6 minutes
From our sponsor
If your CEO has a sudden heart attack, do you know who will take his or her place? What if your top executives are wooed away by another credit union? Do you have the next generation of leaders ready to step into vacant C level shoes? If not, you may end up with an empty C-suite—or worse yet, with under-qualified personnel moving into leadership roles because there is no one better to take over.
The reality is there are many reasons a CEO might suddenly be unavailable or unable to lead your credit union. Regardless of the reason, the board has a responsibility to have potential successors ready to serve. If for any reason your CEO departs and you have not identified or groomed a candidate, your members are not being served. A strategic succession plan covers all the bases for a CEO departure.
Reasons for CEO vacancy:
- incapacitating illness;
- sudden demise;
- surprise departure;
- under performing;
- normal retirement; and
- organization restructure.
Succession planning is not a “drive by” event, leaving leadership to chance and putting the purpose of the credit union at risk. The board of directors is responsible for hiring the CEO and identifies future successors, while the CEO is responsible for developing potential successors.
Creating a robust succession plan requires a structured and systematic process. It is the board’s responsibility to decide what competencies are required to meet the credit union’s present and future needs. Use your strategic plan as a beacon for developing a list of competencies, both hard, measurable skills and soft, personal mastery skills. Competencies need to be defined to measure performance.
Creating a Strategic Succession Plan
Creating an effective strategic succession plan is not a one-time event. It requires effort and contribution from the entire board. It is imperative to ask the right questions and not shy away from tough questions. This outcome will help move the credit union forward, many times in ways not previously considered.
Here’s the board’s checklist:
- The board must assume responsibility for developing a CEO succession plan, complete with competencies, and assign a core group of directors the responsibility to guide the process.
- Insist on “ready now” candidates who are trained for the CEO role.
- Understand who the potential successors are and their competency development issues. Understand how each individual would perform in certain circumstances.
- Assuming the CEO does not have imminent plans for retirement or departure from the credit union, he/she should be requested to present an annual evaluation of potential internal and external candidates to the board.
- If the CEO is to retire within two years, every board meeting should include succession discussion. The board should understand what the CEO is doing to ensure a smooth transition.
- Consider an economic incentive for the current CEO to motivate his or her progress in succession development of potential internal candidates. This can be one of the measurements included in a performance review metric.
- The board will update the CEO position description as part of the annual strategic planning session.
- Ensure you consult with external resources to determine if your compensation and rewards package aligns with succession planning. For example a long-term CEO's compensation rewards package may not reflect current market trends or compensation values. Adding this step in the process will help eliminate the “sticker shock” of today’s CEO compensation and reward packages.
Develop a List of Competencies
There are two types of competencies when deciding what type of person is needed in a particular job. The first is what we call technical knowledge and job skills, also called hard skills. The second competency type is performance skills, or soft skills. Deciding what the CEO job needs to effectively lead is the responsibility of the board, not the current CEO.
Your strategic plan is the starting point. Look forward five years into the future. What will your credit union look like? Who will it serve? How will it serve? What products and services will it offer?
The next step is considering the decisions the CEO should make:
- What businesses should we be in?
- Who will lead the business units?
- How will resources be allocated?
Use this as a framework for developing a list of competencies for the CEO position.
What hard skills are required to make these decisions? Individuals typically develop skills in a formal education setting and/or on the job. Often, they are not transferable across industries.
Soft skills include communication, work habits, style and teamwork. They are transferable across industries.
Hard Skills--Be specific!
For example, if a college degree is required, name the disciplines acceptable. If prior management expertise is necessary, define the scope and depth needed. Constantly refer to your strategic initiatives to develop leadership competencies that will meet the requirements of your strategic plan.
Soft Skills--Difficult but rewarding when articulated!
To be effective in defining these competencies, replace phrases like “effective verbal communication” with “clear articulate speech” or “skilled at influencing others.”
A behavior is an action that can observed, described and verified. Members of your board need to agree on what behavior is acceptable. To be acceptable, the behavior needs to be observed, described and verified by two or more people.
For example, what does it really mean when someone manages conflict? Do they hand out candy bars to stop the fighting? Do they reduce the performance incentive payout? Or, are they able to express opinions directly and clearly without abuse or manipulation? Does she listen to opinions and feelings of others and demonstrate understanding by restatement? Does he communicate disagreement to persons in authority as necessary; ask for negative feedback in order to learn?
External Resources: When to Use Them and Where to Find Them?
Creating a robust succession plan may require guidance from a trained professional with expertise in team coaching, facilitation, competency development in a financial organization and, preferably, a discipline in people development and succession planning.
Along the path to developing your succession plan you may encounter obstacles. Without a structured process, succession plans often result in a "CEO look-alike." We inherently gravitate toward similar individuals; it’s human nature. You could end up with someone who looks and acts just like the current CEO especially if he or she is popular with most of the board.
A systematic and structured process will ensure that the right questions are asked, leading to a purposeful and informed decision about who will lead your credit union into the future.
A facilitator will also help create an environment where all board members are heard equally.
Your facilitator should have access to software for building a succession plan that can be tracked and updated. Your requirements should be matched with assessments of potential successors. A gap report will help build an individual development plan for potential successors.
Summary
A succession plan should be updated every time there is an update in the strategic plan, and the CEO position description must be reviewed and updated annually. Using a qualified, certified coach with specific disciplines in succession planning will provide a foundation for moving forward and updating your succession plan every year.
Ensuring proper succession is a responsibility whose outcome impacts members, employees, community and the future of the credit union. It could be the most important decision the board makes.
Deedee Myers, Ph.D., MSC, PCC, is CEO of CUES Supplier member and strategic partner DDJ Myers, Ltd., and co-founder of the Advancing Leadership Institute based in Phoenix. She is a change agent for individuals, teams, and organizations in being high performers. Her top tier consulting and coaching organization facilitates leadership development in organizations, evolving boards into high performers, and taking strategic planning into effective action. She is a known subject matter expert on succession planning, board governance, board recruitment and renewal, leadership development and transformative change.
