3 succession plan updates every credit union should consider
Leadership continuity has been on the minds of many in the industry, including credit union regulators. For its part, the National Credit Union Administration (NCUA) has called out inadequate succession planning as a contributor to the credit union system’s ongoing trend of consolidation. What’s more, our team of compliance consultants is hearing of regulators bringing up the topic during exams more frequently.
To satisfy the apparent increase in regulator attention to the matter, credit unions without a succession plan should consider developing one promptly. For those with a plan in place, an update that addresses current workforce realities may be in order.
What follows is a set of questions to guide the revision of an existing credit union succession plan.
1. Does our plan empower the credit union to meet its leadership diversity goals?
Many leadership continuity plans name names. In other words, they outline, by name, who is set to take over the roles and responsibilities of a leader upon their departure. There is nothing inherently wrong with this strategy. However, restricting the options to internal promotions only may stall leadership diversity objectives by preventing a comprehensive search for candidates.
Curating a leadership team that is as representative of the community as possible is one of the surest paths to sustainability and growth. People want to partner with financial institutions that feel welcoming. When a credit union’s top decision makers look and sound like them, prospective members are more inclined to give the cooperative a second look.
One practical way to ensure succession plans are equipped to meet diversity objectives is to provide support and resources for the hiring committee. Organizations like the Credit Union Women’s Leadership Alliance, for example, can be a helpful resource for credit unions under $300 million in assets that are searching for their next generation of leaders.
2. Can our compensation package attract the right talent?
For credit unions that anticipate having to look outside the cooperative for a new leader, it will be crucial to understand the going rate for top financial services talent. Credit unions that have been led by the same individuals for decades often find that their top spots come with outdated compensation packages. That is not to say the pay is unfair or even inadequate for the individual in place; it just may not be enough to attract younger generations or leaders from other industries—something that is becoming more common for credit unions today.
To address this need, credit unions may consider adding a recurring market pay analysis to the succession plan. The findings from such an effort will alert the board and others, such as HR and finance, to circumstances in which a C-suite package is too far afield from that of executives leading similar institutions or businesses. In those cases where a major disparity is uncovered, credit unions can budget for incremental increases to the top spot’s salary and benefits until they reach parity with relevant organizations.
3. Is our plan inclusive of all key leaders?
Federally chartered credit unions are required to adhere to certain succession planning processes for board members, management officials, executive committee members and supervisory committee members. While smaller credit unions may be exempt from preparing such a comprehensive plan, it remains a best practice to develop strategies to fill vacancies in as many key positions as reasonable.
A credit union’s lead compliance officer is an example of a position frequently overlooked by succession planners. High turnover of these roles, coupled with a lack of incoming talent, makes replacing governance, risk and compliance expertise especially challenging. For that reason, it’s a good idea to have a multi-faceted plan of action in place for filling vacancies in these spots.
Pro Tip: Involve your top talent to attract top talent
Although it can be anguishing to imagine the day when a beloved leader or set of leaders has moved on, planning for the future can also be exciting. Especially for up-and-coming talent with big plans for the credit union, dreaming of what’s next for the cooperative can be highly motivating.
Credit unions should not hesitate to involve rising executives in the succession planning experience. After all, who is more in touch with what it takes to attract and retain the best people than your best people?