Revolutionizing Leadership

The Role of Fractional CEOs, CFOs, and Other Executives in Credit Unions

Succession planning is a must for credit unions but comes with unique challenges. Unlike large banks that can offer lucrative compensation packages, credit unions often struggle to attract high-level talent willing to commit 24/7, 365 days a year. The harsh truth is that many credit unions can’t match the salary of a branch manager at a big bank, let alone attract seasoned CEOs with the experience needed to guide them through an increasingly complex business landscape.

So, what’s the solution? It might not be traditional succession planning.

And sometimes, the automatic move is to merge with another credit union, but that’s not always the best option – and it’s certainly not the only one. Enter the concept of fractional executives. By rethinking leadership roles and considering fractional or part-time CEOs, CFOs, CTOs, and other executives, credit unions can create a revolutionary business model that addresses their unique needs while ensuring strong governance, business continuity, and oversight.

The Power of Fractional Leadership

A fractional executive is a seasoned professional who works part-time or on a project basis for an organization, bringing high-level expertise without full-time commitment or financial burden. This model has been gaining traction, especially for organizations like credit unions, which are often smaller in scale and constrained by limited budgets.

By engaging fractional executives, credit unions can tap into deep industry knowledge without the prohibitive costs of a full-time salary (and the compensation package that goes along with that). Additionally, these executives bring fresh perspectives, offering insights into strategic planning, cybersecurity threats, and talent development. Most importantly, fractional executives can help create sustainable, forward-thinking business models that align with the needs of the board and regulatory bodies like the NCUA.

The Case for Expanding Leadership Authority

Fractional leadership offers flexibility and expertise, but what if we could expand the authority of proven leaders to guide multiple credit unions? Take Jon Hernandez, the CEO of three well-run small credit unions in California—CalCom, Nikkei, and Mattel. With combined assets of $198 million and 14,000 members, Hernandez manages separate external audits and regulatory exams across these institutions, showing that it’s possible to lead multiple credit unions and thrive.

Hernandez’s leadership success is primarily due to the niche markets each credit union serves. CalCom supports healthcare and city workers, Nikkei caters to the Japanese-American community, and Mattel serves Mattel employees and their families. By sharing resources and negotiating better vendor agreements across the three credit unions, Hernandez has been able to sustain operations and keep each organization financially sound. His success proves credit unions can maintain their independence while benefiting from shared leadership and resources.

Here’s an example of how his experience has created growth at one credit union due to his leadership:

In 2019, Hernandez launched Mabuhay Credit Union, a new brand within Nikkei Credit Union. The new brand was designed to serve the borrowing Filipino American community and complement the non-borrowing Japanese American community. Since then, Nikkei saw its loan portfolio increase from 20% to 80%.

Building a Sustainable Future

While succession planning is something we know is critical in the credit union industry, we must acknowledge that it’s not always realistic for smaller credit unions. In many cases, merging with a larger credit union may seem like the only path forward. However, as Hernandez’s example shows, credit unions can remain independent and sustainable with the proper leadership structure.

What if credit unions expanded the authority of high-performing CEOs to oversee multiple institutions, much like Hernandez?

This strategy could allow credit unions to continue serving their unique communities while benefiting from shared expertise and resources. It’s a win-win for boards, members, and the NCUA, which would have peace of mind knowing that credit unions are operating under experienced, capable leadership.

Embracing a New Leadership Culture

The time has come to change the conversation around credit union leadership. Fractional CEOs, CFOs, CTOs, and other executives offer a viable solution to the ongoing challenge of finding high-level talent. By embracing fractional leadership, credit unions can continue to provide excellent service to their members while navigating the complexities of the modern financial world.

It’s time to expand our thinking and create a future where credit unions thrive with the help of dynamic, flexible leadership.

And the best way to get started?

Attend Thriller, the next UNDERGROUND Collision, in Las Vegas on October 26, 2024. We will launch our latest collaboration, Credit Union Shared Services (or CUSS), and share how we plan to make a difference throughout the industry. Register today.

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