What the Credit Union Board Should Know Before Hiring a Bank Executive

On the surface, the differences between running a bank and running a credit union seem very similar. However, for the Board of Directors to select the right executive to lead a credit union, it must consider that credit unions differ significantly from traditional banks’ structure, purpose, and values. The purpose of a credit union transcends the income statement and balance sheet, and that purpose must be considered when hiring a bank executive to run a credit union. The Board must be well-informed about the nuances of the credit union industry and the unique challenges and opportunities these differences pose for the new executive. While both institutions serve the same fundamental purpose of providing financial services to their members or customers, the transition for a bank executive can present several unique challenges. In this article, we will explore bank executives’ obstacles when transitioning to credit unions and offer insights on overcoming them. This article will explore the key factors that boards should consider before making this crucial decision.

Understanding of the Cooperative Model

Credit unions operate under a cooperative, member-owned model, which is fundamentally different from the shareholder-driven approach of banks. The Board needs to grasp the cooperative philosophy of credit unions, which emphasizes member-centric service, community engagement, and financial well-being. The chosen bank executive should understand and genuinely embrace and embody the seven cooperative principles:

  1. Voluntary and Open Membership.
  2. Democratic Member Control.
  3. Member Economic Participation.
  4. Autonomy and Independence.
  5. Education, Training, and Information.
  6. Cooperation among Cooperatives.
  7. Concern for Community.

Cultural shift is one of the primary challenges for bank executives transitioning to credit unions, which is adapting to the unique culture of these not-for-profit, member-owned institutions. Credit unions are known for their community-oriented, member-centric approach, which often differs significantly from the profit-driven culture found in many banks. Bank executives will need to recalibrate their mindset and priorities to align with the cooperative philosophy of credit unions. The Board should evaluate the executive’s alignment with the credit union’s values and culture. The executive should genuinely embrace the cooperative spirit, and their leadership style should harmonize with the credit union’s mission and vision.

To address this challenge, the new bank executive must actively learn and build relationships with credit union staff and members. This may include attending educational programs, seeking mentorship, and actively participating in credit union events to understand and appreciate their distinct culture.

Regulatory Knowledge

Credit unions are subject to distinct regulatory frameworks compared to banks. They are overseen by different regulatory agencies and adhere to specific compliance requirements. The Board needs to grasp the cooperative philosophy of credit unions, which emphasizes member-centric service, community engagement, and financial well-being. Understanding these differences can be a significant hurdle for bank executives transitioning to credit unions, as compliance with regulations may vary significantly from their prior experience. Credit unions are often subject to more stringent requirements for serving their members and managing their finances. The chosen bank executive should understand and genuinely embrace and embody these principles.

The Board must ensure that the bank executive understands credit union-specific regulations and is prepared to navigate this regulatory landscape effectively. Prior experience in the credit union industry or a strong willingness to learn is crucial.

The transitioning bank executive looking to overcome this challenge should engage in comprehensive training on credit union-specific regulations, potentially involving certifications and courses designed for credit union professionals. Additionally, working closely with the compliance and legal departments of the credit union can provide valuable insights and guidance.

Member Centric Focus Drives Credit Unions

Credit unions prioritize the financial well-being of their members, often forming deep and lasting relationships with them. This Member-Centric Mindset strongly emphasizes their members’ needs and financial well-being, fostering deep community ties. This focus on personalized service and building long-term member relationships can be a notable shift for bank executives, who might be more accustomed to a transactional approach in their previous roles. Developing a member-centric mindset is crucial for success in a credit union.

The Board needs to assess whether the bank executive can shift from a transactional mindset to a member-centric one. The executive should prioritize providing personalized service and ensuring members’ needs are at the core of decision-making.

The Ability to Embrace Limited Resources

With limited resources, credit unions, compared to larger banks, typically operate with fewer resources. This can be challenging for bank executives accustomed to a bank’s financial muscle and scalability. Credit unions often rely on innovative solutions, collaboration, and creativity to address resource constraints and continue providing exceptional service to their members.

For the new executive to be successful, they need to address this challenge by actively engaging with credit union members, soliciting feedback, and participating in community events. They should also encourage their teams to prioritize personalized service and member satisfaction to cultivate a culture of putting members first.

The Board should assess whether the bank executive can efficiently adapt to working with limited resources. The executive should proactively identify innovation and resource optimization opportunities that are crucial for a credit union’s continued success.

Bank executives transitioning to credit unions should learn to maximize existing resources efficiently and identify opportunities for collaboration with other credit unions, industry partners, or fintech providers. Adaptability and a proactive approach to resource management are crucial to overcoming this challenge.

The Community is Part of a Credit Union’s DNA

Credit unions are deeply rooted in their communities, actively participating in community development and support initiatives. Community engagement requires the credit union to play a vital role in their communities, often engaging in community development and support activities. For bank executives, actively participating in community initiatives and developing partnerships with local organizations can be a significant challenge, mainly if they are more accustomed to a detached corporate environment.

The Board should evaluate the bank executive’s ability and willingness to engage with the community. An executive’s experience in community engagement, volunteer work, or collaboration with local organizations can be a valuable asset. To be successful, the leader must learn to embody the credit union’s commitment to community well-being.

Bank executives making the transition should make an intentional effort to embrace the credit union’s community-centric approach. This may involve volunteering, participating in local events, and collaborating with community organizations. Establishing strong ties with the community is essential for building trust and loyalty among members.

Commitment to Education and Training

Credit unions often provide educational and financial literacy programs to their members. The Board must gauge the bank executive’s commitment to these financial wellness programs by supporting and promoting initiatives that empower members to make informed financial decisions and improve their financial well-being.

Transitioning from a bank executive role to a credit union leadership position presents a unique set of challenges that the Board must assess. However, bank executives can successfully make this transition if they possess:

  • A dedication to “resetting” their business and philosophical purpose.
  • A willingness to adapt to the cooperative principles.
  • A commitment to understanding the credit union’s distinct culture and mission.

By addressing these obstacles head-on, bank executives can leverage their expertise to further credit unions’ mission and contribute to their members’ well-being.

Selecting the right bank executive to lead a credit union is a pivotal decision for the Board of directors. The Board must use the unique nature of credit unions, the cooperative philosophy, the regulatory landscape, and the member-centric focus that defines these financial institutions as their NorthStar in the selection process. By considering these factors, the Board can make an informed choice, ensuring that the executive will lead the credit union effectively while upholding its values, serving its members, and contributing to the community’s financial well-being. A credit union’s success is deeply tied to the suitability of its leadership, making this a decision of paramount importance for the Board.

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.

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