The best laid plans

Credit union succession planning often seems to be one of those back burner issues that we will get to when we really need it. Unfortunately, that need can be unpredictable. Beyond the timing uncertainty, succession planning is a very sensitive topic that some stakeholders are reluctant to address in an open and honest way. Most know good governance requires succession planning, but few make the commitment required for consistent, positive results.

There is understandable sensitivity around someone’s age, anticipated retirement or future career plans. No one wants to be considered a “lame duck” or uncommitted to the long-term success of the organization. But effective strategic planning requires that we consider what-if scenarios that include the planned or unplanned departure of a key executive or board member. Succession planning should be as common as strategic planning and a living document and process that is part of the culture of the organization, discussed regularly and continually updated.

Part of the emergence of the need for a robust succession planning process is the undeniable reality that today’s credit unions are extremely complex organizations. Thirty years ago, the board may have been looking for a CEO who could manage the balance sheet and ensure accurate financial statements. Today, the job of CEO and other executive positions require deep experience and expertise. Board positions need to be filled by committed individuals who understand this complexity and contribute their own expertise to decision making.

So, what’s the good news? The good news is that effective succession planning doesn’t take the best technology, big data or clairvoyance. It just requires a commitment of time and direct communication. Every executive should be helping to prepare for their own departure and the potential short-term or permanent departure of subordinates. Best practices for succession planning include developing a process for the ongoing assessment of potential successors and a plan for individual advancement or promotion. One of the challenges is that complex organizations require deep functional expertise. This often results in extremely competent but “narrow” executives who have not been given adequate exposure to other essential areas of the credit union. The CFO may be a financial genius, but a neophyte when it comes to managing a consumer loan portfolio or overseeing retail branches. This is the primary reason succession plans can fall short and unfortunately, for the credit union and the executive this can result in a significant loss of potential. Beyond individual assessments, organization structure and development should also be a part of succession planning.

The fact you don’t need new technology or significant funding does not mean succession planning is easy. There is often anxiety and the potential for miscommunication that can create internal challenges. Despite these risks, a vigorous and ongoing succession planning process will pay big dividends overall. It will communicate a commitment to key employees, ensure a long-term focus on the strategic plan and enable the credit union to thrive despite any unplanned executive departures. Even the best laid plan may be impacted by significant surprises but the credit union will be well-prepared to adapt despite the consistent evolution in financial services. If succession planning is on your “to do” list or needs to be enhanced, we would love the opportunity to discuss how to make the most of your leadership development initiatives.

Jim Hansen

Jim Hansen

As a Senior Consultant at Rochdale Paragon Group, Jim is responsible for providing clients with strategic consulting with an emphasis on governance, succession, risk management and strategic initiatives.  Previously, Jim ... Web: Details