In my experience with credit unions that are dealing with asuccession situation with their CEO, I frequently hear boardsexpress they are looking for someone just like the retiringpresident. In the cases where the parting of ways was acrimonious,the boards are looking for the exact opposite of who they've had todeal with. Neither is the best approach

The best criteria for finding your next CEO is finding the bestfit between what the credit union must do strategically and theperson who can transform the credit union in the near future. Thistransformation is to become even more competitive in thisdrastically changing environment. In today's economy and rapidlychanging landscape, a transition is no longer enough. Credit unionsare going through transformations.

Reshape the future while honoring the past

Most successful credit union leaders are in their positions fora long time and leave a legacy to be honored and respected. One ofthe best ways for a board to honor the past is to remain on theboard through the transformation to the incoming president. Theycan support the person they selected and help structure thetransformation they envisioned when selecting this person.

Related:
Not for CEOs on Succession Planning

If many board members are interested in “retiring” once theretiring president steps down, it would be wise to complete theboard transformation before the search process begins. The mostimportant relationship in the success of the credit unions isbetween the board and the president. The board who selects the newpresident needs to have a future-focus, not a past-focus.

Honoring the president's legacy doesn't mean keeping everythingthe same. The best way to honor a legacy is to build on it andtransform 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 planningcommittee. It is the responsibility of the succession committee tonot only select candidates, but after the selection to enable thesmooth transition for the new CEO as well as shepherding theorganization through the transformation.

While 69% of survey respondents think that a CEO successor needsto be “ready now” to step into the shoes of the departing CEO, only54% are grooming an executive for this position. The grass isn'talways greener on the other side of the fence. If properlydeveloped, your best succession candidate could already be on yourteam.

Boards consider succession planning an event. “When we need ournext leader, we'll crank up a process to prepare one” is thetypical refrain. That is to assume all transitions are plannedyears out. There are a number of reasons for a sudden need for anew leader of the credit union. When an opening occurs suddenly andthe board isn't prepared, a sense of panic sets in and the planningprocess becomes focused on getting someone quickly, rather thanfinding the best candidate.

It becomes the CEO's job. Boards often make the mistake ofdelegating the task of succession planning completely to the CEO.As good a leader as the CEO might be, that does not mean he or sheis best positioned to choose a successor.

Succession planning best practices

Board/CEO discussions about succession planning should beginthree to five years prior to the time a CEO transition is expected. By starting so far in advance, internal candidate evaluationscan be discussed with time for focused development of that personto seamlessly step into the position and exercise her new ideas andfocus for the credit union.

Criteria for the new CEO should be developed that are consistentwith the organization's future strategic needs. The credit unionboard needs to have a firm grasp of the direction and goals of thecredit union before finding the right person to take it there.Remove the politics, the hidden agendas and the power plays. Thebest person for the job is the person who fully understands yourplaybook and is ready to reach your destination.

The outgoing CEO should either leave the board immediately orstay on as chairman for a transitional period of six to 18 months.The argument for why a CEO should leave immediately is to allow thecredit union to become the full domain of the new leader. Manyboards keep the retiring CEO around for six months just in case.Most of the time this becomes a hovering shadow leader who actuallyinhibits transformation.

The only time to keep the CEO as a chairman is if thetransformation is happening in the middle of a large project suchas a merger, extensive expansion, or entering into a brand newmarket.

Transformation is not easy and is critical to the health of thecredit union. Make sure you are focused on what's in front of youand not what is behind you when making a succession selection.

Russell J. White is a consultantand speaker from Lake Wylie, S.C.