A Better Model for Leadership Transformation, Succession Planning

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Boards at banks that are looking to position themselves for long-term success should consider leveraging a more robust executive assessment process for their senior leadership. This process can provide directors with a well-rounded picture of where their institution is now, along with specific insights to develop leaders, drive results and set up the bank for future succession for key roles.

There are three reasons that banks should consider an assessment tool and coaching with your management team. Many organizations use basic assessment tools when hiring leaders; rarely do organizations implement a more holistic executive development process that leverages the insights an assessment tool provides. But now, more organizations are experiencing the value of pairing an assessment with a leadership development plan that includes third-party coaching. Employing best practices gives top-performing organizations a dynamic executive development model to drive the following outcomes:

1. Succession planning: A strong succession plan identifies key competencies for the banks and the necessary skills for business continuity. The plan allows for focused development that meets the bank’s future business needs. A starting assessment makes development easier. Good assessments will consider an individual’s skills, personality, influence, communication and leadership abilities, plus a development plan that often includes coaching.

2. Retention: Assessments can increase engagement by creating a vision for advancement if they’re used correctly. Leaders who stagnate in a job tend to be more likely to leave. A well-rounded assessment tool can help a board uncover growth opportunities for the team and reveal untapped skills that are useful to the organization.

3. Dynamic leadership: Being your best every day is hard when you do it alone. Performers at every level can use a coach to bring out their best. An initial assessment that provides insight into the individual and team dynamics can fast forward an organization’s financial performance and set up the bank to outperform in the industry.

Assessments at all levels of the bank lead to higher engagement and retention. They can highlight tensions early, so executives and the board can proactively solve them rather than use reactive temporary fixes. But the power of assessment comes from choosing the right tool.

Top Two Mistakes
1. Assessment to check the box: Too many banks use an assessment to produce a label or outline a gap. They present these results to the team without a development plan to close the gaps, and many are left feeling underappreciated and frustrated. In these cases, assessments damage the culture. Good assessments produce data that allows boards to create a plan and take action. A great assessment does this — and then increases the readiness of participants to engage in next steps.

2. Off the shelf tool with no qualitative research component: Have you ever taken an assessment and felt constricted or limited by the way the question was asked? “Are you most like this or less like that”? You want to answer “Yes,” but that isn’t a choice. No employee likes an assessment that is difficult to complete. But at the same time, bank management teams need the quantitative data that is easy to build the big picture. The best assessment tools will combine this quantitative data with qualitative research.

When looking for an assessment tool, consider these components:
• Online assessment: A user-friendly online tool can quickly capture personality insights, team dynamics and leadership strengths. Boards should look for a tool that produces insights into both individual strengths and gaps, as well as team communication.

• Qualitative research: When using an assessment vendor, be sure to get a sense of their industry knowledge and experience with interviews for assessment.

• Your tools: Rounding out a powerful assessment is the incorporation of tools your bank has already used — anything from performance reviews to grit studies. The final assessment presentation can include data that the bank has previously gathered.

Why Directors Should Not Fear Board Evaluations

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governance-1-23-19.pngIn governance circles today, the conversations about board performance and evaluations continue to advance.

Governance advocates, proxy advisors and institutional investors encourage varying approaches to evaluating directors, assessing board effectiveness, and raising the bar on expectations for director contributions and performance.

Many community bank directors, however, are reticent to go down the board assessment path, fearing that the process will somehow result in their removal from the bank’s board. The goal of any evaluation, however, should not necessarily be to weed out directors, but rather to highlight areas for board and director improvement, and encourage continual forward movement on good governance.

In our view, there are three general types, or levels, of board evaluation to consider:

Level 1: A general assessment of the board overall and how the group is functioning. This evaluation might include areas such as:

  • Do we have the right committee structure, leadership and meeting frequency?
  • Are we as a board focusing our time on the correct and critical topics?
  • Do we have an appropriate and valuable range of skills and experiences around the board table to govern effectively in today’s industry climate?

Level 2: This typically involves an element of “self-assessment,” focused on what individual directors believe they contribute. This analysis highlights contributions of a technical, industry, business, community or other relative area. Self-assessments also aggregate the collective skills sitting in the boardroom, and help to inform the board about where there are critical gaps in the needed skills.

Level 3: This is where some trepidation arises—the individual evaluation. This assessment involves each director providing confidential feedback on their fellow directors, and should always be facilitated by a third party. Using an outside resource to review and compile the data provides a level of professional insulation between directors, and ensures anonymity of the assessments.

Peer evaluations can serve an important function by informing directors as to how their peers view their contribution. When viewed in conjunction with self-assessment output, it can provide a comprehensive, objective look at how each director views their contribution relative to how their contribution is viewed by their colleagues.

Many board members fear an assessment will expose shortcomings as a director. However, the goal of evaluations is to highlight areas for improvement and strengthen governance—not necessarily cull the herd. There are plenty of examples of directors whose contribution had slipped a bit due to personal or business distractions without realizing this shift occurred. In these instances, peer feedback was instrumental in helping that director return to highly engaged participation.

It’s also common to see individual feedback highlight areas where directors needed updated training or a refresher course in bank operations or oversight, often resulting in additional training for all directors.

One of the hallmarks of the most effective boards is a desire for continuous improvement, and striving to become a “strategic asset board.”

To be sure, board members whose contributions have declined considerably and remained below expectations for an extended period might need a “tough love” conversation. A board seat is a precious thing, and every director must bring current and valuable skills and experiences to the board table.

Directors whose lengthy tenure or legacy contributions are simply not up to current needs and governance standards—and who lack the fortitude for improvement—should ask themselves whether the bank would be better served by a different individual in that seat. It takes real maturity, self-awareness and a view for the “greater good” for a director to make such a determination.

Boards have long held to age limits more than term limits as a vehicle to repopulate their boardroom. Yet as directors age, many institutions are raising or waiving the age requirements to retain experienced directors. Good reasons exist to keep veteran directors, but a board seat should be earned through performance. Seats should not be “institutionalized“ to an individual or family if those representing select interests are not qualified to contribute in a meaningful way and put the institution’s interests above their own.

The highest performing boards make it a policy to conduct some form of evaluation on a regular if not annual basis. Whether though a general, self or peer assessment process, more informed boards make better decisions around board composition and continued director service.

Boards with the strongest, most capable and engaged directors will have the greatest ability to survive and thrive in a consolidating industry. Boards that utilize some form of assessment are more likely to be among the survivors going forward.