Succession Planning: A key for continued credit union success
In their proposed regulations, the NCUA is now requiring each credit union to have a formal Succession Plan for their staff and volunteers. It is rare that Regulators are ahead of credit unions in requiring what are obvious leadership responsibilities. However, we find that while many of our clients have an “intuition” as to their “bench strength” many have not undergone the necessary formal processes to define their future leaders, evaluate their potential, develop their needs and anticipate their readiness.
A definition of succession plan is: A plan to ensure credit unions are prepared for any expected or unexpected changes to their senior/executive management staff. Organizational success is dependent upon placing the right people in the appropriate positions at the right time. An effective succession plan is designed to ensure the continued performance of a company by planning for the ongoing development, placement, and replacement of key personnel; effectively part of the strategic planning process.
As we examine the benefits of a formal succession plan, they are many:
Prepares for the inevitable
Identifies current staffing issues & concerns for future improvement
Doesn’t eliminate surprises, but prepares for them
In our credit union industry, it fulfills regulatory requirements
Identifies gaps & blind spots for remedial action
Develops executive & senior managers for next level assignments
Creates an organizational framework to deal with contingencies for the future
Enhances organizational communication – establishes transparency
Creates a two & three deep battle plan (and bench-strength) for all key positions
Additionally, an article, out the Harvard Business Review in May of 2021, provides some alarming data:
Companies should only rarely hire externally; external hires are paid 15% more, have a 84% greater chance of turnover, and 70% of them had better performance within their first companies.
The amount of market value wiped out by badly managed C-suite transitions & poor succession planning, costs S&P 1500 companies close to $1 trillion annually.
With better succession plans, company valuations & investor returns increase by 20-25%.
Only 7.2% of outside hired CEO’s have a 60% chance of outperforming an insider.
In the absence of a succession plans, companies’ run the risk of losing considerable intellectual capital.
Key questions that CEO’s & Chairs might ask:
- Can you provide the details of your succession plan?
- When examiners ask to see your succession plan, is it readily available, or does it require a panic and “all hands-on-deck” to complete? Or does it result in a DOR?
- Are we prepared to respond if our CEO retires or is recruited to another credit union?
- We rely heavily on the expertise of a few key Executives (CFO. CIO, CLO, CXO). What is our “bench strength” behind those key leaders?
- We have experienced higher turnover and difficulties in hiring qualified staff. Do we have programs in place to retain the emerging leaders we need for the future?
- Have we protected our intellectual capital by developing our internal successors?
- Is upward mobility understood and is transparency provided for our future direction?
Understanding the benefits of succession plans and also the consequences of not having one coupled with our own knowledge of what was occurring within the credit union industry, succession planning direction became apparent as a critical need. In an effort to address this need, we assisted and provided input to another firm (SuccessionNow, LLC) in their development of just such a product. With the combined efforts of our groups, a sophisticated on-line tool that facilitates, completes and accelerates the succession planning process for credit unions has been created; it’s called SuccessionNow. SuccessionNow provides the following features and benefits to assist credit unions in this process:
- Identification
- Identifies the replacement positions (CEO, Chiefs, SVP’s VP’s)
- Identifies potential successors
- Creates successor profiles (experience, education, desires, talents, performance)
- Evaluation
- Evaluates successor’s “conditions of concern”
- Evaluates successors against a list of potential predictors
- Ranks potential successors based on the results of the evaluation
- Creates a succession planning scorecard
- Development
- Identifies gaps of needed improvement
- Creates a development plan for potential successors
- Establishes timelines for completion
- Readiness Timeline
- Identifies readiness timelines per each internal successor
- Evaluates their competency fit
- Robust Report Features
- Profile reports, Scorecard reports, Development reports, Timeline reports, Board Reports
- Policy & Practice statement
- Position competencies descriptions
- Complete credit union customization
- Comprehensive but time-sensitive…most succession plans can be completed within 60 minutes.
If succession planning is on your list of important things to address, I recommend Succession Now. Please contact me at: jgregoire@theprocongroup.com or go to the website, SuccessionNow.com --- for a review of the product. If you have further questions, I can setup a 30-minute webinar for your review: John Gregoire, Partner, HNG (608–239-3449)
About Author:
is a partner in Higgins, Nelson and Gregoire (HNG), a consulting firm dedicated to executive compensation, succession planning and performance management in credit unions. With more than forty years of experience in the financial services industry and having held senior management positions in state and national trade associations and credit unions, his is a broad-based perspective reaching to board governance, team leadership, CEO appraisal, score carding, succession planning, mergers, and the alignment between executive compensation and organizational strategy.
John also founded the ProCon Group Ltd., now in its twentieth year of serving a client base comprising over forty percent of credit unions with a billion dollars or more in assets. A founding member of the Filene Research Institute, he was instrumental in the development and publishing of the report on Board Responsibilities and Work Styles in Effective Credit Unions. He has authored a variety of articles on strategy, the balanced scorecard and governance. John earned his master’s degree in management from the Claremont Graduate School – Peter B. Drucker School of Management Program, working directly with Drucker on topics of executive management. He is a former board member of the National Credit Union Foundation.