Does Your Bank Have a Dream Team?


succession-10-24-17.pngMany bank boards of directors and CEOs are proud of their bank’s executive team. And rightly so! Yet frequently those feelings of pride dissolve into uncertainty when the bank is faced with the decision to promote a banker into a top executive position or even the CEO role.

How does this happen? Why do well laid out succession plans sometimes evaporate in the face of reality when the time to elevate someone finally arrives? One reason, based on our experience working with hundreds of community bank boards and executive teams, is that directors are often missing context when faced with a promotion decision. The lack of relative perspective on comparative candidates for similar roles may at times impede the comfort level necessary for a board to validate a major promotion decision.

Succession plans are frequently aspirational in nature for community banks: long on good intentions towards the executive and bank, yet short on taking advantage of the time available to fully develop and groom worthy successors for key roles. In order for a bank board to feel comfortable supporting a CEO’s recommendation for a C-Level executive promotion, or for the board to align around a promotional decision into the CEO role, a robust assessment, development and monitoring program needs to have taken place along the way.

True clarity around the bank’s strategic plan and growth objectives is also critical. Alignment among the key decision makers—usually the board of directors or trustees, along with the CEO—provides a consistent viewpoint on what the bank needs in its next leader. Strategy informs profile on many levels, including both tangible skills and leadership competencies, and collectively these must also mesh with the company and boardroom culture to enable a successful leadership transition.

Once a bank’s strategic direction is updated and affirmed, an appropriate next step is often to conduct a management assessment of the existing leadership team. At a minimum, this exercise should provide a developmental action plan to help elevate performance of the senior team—even when that performance is already solid.

Evaluating the leadership team provides multiple benefits, including:

  • An objective evaluation of the strengths, scalability, areas of development and desire for more responsibility—particularly when conducted by an independent party.
  • Creation of a “road map of development,” which can be taken to boost executive performance and enhance succession viability.
  • Increased likelihood of retention of high potential bankers due to the feeling of being “valued” and “invested-in” by the organization.
  • Higher morale, as employees see the investment in future leaders as a sign of a commitment to growth and continued independence.
  • A lower risk of a sale or merger driven by a talent deficit, as good succession planning enhances the continuity of leadership and strategy.

A robust management assessment program should have several critical components:

  • Input from the CEO and board that aligns strategy and the desired/needed profiles of future leaders for key roles. These profiles are often different than an incumbent’s profile.
  • Extensive in-person interview time with a qualified industry talent expert. This should involve both behavioral and chronological interviewing techniques.
  • Use of a third-party assessment tool to help understand an executive’s full range of behaviors and leadership attributes, and the ability to benchmark against desired profiles.
  • A peer evaluation survey to garner candid input from close colleagues. Such a 360° process can provide valuable insights to help guide developments plans.

There is no more important responsibility of an incumbent CEO and community bank board than to develop the strongest possible leadership team and potential CEO successors. An informed board with a strong range of perspectives on the bank’s executive talent is best positioned to make promotional decisions on future bank leaders and the next CEO. A robust management assessment program provides the right foundation for good governance and successful succession planning.

Does Your Bank Have a CEO Succession Plan?


succession-10-11-17.pngMedian-CEO-image.pngIn the Bank Director 2017 Compensation Survey, sponsored by Compensation Advisors, a member of Meyer-Chatfield Group, 48 percent of bank directors and executives say their bank does not have a successor to replace the chief executive officer when that person leaves. While some responders indicated they did not have a designated successor because their CEO did not plan to retire soon, there are other unforeseen events that could prompt the need for a successor sooner than expected. Starting early on a good succession plan is one of the keys to a successful transition event.

Succession planning is an ongoing practice that is focused on the organization’s strategic vision and identification of the leadership and managerial talents that are necessary to carry out that idea. Recruiting, developing and retaining individuals who have or who can develop those skills is an integral part of the process.

Maintaining a succession plan will promote a healthy organization and mean a great deal to stakeholders. It’s a shared responsibility that requires a strong partnership between senior management and the board of directors.

The best time to discuss a leadership transition is when it isn’t imminent. Establishing an environment that supports open and ongoing discussions about succession and leadership development will reduce the anxiety that executives and board members may feel.

A comprehensive plan must also take into account what happens when the potential internal candidates are either not ready to assume the needed role or have not been through a sufficient grooming process. There are three key planning processes your institution should embrace:

1. Anticipate Emergency Situations
Emergency succession planning focuses primarily on the unanticipated departure of a CEO. You may be given a few weeks’ notice, a few days, or possibly no notice at all. An emergency succession plan ensures the uninterrupted performance of essential executive functions and outlines the steps necessary for the appointment of an acting CEO.

This interruption in leadership may be short term or permanent. Regardless, planning for the event is absolutely critical to maintaining a successful drive toward the institution’s long-term business objectives.

2. Developing Leadership
Leadership development is an ongoing process that identifies the core competencies, skills and knowledge needed by the institution over the next five years or so, including a plan to develop those competencies in your existing leadership team. If the board feels that such qualities are not inherent in the current team, you’ll need a plan to recruit new talent.

Creating a strategy for leadership development will help ensure that your organization will survive a required leadership change, whether expected or unexpected. Some of the key questions to address in this step include:

  • How do future opportunities for the organization impact our leadership needs?
  • Where are the future leadership gaps?
  • Is the board developed to its full potential?
  • Who are the natural internal leaders in the organization and how can we nurture them?

3. Seamless Transition
When a leadership change needs to be made, the transition process is not automatic. To ensure a seamless, problem-free transition, a defined course of action should be executed. One question to address is: How much time do you have?

If the departure is anticipated, such as a future retirement, it’s important that the departing executive establishes a clear and unchanging end date so that the organization can work diligently to prepare for that day. Otherwise, it is likely the organization and board will be unprepared and the transition will inflict greater stress on the firm. For unanticipated departures, the transition period will be brief, so having a clear plan of action at the ready is all the more critical.

Proper communication to stakeholders and executives can be one of the most essential tasks in succession planning. Your stakeholders will want to know what contingency plans are in place. And your management team will want to know of anticipated changes in their roles and responsibilities. Losing other key members of the leadership team in this process only makes the board’s job that much more difficult. So be strategic about your communication, which means listening, speaking the truth and helping everyone understand what is taking place.

Click for more information from the 2017 Bank Director Compensation Survey sponsored by Compensation Advisors, a member of Meyer-Chatfield Group.