At Isabella Bank headquartered in Mount Pleasant, Michigan, the officers are seasoned veterans with an average of approximately 20-plus years of experience at the $1.3-billion asset institution. Replacing individuals with that kind of experience when they retire is a difficult task, a fact which was not lost on Isabella Bank CEO Richard Barz, who sees his own retirement on the horizon.
“In about 2007, the human resources director and I met and we talked about succession planning down the road,” says Barz. “One of the things we realized is that we have to start acting now because we were going to have about seven of our senior people retiring in a ten year period—beginning in probably 2012 or 2013.”
Barz felt the best candidates to fulfill these positions would be found within, and fortunately, his board was in full agreement. The challenge was that as individuals were brought up into these senior positions within the organization, they would in turn be leaving openings that needed to be filled.
“There is a term they use out there called a virtual bench,” says Barz. “It’s continually changing. You can replace five or six positions, but you are also opening five or six positions. So you have to make sure the next five are ready to fill in their new roles well and so on. All of a sudden, you’ve got to think about fifteen people transitioning. You have to develop a virtual bench of people who are fulfilling those roles. You can’t just do it by doing an evaluation once or twice a year,” he says.
Barz and his team started taking a more proactive approach to succession management than in years past. They began by going through a select number of people they thought had the possibility of becoming CEO or president, as well as the people who would likely follow up the line due to backfilling. Then, they traced the qualities they were looking for in each of these positions, and instituted a program that would emphasize these traits during goal setting for the selected individuals.
They quickly realized that tackling this new program alone might not be the best strategy. “The problem is that we just didn’t have the time, or really the skill, to follow through and take this to the next level like we needed,” says Barz. “At that point, we decided we wanted to bring in a professional development firm whose sole responsibility is to assist the selected individuals in working on the specific skills they would need—basically we brought in a job coach for executive development.”
All candidates went through a two year training program to identify their strengths and develop the qualities they would need for their future positions—eight started the first year, and after seeing how successful the program was becoming, 10 started the next. Barz says the results were amazing. He saw the candidates’ confidence increase as well as their ability to work with others in the organization and create bonding relationships. “The whole concept was to have them work as a team,” says Barz.
The final step was to take the individuals who were going to be in the very top positions and have them work with a professional succession management firm. Barz enlisted the firm Heidrick & Struggles, who devised its own set of important skills and attributes from the firm’s previous experience, and then went through the top people to see how these individuals fit into these roles. The firm helped identify the strengths and opportunities for improvement of the future CEOs and presidents, which helped these individuals develop towards their eventual roles.
While this was a long and fairly complicated process, Barz feels it was certainly worth the investment. For one, Barz says the failure rate of CEOs who are outside hires is too high, especially when you consider what is at stake with shareholders and the future of your entire operation. Perhaps more importantly, all of this preparation takes away uncertainty and instills confidence in the organization. If a position opens up either through retirement or unexpected circumstance, the bank will be assured that the person filling that spot has the necessary skills and understands the culture.
When Barz retires as CEO, he knows the 370 employee bank will be in good hands even without him. “I’ve been asked to stay on the board, and if [the future executives] ask me for some advice I can give it to them. But in general, they probably won’t need it. The people we have filling these roles are experienced and skilled; it’s really going to be their bank and their corporation,” he says.