Innovation begins in the boardroom
The bottleneck is at the top of the bottle.” – Gary Hamel, Strategy as Revolution
Credit union board directors, with their weighty fiduciary responsibilities and the conscience of members on their minds, are a generally risk-averse group. They have good reason to be. At the same time, most observers in the credit union space agree that credit unions need to innovate or face diminishing relevance. In addition to ensuring safety and soundness, credit union boards must also understand and promote the long-term viability of the organization. What’s a fiscally prudent director to do? If you want to ensure continued sustainability in the face of a disruption-happy financial services ecosystem and shifting consumer needs, you will want to promote innovation.
I find it interesting that few proselytizers of innovation touch on the role of the board. Yet, when it comes to creating the conditions for innovation, the work actually begins in the boardroom. The opening quote by Gary Hamel speaks to strategic planning, but it applies just as well to the challenge of fostering creativity across an organization. Hamel suggested the bottleneck at the top of organizations came from a lack of diversity of experience, a focus on the past, and a reverence for dogma. These traits may not get in the way when it comes to overseeing the compliance, safety, and soundness at your credit union. But when it comes to positioning your credit union to thrive in the future, board directors need to take a future-forward stance and put on their strategic thinking hat. Board directors should take a leadership role in promoting innovation so they can continue to be good stewards of their credit union, which includes making sure the credit union evolves to meet the new member needs of our era.
How can boards foster innovation?
If your board is not interested in cultivating innovation, the credit union’s ability to evolve to meet the needs of the day will be severely limited. Let’s be honest. Cultivating innovation is hard. Especially for a credit union, which is operating within a highly regulated industry–we’re not talking about Silicon Valley startups. But the building blocks are largely the same: innovation requires creativity, courage, resources, and a willingness to fail. Successful innovation begins with sourcing new ideas and testing them through experimentation. The process only works if there is room for sharing ideas that may go nowhere, and for testing out promising ideas and seeing them fall flat. How might your board respond if the CEO reports on a failed experiment that used a substantial amount of funding and staff time? What would it take for the board to actually support that type of work?
Boards could begin by putting innovation on their agendas and begin talking about it with their CEO and Senior Team. Look for ways to support leadership on this work. Identifying innovative solutions is challenging and requires a different type of leadership. Testing out innovative solutions means investing resources and taking on new risks. What follows are four elements that will help your board get started.
Foster innovative thinking in the boardroom
Be curious: For good governance generally and for innovation specifically, board directors would do well to learn when and how to think more broadly. A good first step is to take a stance of curiosity and learning. Stanford psychologist Carol Dweck’s concept of the Growth Mindset provides a strong approach to shifting individual and group perspectives on learning. Groups that foster curiosity tend to ask better questions, and from that dialogue can come new understanding, awareness, and insight on ways to improve.
Listen, inclusively: Curiosity and learning are important, but if a board only seeks out voices that confirm their existing ways of thinking, they won’t go far in identifying creative new ways of thinking to help broaden understanding of challenges and opportunities. Seek out different opinions, voices, and perspectives. Give them the benefit of the doubt and see where the idea takes you. Together, curiosity, a learning stance, and broad listening become the preconditions for innovation. When a board fosters innovation, they are better positioned to consider new ways of understanding the challenges facing your credit union and what forms new solutions may take.
Consider updating your approach to leadership
Leadership starts at the top. When 94% of senior executives agree that nothing drives innovation more than people and organizational culture, credit union boards should work with their senior team to review and update leadership approaches to better nurture a culture of innovation across the credit union. This means having leaders create space for staff to pursue new ideas in addition to completing the many items on their daily to-do lists. Leaders should also become collaborators-in-chief, listening inclusively and creating the conditions for candid communication and the sharing of ideas. Innovation-focused leaders also need to facilitate the sharing of new ideas across the organization to assess feasibility and refine proposals. Boards might look for ways to incentivize these leadership traits in conversation with their CEO, perhaps even adding them to performance evaluation criteria.
Provide for experimentation
After the board and senior team have improved their ability to understand innovation and create the leadership conditions for more curious and creative teams, they need to be ready to invest resources to evaluate and test promising new ideas. Boards need to support experimentation. Experiments are the best way to identify what might bring value to the credit union (success–let’s scale it!), what could work with a few revisions (let’s iterate!), or what simply does not work as intended (let’s learn and move on, quickly!). Providing for experimentation means the board must be understanding and expect uncertain outcomes and failed experiments. Progress moves in fits and starts and rarely takes the form of a stable trendline.
Work with your senior team
As with strategic planning, boards can best foster innovation when they work in constructive partnership with their senior team. The senior team are the experts who will actually put in the effort at creating a culture of innovation, supporting the vetting of ideas, and knowing when to invest in experimentation.
One way the board and senior team can work together is to incorporate elements of innovation into their credit union’s strategic plan. From the plan follows the work of identifying how the senior team might measure their activities relating to innovation, and how to budget for it as well. The strategic plan, metrics, and budgeting process are key areas where the board can take an active role of promoting and partnering with the senior team to begin to realize a shared long-term vision for the credit union’s future.
Finally, there will be times when the board and Senior Team may need to be willing to do more than aim for incremental improvements. Sometimes you need to make bigger bets. Of course, you want to start small and build capability first. Develop more innovation-forward dialogue in the boardroom, evolve your leadership approach, and provide for experimentation. Then, when the opportunity presents itself and that bold new initiative is brought to the board for approval, directors can cast their vote with a fuller understanding of the risks and opportunities at stake for the credit union.
