Preparing Your Virtual Bench

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lineofmen.jpgAt 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.  

Cultivating the Talent Within

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military-formation.jpgHaving trouble finding quality managers that fit your organization’s culture? Maybe it’s time you make them yourself. Bank of Marin, a $1.4-billion asset community bank headquartered in Novato, California, is doing just that.  By applying a similar training concept to those sometimes employed by much larger institutions, Bank of Marin  is wagering that even for a community bank, the long-term benefits of an early investment in employees will be well worth the initial cost.  Bank of Marin CEO Russell Colombo recently spoke with Bank Director about the program.

Why did you start an employee training program? 

We really looked at both our growth and our total employee base. As we’ve been growing, we felt it was important to start building a culture from the bottom up by training people to learn the organization. That way we knew what we were getting.Whereas, when you hire from the outside, there’s a little bit of risk. You can interview all you want, but you don’t necessarily know what you are getting.

The program also sends a very good message to our employees that there are opportunities here for growth.

Can you give us an overview of how the program works?

It’s a nine month program. Each trainee is assigned a mentor who meets with them regularly either at branch locations or at headquarters depending on where they are assigned. These mentors, usually branch managers, provide the trainees with guidance and assistance. 

After they graduate, the mentor who was assigned to them still remains in contact and works with them as they are taking on their full responsibilities in the branches. They help them make that transition. So, it’s a nine month program with three months of additional mentoring. The trainees become pretty close to their mentors.  They can call them anytime for assistance, direction and guidance even after those last three months.

What are some of the qualities you are looking for from trainees?

There are a few things. For educational background, we are looking for a bachelor’s degree or better. We are looking for [people with] leadership qualities: Those that are not afraid to speak up and are open to learning. We are looking for those that can be outgoing and have a sales aptitude. We also want someone who isn’t afraid to ask for business and who can build client relationships with existing customers.

How have you been gauging the success of the program?

It is early yet since we just completed the first year, but we had our first graduation and each [graduate] got up and gave a speech. They felt good about their own careers because the bank had confidence in them and we were willing to spend money to train them for success within the bank.

I think this [program] creates a strong sense of loyalty. These days you have people coming out of college with degrees in business and accounting who are taking jobs as tellers. We pulled our [trainees] out of these ranks because they clearly have the capability and the capacity to do more.  We are giving them their opportunity.

People see this and they say, “If so-and-so can have that opportunity and succeed, I could too,” and maybe they will raise their hand the next time or be chosen the next time. That has a real positive impact on a culture.

Do any of your area competitors have similar programs?

I haven’t seen any others in the area doing this. This is what the big banks used to do. They all had training programs. When I started in banking, every bank had a significant training program where they hired a number of people and put them through a class. You spent a year or two training and learning about the bank before being placed in a job.

With community banks it’s tougher because it’s a matter of cost. Everybody is looking hard at the efficiency ratios. We are adding people who do not have a function other than learning, but I Iook at it from this perspective—even though there is that initial cost, in the long run this is going to be really efficient for us because we don’t have to go through the retraining when we hire people. We are creating a pipeline of people who can take over, who can really be a succession plan for our branch managers. We don’t want it to be a fire drill and have to go out and look for the right person every time a spot opens up.  You want to be able to say, “OK, this person is ready now to take that roll on.” That’s certainly the best way to do it.

What lessons have you learned from the program?

I think one of the things we learned is we have to do a really good job in training our employees who are managing people on the employment laws and regulations in this state. There are a myriad of regulations they need to know about employment issues that go beyond just basic management skills. We don’t want them to either risk their own careers or the bank because they made mistakes regarding the law. It’s not as simple as it used to be. Believe me. 

What advice would you give to CEOs considering a similar training program?

I would say to any other community bank—if you can afford to do something like this, it is well worth it. It’s a great way to build upon the culture that your particular organization has. This program is creating branch managers who will ultimately be doing things the Bank of Marin way. So, there is not a culture clash between the new hires and existing employees. We don’t have people saying, “Oh, we did it like this at x,y,z bank.” No.This is the way we do it, and I think there is a lot of benefit to that.

I look back on my banking career, and I had the opportunity to go through a [training program]. It was terrific because your job was to learn. You have people that are learning the right way to do it. That’s invaluable. It  will save you money in the long run, and it will build a more positive environment and culture for the bank.