In my experience with credit unions that are dealing with a succession situation with their CEO, I frequently hear boards express they are looking for someone just like the retiring president. In the cases where the parting of ways was acrimonious, the boards are looking for the exact opposite of who they’ve had to deal with. Neither is the best approach
The best criteria for finding your next CEO is finding the best fit between what the credit union must do strategically and the person who can transform the credit union in the near future. This transformation is to become even more competitive in this drastically changing environment. In today’s economy and rapidly changing landscape, a transition is no longer enough. Credit unions are going through transformations.
Reshape the future while honoring the past
Most successful credit union leaders are in their positions for a long time and leave a legacy to be honored and respected. One of the best ways for a board to honor the past is to remain on the board through the transformation to the incoming president. They can support the person they selected and help structure the transformation they envisioned when selecting this person.
Not for CEOs on Succession Planning
If many board members are interested in “retiring” once the retiring president steps down, it would be wise to complete the board transformation before the search process begins. The most important relationship in the success of the credit unions is between the board and the president. The board who selects the new president needs to have a future-focus, not a past-focus.
Honoring the president’s legacy doesn’t mean keeping everything the same. The best way to honor a legacy is to build on it and transform the credit union based on that legacy foundation.
Common succession planning mistakes
The average CEO tenure in the financial industry is five years, yet only 2.5% of financial institutions have a succession planning committee. It is the responsibility of the succession committee to not only select candidates, but after the selection to enable the smooth transition for the new CEO as well as shepherding the organization through the transformation.
While 69% of survey respondents think that a CEO successor needs to be "ready now" to step into the shoes of the departing CEO, only 54% are grooming an executive for this position. The grass isn’t always greener on the other side of the fence. If properly developed, your best succession candidate could already be on your team.
Boards consider succession planning an event. "When we need our next leader, we'll crank up a process to prepare one" is the typical refrain. That is to assume all transitions are planned years out. There are a number of reasons for a sudden need for a new leader of the credit union. When an opening occurs suddenly and the board isn’t prepared, a sense of panic sets in and the planning process becomes focused on getting someone quickly, rather than finding the best candidate.
It becomes the CEO’s job. Boards often make the mistake of delegating the task of succession planning completely to the CEO. As good a leader as the CEO might be, that does not mean he or she is best positioned to choose a successor.
Succession planning best practices
Board/CEO discussions about succession planning should begin three to five years prior to the time a CEO transition is expected. By starting so far in advance, internal candidate evaluations can be discussed with time for focused development of that person to seamlessly step into the position and exercise her new ideas and focus for the credit union.
Criteria for the new CEO should be developed that are consistent with the organization’s future strategic needs. The credit union board needs to have a firm grasp of the direction and goals of the credit union before finding the right person to take it there. Remove the politics, the hidden agendas and the power plays. The best person for the job is the person who fully understands your playbook and is ready to reach your destination.
The outgoing CEO should either leave the board immediately or stay on as chairman for a transitional period of six to 18 months. The argument for why a CEO should leave immediately is to allow the credit union to become the full domain of the new leader. Many boards keep the retiring CEO around for six months just in case. Most of the time this becomes a hovering shadow leader who actually inhibits transformation.
The only time to keep the CEO as a chairman is if the transformation is happening in the middle of a large project such as a merger, extensive expansion, or entering into a brand new market.
Transformation is not easy and is critical to the health of the credit union. Make sure you are focused on what’s in front of you and not what is behind you when making a succession selection.