How to Craft a Succession Planning Process

Written by

The financial services industry is facing a substantial succession bubble, with an expected 50% board and senior management turnover by 2025, driven by generational and business model changes. In addition, the recent pandemic accelerated the baby boomer generation to exit more rapidly than predicted prior to the pandemic.

Most experts agree: The high demand for senior leadership talent will continue into the foreseeable future. In the face of a highly competitive talent cycle,  coupled with many banks increasing in business complexity, does your institution have confidence in the current board and senior leadership composition to guide your organization through the next five years?

Over the years, the Chartwell Partners’ Financial Services Team has helped clients evaluate their board and senior leadership team against the strategic plans for the bank to help our clients make confident leadership decisions. We have successfully used a four-step process we find effective that includes:

Step 1: Intake
Engage a third party or appoint a director to lead the planning. Meet with key stakeholders, such as the chair, lead director or CEO to understand the business strategic objectives, the current leadership dynamic and unique cultural elements that drive effective leadership transition plans. The ultimate goal is to align leadership decisions to the future business objectives.

Step 2: Planning
Create a tailored plan to define outcomes, outlining defined action plans and a timeline. In our case, we work with the decision-making team to provide guidance on executing against the defined plan — whether it’s testing a current succession plan or executing internal leadership assessments and processes to provide leadership insight supporting board or management changes.

Step 3: Assessment
Leveraging in-person executive assessments, coupled with data-driven online assessment service, the point person should meet with the select executives and provide in-depth insights into the leadership team. They can also provide perspective on the leadership team compared to outside executive options to provide the decision makers a thorough leadership analysis.

Step 4: Reporting
Following assessment, the project lead should produce a report based on the desired outcomes defined by the decision team, which may include a well-defined succession plan or a guide to an internal leadership selection process. Reports should be tailored to the specific needs of the bank, so key stakeholders can be confident in the executive leadership decisions.

At the conclusion of the four steps, it is important to communicate the plans with the team and instill board confidence in the organization. In addition, it is critical to consistently evaluate the leaders against the strategic plan and ensure they are growing and developing leaders the organization can follow. Ultimately, the board owns the responsibility for the CEO and holds them accountable for the development of their team; however, it is always important the designated committee of the board be in touch with management team succession planning. Effective succession planning takes intentional focus from the board. Banks that are proactive about succession planning increase the likelihood of a successful outcome transitioning boards and management teams.

Searching for the Next Generation of Bank Board Leaders

Written by


governance-11-4-15.pngCorporate boards have historically been predominantly comprised of men, who are either C-suite executives or major investors. Corporate boardrooms in many circles are referred to as men’s clubs with women representing only one fifth of the 1,210 board seats at 100 of the largest U.S. public companies. Banks however, represent a positive trend in board diversity with 22 percent of board seats held by women at the top 25 banks. A study of 2,360 companies conducted by Credit Suisse found that companies with women board members have a higher return on equity, of 4 percentage points on average, when compared to companies with no women board members. While there is a correlation, companies with diverse leadership are also better able to attract top talent, improve their customer orientation and drive employee satisfaction, which all lead to increased returns and profitability.

Board Diversity
The lack of women in board seats is a direct correlation to the lack of women in senior management or C-suite roles compared to their male counterparts. Several large public companies are making great strides to cast away previous recruiting tactics, bringing in new and refreshing initiatives around diversifying the board makeup. Many believe boards should be representative of a company’s customers and employees, but the statistics show that is just not the case. While directionally there has been a shift, it has taken decades to arrive at this point. Boards of today should embrace diversity in the broadest sense, whether that involves gender, age, culture or ethnic diversity, because the net effect of a broad range of perspectives and expertise is board effectiveness.

The Expertise Trend
Moving away from a narrow representative board and focusing instead on functional needs on boards, where specific members will have functional experience, whether in risk, operations, technology, compliance or audit, is another forward-thinking strategy. Proven C-suite executives bring a wealth of knowledge and experience, but surrounding those folks with functional experts will only add to the success and diversity of the board. Driving diversity in thought and experience will lead to more constructive dialogue inside the boardroom, ultimately driving the effectiveness and success of the board and company as a whole. Diversity at all levels is a driving thought behind board hiring, but the statistics still show that although a focus, boards have significant room for diversity growth whether relating to industry, sector, gender or ethnicity.

Aging Board
The average age of board directors at S&P 500 companies has increased from 60 to 63 years old during the past 17 years. Experience is a critical attribute, but in the changing economic environment of today, companies are forced to take a front window approach. Institutions are setting a mandatory retirement age regardless of performance. In some cases, this might hinder a board in the short term, but potentially drive diversity and enhance the board’s overall effectiveness when boards are forced to replace their older members with newcomers. In PwC’s Annual Corporate Directors Survey, of the 934 directors who responded, age was one of the top three reasons attributed to the lack of performance and the need for replacement. While a great percentage of companies have a mandatory retirement age, there are extenuating circumstances when that is waived. The same is true for term limits. It is good to keep those in the 10- to 15-year range, but once again, they can be waived in certain instances if the board deems it necessary.

Bank board recruiting continues to evolve and many banks are seeking non-banking professionals to complement existing banking boards. Just recently, Boston Private Bank and Trust recruited Kimberly S. Stevenson, the current chief information officer at computer manufacturer Intel to its board. Given the amount of reliance on technology within the financial services industry, her background represents the positive trend towards diversity in gender and industry. Assembling a compatible, diverse and successful board is a challenging goal, but a worthy one where the pay-off is measurable and invaluable. With a rapidly changing workforce, boards will be forced to stay current with the broader trends. There is a need for more diverse boards to complement the next generation of senior management.

The Board’s Role in Succession Planning

Written by


10-23-13-Barack.pngGiven the increase in shareholder activism and regulatory oversight, financial institutions have to revisit succession planning as part of their governance practices. What if your CEO, or other senior executives, cannot continue to perform in their roles? Your shareholders and regulators want to know that you have in place a solid plan of action if called upon in an emergency or as part of your long-term vision.

Because succession planning is not a new idea, only a recent hot topic, you may already be familiar with it. You may already do it consciously or without realizing it. In either case, you are a step ahead. Whether you are in the lead or still a bit behind, it is a good idea to consider a few issues with respect to succession planning.

Fiduciary Duty

Directors have a fiduciary duty to work toward identification and mitigation of major business risks, including the loss of senior executives. Turnover can be unforeseen and immediate or it can be expected and deliberate, or somewhere in between. The board must consider its possible impact on the company. In addition to considering a CEO successor, the board should also consider other key positions like the chief financial officer, chief operating officer, division heads and other key officers.

Succession Planning for Executives

There are no set rules for succession planning. The board has free reign, but should focus its efforts to be productive. An initial step would be to open dialogue with the most senior executives within the company. Ask if they have given thought to their own long-term plans. Ask their thoughts on succession. Ask about contingency plans. After the board understands where the company is, it can begin to develop a plan to get the company where it should be. In developing its plan, the board should consider:

  • Will succession planning be a task for the entire board or a committee?
  • Will the CEO be “on board” with the effort?
  • What are the short- and long-term business needs that the plan must meet? Is there a specific timeline?
  • Is it best to have separate short-term and long-term plans?
  • For which executive officer positions is a plan most critical?
  • What skills and experience are required for each position?
  • Has the incumbent identified any potential successors?
  • Does the potential successor require additional training or professional development?
  • If the incumbent has not considered succession planning, how does the board evaluate potential successors? Should the process be different for internal and external candidates?
  • Does the board need the assistance of external advisors to successfully implement its plan?

Once established, it is critical for the board to regularly revisit its succession plan. In order to stay on course, the board should consider scheduling time quarterly to discuss progress toward the plan.

Also, the board must guard against the process turning negative. A mishandled attempt at succession planning can lead to bruised egos and weakened morale, especially among internal candidates passed over for promotions. The board should strive for a process that allows potential successors to understand they are critical to the organization and what they need to do to continue to grow within the organization. At the same time, the board needs to avoid creating an overly competitive environment that fosters discord and animosity among executive team members.

Succession Planning for Directors

Not only must a board of directors address the risks associated with executive succession, it must also look internally at director succession to ensure that the composition of the board continues to satisfy the changing needs of the company. Self-assessment and evaluation should be part of the board’s annual process leading to the recommendation of the slate of directors for the annual shareholder vote. The board should view director succession in the short-term and long-term. It is somewhat unsettling that the most commonly cited form of board succession planning is a mandatory retirement age. That is not enough. Boards must consider the qualitative skills required to serve as a director, where people with such skills can be found and how they might be attracted to board service. Finding individuals who are willing to serve as board members is an increasingly difficult task, but not an impossible one. Proper planning will go a long way toward ensuring that your board of directors remains vital.