wanting things to change. That is what is happening at SECU. When the organization sees a need to progress forward, adopting new technologies, new services, and new products, and the Board of Directors wants things to stay the same, there is a danger of the Board’s governance becoming interference. This strains that delicate balance between leadership autonomy and corporate oversight. Yes, effective corporate governance is crucial for the success and sustainability of any organization. But, a vital component of this governance structure is the relationship between the board of directors and the executive leadership team. Striking the right balance between board involvement and operational autonomy is a delicate task that became a dysfunction at OpenAI and SECU.

The Role of the Board of Directors:

Boards typically oversee a company’s management and ensure its long-term success. The board’s role becomes even more critical in the tech and financial services space, where rapid advancements and disruptive innovations are the norm. Board members must bring diverse expertise, strategic insights, and a fiduciary duty to stakeholders, not their biases, whims, or personal likes and expectations. They represent the membership and oversee the credit union’s fiduciary responsibilities, not their individual agendas. It seems with both OpenAI and SECU, the board was more invested in representing their agendas, not the needs of the membership or the organization. We have seen in both cases CEOs being changed out, leaders have chosen to leave, and employees are anxious and stressed. In fact, at OpenAI, the staff revolted because they saw the disconnect between what the board was doing and the company’s mission.

Importance of Management Autonomy:

Leadership and management autonomy is the driving force behind organizational innovation and agility. We must assume that the leaders are competent and demonstrate subject matter and leadership expertise. Having autonomy allows executive leaders to make decisions quickly and adapt to rapidly changing environments. Maintaining operational autonomy is essential for staying at the forefront of technological, service, and engagement advancements in the financial services sector, where disruption is a constant. When leadership’s autonomy is interfered with, the board is essentially micromanaging the organization, and although the board may be well-intentioned, they are not on the front lines of a disrupted, highly competitive, and commoditized business sector; management is on the front lines.

Challenges of Board Interference:

While boards of directors play a crucial role in overseeing the organization’s strategic direction and ensuring its fiduciary responsibilities are met, excessive interference in day-to-day operations will hinder innovation and agility. Micromanagement from the board can stifle creativity and impede the decision-making process, slowing down an organization’s ability to respond to market and consumer demands. Here are the challenges undo board interference creates:

  • Vision Misalignment: Differences in vision and priorities between the board and the executive team can lead to conflicts in decisions and strategic direction. We saw this clearly at OpenAI. The employees revolted because of the lack of vision alignment on the board. At SECU, executives were focused on innovation and long-term growth, while the board demonstrated extreme resistance to change.
  • Micro-Management Concerns: As mentioned above, when board members become overly involved in day-to-day operations, it can stifle creativity and hinder the agility needed for the organization to stay ahead in the competition and the ability to differentiate itself in a complex and congested market. In both OpenAI and SECU, the issue of board micromanagement became a reality; there was little collaboration and compromise, and the board took a “my way or the highway” approach.
  • Innovation vs. Stability: In the case of SECU, balancing innovation with the board’s desire for stability, resistance to change, and risk aversion proved to be a constant challenge. Too much focus on either end of the spectrum can jeopardize a company’s competitive edge, but we know that disruption is rampant in the financial services world, and change is a constant. Too much aversion to change will ultimately erode the sustainability of the organization. As the subject-matter experts, management must lead the way in innovation. At the same time, the board must continually and objectively evaluate and monitor the risk-reward proposition without regard to personal bias, agenda, or preferences.

SECU’s and OpenAI’s Mission and Challenges:

SECU’s mission is To be the trusted provider of financial services to every eligible member and to enhance the value of their lives and financial well-being while maintaining our fiscal strength.” OpenAI’s mission is “To ensure that artificial general intelligence benefits all of humanity.”  Both of these missions are worthy, inspiring goals. The challenge at SECU and OpenAI stemmed from an inability to balance the board’s need for oversight of the credit union to the point of interference and what management determined necessary to improve the organization’s value to all stakeholders. At SECU, management understood the need for innovation in member access and service choices driven by the competitive landscape.

The Breakage Between Leadership and the Board:

Leadership at the executive and board levels plays a pivotal role in finding the right balance between strategy and tactics and governance and management. At OpenAI and SECU, there was a significant divide in the mission and vision between the board and management. It appears from the outside that effective communication, transparency, and a shared understanding of organizational goals were missing or ignored. Leadership struggled to work collaboratively with the board to ensure that their strategic decisions aligned with the organization’s mission while exercising the necessary autonomy for the operational teams to execute their mission and vision. At SECU, it appeared that the board was seeking to continue business the way they had always done business, and this was in direct conflict with management aiming to become a contemporary, relevant banking option for the membership.

Finding the equilibrium between board oversight and operational autonomy is an ongoing challenge for organizations in any business sector. This balance becomes even more critical in the ever-evolving landscape of financial services. SECU and OpenAI must learn to navigate these complexities to fulfill their mission of advancing for the benefit of all stakeholders. Ultimately, stakeholders will decide whether SECU or OpenAI has addressed these challenges and adapted its governance structure to foster innovation while upholding its mission.

Best Practices for Harmonious Leadership and Board Alignment:

  1. Clearly Define Roles: Delineating the roles and responsibilities of the board and executive leadership will help prevent misunderstandings and conflicts. The ways to create this vital alignment are:
    1. Conduct Board Training: This training should be designed to identify the guardrails within which the board and management operate; when does the board have a voice, and when do they trust management to operationalize the strategies? A vital part of this training is to help the chairperson to understand their place and purpose on the board. The chair’s role is to manage the conversations, bring the discipline of the board’s purpose to each meeting, and, when a vote is called or a discussion ensues, to be the last person to speak and only vote when the chair vote is required to break a tie vote. Another element of board training is to help the board have a process of anchoring all decisions and conversations to the organization’s mission, vision, and core values.
    1. Learn Techniques for the Board to Self-Govern: This discipline involves learning the rules and tools to have difficult conversations and disputes with techniques designed to call a stop when a board member crosses the lines between strategy and tactics and governance and management. The primary responsibility of this self-governance falls on the shoulders of the chairperson. Still, in a perfect world, any director should have the courage and empowerment to call a stop and redirect the conversation to the appropriate level.
    1. Have an Objective Leadership Coach Present: This coaching engagement would include having a neutral leadership/governance professional attend all board meetings for a predetermined period. This engagement aims to create a self-governance discipline and model when and how to realign the discussions to strategy and governance during the board meetings. In addition, this professional often conducts leadership coaching with some or all of the directors and senior management.
  2. Regular Communication: Open and transparent communication between the board and executives is crucial. Regular and transparent updates on strategic initiatives, challenges, and progress can foster trust and understanding. Beyond regular updates, the mission, vision, and core values must become the primary anchor for all board decisions. An excellent communication strategy involves a close and trusting relationship between the chairperson and the CEO. Before a critical strategic or budget decision is presented to the board, the chair and CEO have a preliminary conversation to prepare the chair on what management needs and why this vote is critical. Also, the chair is vital in reaching out to other directors who may not be in sync with the board while bringing unity to the decisions and conversations.
  3. Embracing Diversity of Thought: Boards benefit from diverse perspectives. Ensuring that board members bring varied expertise and backgrounds will lead to more robust decision-making. There is much evidence that board diversity is vital to a board’s ability to make balanced discussions. All directors will see decisions through their lens and from their backgrounds and experience. When you lack diversity, the board becomes a group of “bobbleheads,” or it fails to challenge the “groupthink.” For a credit union, ideally, the board of directors should represent their membership in gender, age, race, and religion. Too many “old white guys” on a credit union board is a concern, and the commission must design a succession plan to install diversity in the future.

Balancing the interests of a board of directors and executive leadership is an ongoing challenge for credit unions and tech companies, primarily if they aim to innovate, differentiate, and serve their members while maintaining stability. Learning from the unfortunate example we find at OpenAI and SECU, an organization will learn valuable insights on navigating this delicate equilibrium in the ever-evolving business landscape.

About rich@leading2leadership.com

Rich Jones is the Founder/Principal of Leading2Leadership LLC. Before starting his strategic planning agency, he spent over 20 years in leadership roles in the financial services sector. Before becoming an executive in the financial services sector, Rich was an entrepreneur, building and selling two businesses and working for early-stage start-up companies in executive roles in marketing, business development, and seeking investment partners. With more than three decades of experience, he brings innovative thought to companies and executives. Rich published “Leading2Leadership, a Situational Primer to Leadership Excellence.” The book is available on Amazon.com and was designed to be used as a book study for leadership development programs; it breaks leadership skills into manageable situations for discussion and reflection. Rich works with credit unions, CUSOs, and vendors, designing digital, data, culture, marketing, and branding transformation strategies. In 2014, Chosen as a Credit Union Rock Star by CU Magazine, and in 2018, Rich received the Lifetime Achievement Award from CUNA Marketing and Business Development Council. A Marine and graduate of Colorado State University, Jones shares his expertise at www.leading2leadership.com.

1 Comment

  1. rich@leading2leadership.com on December 1, 2023 at 8:46 am

    I had a very refreshing call yesterday, 11/30, from a leader at SECU about the blog post below. This person shared that the Board of Directors supported the changes that SECU has made to stay relevant for the membership and that most distractors were ex-SECU employees, including the retired CEO, Jim Blaine. This was refreshing information that I appreciated. As an outsider looking in, I only knew some of the nuances of what was happening. That is why this dialogue with this leader was so helpful. I greatly respect SECU and what it was and what it is becoming, and I am happy that they are on this trajectory of becoming more and more relevant.

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