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.<...