The tyranny of the dominant director

The tyranny of the dominant director

“The real challenge for credit union people is developing higher levels of personal and group awareness and responsiveness. The single biggest inhibiter of change lies within the cadre of voluntary directors which is why Irish credit unions will inevitably fail."

This is the stark conclusion of leading credit union thinkers in Ireland and internationally.

So far credit union people have not created the structures and evolved the appropriate governance models and systems required to respond to the demands of a modernised society. They have not learned how to craft compelling propositions for their members.

The largest decision or action unit remains the credit union board. These are frequently dominated and controlled by two or three individuals. Few of whom have professional qualifications or experience in business management.

These dominant directors' views, opinions, behaviours and attitudes have all been formed from their experience of the small works of their local credit union and chapters. They remain intensely local and have not evolved a wider commercial collaboration with others. They are convinced their partial view is the right one and as a result they ignore or deny the larger systemic nature of credit union issues. Participation is based upon past memory, which tends to recall a lot of “not” – what did “not” work, what could “not” be funded and so on.

Achievement and recognition is down to how well a person articulates credit union social philosophy and understanding of credit union law, rules and regulations.

Discourse is limited to adversarial debate or point scoring. Few conversations progress to consensual dialogue. An evolved parochial language blinds groups to wider influences where the credit union horizon is no wider than its local parish boundary. Change can only be agreed through a political system of town hall public meetings. Even then agreement is discretionary allowing for opt-outs at credit union level.

Collectively directors ignore and block external realities. They fail to develop intelligence and knowledge and are unaware of anything other than that which exists within the boundary of the credit union. They create the autistic board.

The nonsensical notion of “not-for profit”, defines director reality. Without profit credit unions cannot survive. Profit is required to create reserves, finance investments in infrastructure, new products and services and of course pay dividends. “Profit” is translated into “Surplus” not because of any inherent philosophical reason but to shore up the argument for non-taxable status.

The reality created through language of “surplus” is one where financial performance is unmeasured and unmanaged by credit union boards. Few if any boards are exercised by financial performance standards. Profit is seen as something alien and unworthy of credit unionist attention.

Directors ignore profit, cost, revenue and risk realities that are undermining sustainability. They eschew business management practices such as financial, risk, marketing, operations and human resources. These practices are seen as belonging to the for-profit sectors. The credit union credo of "not for profit but for service" and its language has created the reality for most if not all credit unions. Thus credit unions are not governed as commercial enterprises but rather some form of NGO financial co-operative.

The language of social finance has been adopted for use. Credit union leadership claims social finance lending of €700m but the facts and data do not support this claim is social finance is defined as lending to community enterprises not the individual. But the ILCU alone insists on a its broader definition as lending to the underserved individual – those who cannot access banking services.

This position has in effect left credit unions off the hook in developing innovative responses to social finance. Contrast this to innovative community credit unions in the US, the home of social capital and social finance concepts. Once again the language of credit unionism defines a reality shared only by credit union people. Why is it that millions lie unused in credit union social funds?

Most directors have a passive dependence on a few perceived “knowledgeable ones” from whom they wait for direction or answers. This deference to others retards the capacity of credit unions to innovate or develop because “the many” are constantly waiting for the “few” for decisions and initiation. This is highly evident in the ILCU system in which people have abdicated initiative and creativity to a centralist hierarchy and autocracy that further stultifies creativity and innovation.

The ILCU system is a larger manifestation of board autism. The autistic reality and its deficit thinking are magnified through the chapter structure and onwards to the ILCU board itself. Its board comprises credit union directors many of whom are drawn from small credit unions that are still staffed solely by volunteers, only opening a few evenings a week. The ILCU appears to be more of an association for dominant directors than a credit union trade and development body.

The ILCU is indeed a carbon copy of the autistic credit union board. Deficit thinking is magnified and external reality rejected. In such systems people become more concerned with looking good than doing good and leading change. They become invested in defending their positions, rather than in asking themselves how their thinking is contributing to a solution. They develop defensive postures, seeking to escape blame. Such defensive moves lead to greater separation between people and the problem itself, making it difficult to build trust. People are more concerned with avoiding blame than with discovering new approaches. They are more concerned with looking good than in doing well. People caught in this defensive spiral become masters of what is called “skilled incompetence” – experts at protecting themselves from the risk of learning and failing, thus blind to their own need to learn and change. They get better and better at doing the wrong things. The consequence is a breakdown in relationships and trust.

The ILCU system provides fertile ground for the dominant director to seek wider influence – first as chapter delegate and then to the ILCU board. Their views, opinions and behaviours remain local and parochial – never national. Thus credit union discourse remains routed within the autistic board with all its unawareness and unresponsiveness.

Credit union people must find a way to break out of the negative spiral of deficit thinking. It’s a thinking that blinds them to external realities. The tyranny of the dominant director must be undone as they provide far too many with sustenance derived from celebrating past glories and believing in the rhetoric of the “most successful movement in the world”. Whilst it right to celebrate, it is also right to move on. Looking and sounding good has to give way to doing good.

In the past decade credit unions have funded the the ILCU by over €110m. In this time not one transformative,innovative nor creative initiative has been successfully executed.

There is a need for a new form of collaboration that ensures transformation, innovation and creativity - led by those who are drawn into the future rather than dwelling in the past and who come together and begin the process of change.