Market Trends & Perspective

Recruiting a 5-star CEO

I rarely go shopping, which is a little ironic because I have every retail store known to man within a one mile radius of my house. The shopping I do conduct is primarily limited to online retailers and I’m a big fan of Amazon. My household has an Amazon Prime membership and the friendly UPS driver appears regularly on our doorstep. One thing that I’m dependent on when shopping online is the customer reviews and ratings. I don’t think I’ve ever ordered anything that didn’t have strong four and five star reviews. I’m willing to pay slightly more for a product if I’m comfortable with the value proposition i.e., a better or longer lasting option.

Currently I’m in need of a new gas grill. I’ve had a Weber grill for the last ten years and it has finally given out. As I conduct online research on grills it becomes apparent very quickly that Weber grills cost about 50% more than other brands. It is also clear from reading reviews that people are very happy with their Weber grills and many have had a great experience. Though initially more expensive, the grill is a strong performer and has a long useful life expectancy. It becomes clear that paying more up front for the Weber grill is a better value in the long run.

I think most people are comfortable with the concept that many times you get what you pay for; even when it comes to people. The media is filled with stories about highly paid athletes and coaches. There is also a lot of press concerning the high pay of top executives. While at times controversial, I think there is a very real justification for paying top salaries for a Tony Hsieh at Zappos or Alan Mulally at Ford. That justification is they pay for themselves many times over through the value they bring to their respective organizations.

So how about credit unions? Do you get what you pay for? In a word, yes! Exceptional talent is certainly rare and a highly competent CEO will bring significant value to the credit union. That means a strong financial institution that is able to provide better service to members. I understand there can be many reasons for credit union board members to be reluctant to pay anything above a “mid-point market” rate. Despite the fact that by definition the market is made up of a significant portion of average performers. Board members do have a fiduciary responsibility and they don’t want CEO compensation called into question. Credit unions are “not for profit” and a well-paid CEO can be criticized if compensation is made public. Credit unions are also highly regulated and anything outside of “peer” is probed by examiners. I suspect if NCUA regulated Amazon they would still be a small company known to only a few people in Seattle.

As a credit union recruiter I often hear from board members that they are seeking exceptional talent – CEO candidates who are leaders in the industry. There is a realization that the credit union business has changed dramatically over the years and the type of people who brought us to this point are not necessarily the same profile as those who will lead us to success for the next 10 or 15 years. Credit unions are much more complex, competition is proliferating and the demands and expectations of the CEO have never been greater. The environment we are in is generally agreed upon by all parties. There is also often a general consensus on the type of leader needed to take us into the future. The disconnect then appears when the topic of compensation comes up. We need a different type of leader to take us into the future but we’re not comfortable addressing what it will require to recruit that type of individual.

I understand there are constraints and compensation strategies won’t change quickly in the credit union industry. But I would urge all credit union board members not to seek the lowest paid CEO they can find. Please don’t believe that you are serving your members well by hiring a CEO who will work for below market compensation. Consider the value that a strong CEO will bring your credit union members. What could hiring a 5-Star CEO mean to your credit union?

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