Succession planning is a vital process for any company, from a small business to a national manufacturing corporation. It’s important that employees are fully prepared when the time comes for the current leader(s) to leave their position(s), whether they resign, retire, or pass away. This is especially true for banks and credit unions.
These financial institutions rely on their strong leaders to guide day-to-day business and strategic planning; these leaders also play a critical role in the lives of bank investors and communities. Identifying and developing potential leaders (which are the two main steps in succession planning) for your bank or credit union will ensure your institution doesn’t suffer when it’s time to fill critical roles.
Why Succession Planning for Credit Unions and Banks Is Important
No matter how stable your organization’s leadership is, things happen. You may find yourself having to fill a managerial position or another critical role when you least expect it.
Oftentimes, when a CEO decides to step down, they announce their decision far in advance in order to give the company time to find a successor and prepare employees for the big change. Other times, illness may strike your leader(s), or perhaps an executive may be recruited by another company. In these cases, you will have very little time to fill the leadership position, and that gap can place you and your team at a significant disadvantage.
If an organization has overlooked or ignored succession planning, the board may find themselves scrambling to find someone to step into the position. It’s important to avoid this at all costs since making the wrong choice can have long-lasting consequences.
Creating a Plan for the Future
Succession planning for banks and credit unions doesn’t have to be a highly stressful process. In fact, it should be the opposite—succession planning should help ease tension by providing you and your employees with a plan for the future.
Succession planning isn’t necessarily about identifying the specific persons you would like to bring into the executive position. Although it’s never a bad idea to develop a shortlist of candidates, the main point of succession planning for credit unions and banks is to establish the best practices and processes for choosing the next person to fill a position.
The Succession Plan Process
Succession planning is never the same at every institution. Each bank or credit union has its own culture, its own set of ideals and principles, and its own strategy for the future. Still, the one factor that should make its way into every succession plan is communication, especially between the executives and the board.
Chief executive officers and other execs should be clear about their own career paths, particularly if they have a target date for leaving their position. This culture of open communication gives the board plenty of room to operate as well as scope for initiative in their succession planning.
The next step is to start considering potential hiring pools both internally and externally. In terms of internal candidates, there is likely already an existing pool of employees who have been groomed to assume key roles in the company when current employees leave, and these internal candidates should be vetted as potential replacements. As for candidates outside the organization, you can find these people by studying your competitors and using your contacts within the industry.
Another piece of business to always keep in mind is the potential for mergers. For both institutions involved, a merger may make more financial sense than the replacement of an executive or executives. With a transaction like a merger or acquisition, companies can pool their financial and executive resources and make a new, more competitive organization. Trends in executive compensation can have a major impact on this strategy, so keep abreast of where compensation is headed.
Use Outside Resources
Finally, it’s always a good idea to consider consulting with an employment agency as part of your succession planning efforts. For recruiters, succession is the name of the game. They may have some insights into the process that could be extremely valuable to your bank or credit union, so you may want to engage their services as partners in your succession planning.
How to Think About the Legacy You Want to Leave
For any executives or board members reading this now, your legacy is an important part of your career. What mark do you want to leave on the organization? Sustained growth is one obvious goal, but an institution’s overall stability is just as honorable an achievement.
Succession planning is a way to help shape your legacy and to provide an outline for how you would like your time with an organization to be viewed. This isn’t just about shaping the past—it’s also about the direction the company will take in the future. Succession planning is about finding the right way forward so you can move on from your company with respect and the ultimate success.
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