By Tony Ferris
Most credit union boards I work with take their responsibilities seriously. Yet, across years of working with boards and executive teams, I continue to see a significant opportunity for improvement: how boards engage in strategy development and oversee its execution.
The issue isn’t whether a credit union has a strategic plan. Most do. The question is whether directors help shape its direction, understand the strategies recommended, and actively oversee their execution.
Strategic Direction Begins Before Strategic Planning
Effective strategic governance is continuous, not an annual planning event. Boards and management should regularly discuss the competitive and emerging landscape, the credit union’s current position, and what developing issues may mean for its threats and opportunities. These conversations build a shared understanding of how changing conditions could affect the credit union, providing the foundation for broad strategic direction and longer-term priorities.
There is a caution here. Many emerging issues have no clear answers. If directors expect management to arrive with a solution to every uncertainty, management may become less willing to raise them. Boards should instead expect a disciplined process to identify and monitor emerging issues and revisit their strategic implications. The purpose is usually to develop understanding, not immediately develop a specific strategy.
From that shared direction, management should formulate specific strategies and initiatives and bring recommendations to the board for discussion, challenge, refinement, and approval. The board should shape direction before a completed plan arrives, without taking responsibility for management’s work.
Constructive Challenge Is a Governance Responsibility
Boards sometimes hesitate to challenge management’s recommendations. Volunteer directors bring valuable judgment, but most aren’t financial services experts. Some worry that asking questions exposes gaps in their knowledge or crosses into management’s responsibilities. Others hesitate because they are concerned that challenging management or asking difficult questions conveys a lack of trust.
Neither should prevent meaningful inquiry. Challenge isn’t distrust or micromanagement. Directors need not develop operational solutions, but they must understand the decisions they approve.
The most useful questions are usually the most straightforward. They are governance questions, not operational ones.
Why this direction, and which alternatives were rejected?What assumptions must hold true for success?What developments could undermine those assumptions?What are the worst realistic outcomes, and could we absorb them?Do the risks fit our risk appetite? If not, should the strategy or our risk appetite change?What does success look like, and how will we measure it?
Risk Appetite Clarifies Strategic Choices
A recurring gap is the separation of strategy from enterprise risk management. Risk appetite is more than financial limits or budget parameters. It should encompass the full range of risks and strategic choices facing the credit union. For example, this includes the board’s tolerance for regulatory ratings, its willingness to pursue mergers, how quickly it is prepared to adopt emerging technologies, and how aggressively it will encourage members to transition toward digital self-service channels. These are just a few examples of the broader strategic decisions and risk-taking expectations that risk appetite should help guide.
Developed through board and management dialogue and approved by the board, risk appetite clarifies what the credit union will and won’t pursue, how much risk it will accept, and where management has room to act.
That alignment matters when decisions become difficult. If a technology investment is failing, for example, shared expectations help directors and management determine whether to invest further, change course, or recognize a loss. Risk appetite doesn’t make the decision, but it provides a common foundation for evaluating it.
The goal isn’t to avoid risk. It’s to take risk deliberately, within the credit union’s capacity and in pursuit of its long-term objectives.
Strategy Requires More Than an Annual Planning Session
Perhaps the most significant gap is what happens after approval. Board meetings can become dominated by financial results, compliance, and operational reporting, while strategic initiatives receive periodic updates without meaningful insight into long-term progress.
Boards should consider making strategy a standing agenda item near the beginning of each meeting, when directors are fresh and discussion isn’t competing with the clock.
More importantly, oversight must distinguish between completing initiatives and achieving intended strategic outcomes. Implementing a technology platform, launching a product, or expanding into a market doesn’t necessarily mean the underlying strategic objective was achieved.
Boards need measurable outcomes, leading indicators, and meaningful explanations of deviations. They must also revisit assumptions and determine whether changing conditions warrant adjustments.
Annual budgets and financial results matter, but they don’t necessarily reveal whether the credit union is strengthening its competitive position, capabilities, or relevance to members. A credit union can meet its annual budget while falling behind strategically.
Moving From Approval to Active Oversight
Management develops and executes strategies. The board helps establish direction, approves risk appetite, challenges and adopts recommended strategies, and oversees results.
The strongest boards aren’t those asking the most questions. They’re the ones asking the questions that matter.
Ultimately, strategic governance isn’t about approving a plan. It’s about understanding the choices, accepting the risks, and ensuring the strategies deliver their intended outcomes.
