What do you do as a board when you hear the words from your CEO of some 20-plus years, “I am planning to retire within the next few months?"
At first, the words do not penetrate. After all, your CEO has been in place for a long time, things were running smoothly and although inside you felt your organization may not have been quite leading edge, the comfort zone took over. If this is the case, this is a strong indication that the board has not been strategic in its thinking. A board should invest just as much time to contingency plans as they do to succession plans.
As part of the board strategic planning responsibilities, a succession plan should be in place. It should be actively reviewed as part of your annual planning session to be sure it is current. The plan should contain specific contingency actions to follow in case of an untimely departure of your CEO. An annual update of the plan is also an opportune time to have a conversation with the CEO about work or retirement plans. If the board and the CEO are aligned, it will help facilitate an orderly and brief transition.
After the board had some time to think this announcement over, reality begins to set in. Is there a viable internal candidate for consideration? Is it time for a fresh look? When should the search begin? Is this the time to seek a merger with another credit union? Mergers are not only a growth option during normal times but can be a viable succession plan for smaller credit unions, especially if the CEO wears many hats. These should all be board discussion topics.
Another important topic for discussion is the current compensation package. Is it competitive and aligned with what other credit unions are doing? Many times, when a long-term CEO retires, the board may find that the total compensation package may not be adequate in today’s market. The best compensation packages should be the motivational tool that will appeal to the candidate of your choice. A good search firm should make the board cognizant of current practices. The board must be flexible and strategic in this area.
Once the decision is made to seek a new CEO, the process begins. Many credit unions are facing similar situations with the boomer exodus. and you will find a very competitive market.
If you do not have a human resources professional on the board to help manage the search process, you may need some assistance from your credit union’s HR lead to get started.
A board search committee is typically formed and the due diligence of finding a search firm experienced in financial recruiting begins. A good search firm will take the board’s outline of the ideal candidate and begin the search, ultimately providing a small group of final candidates that are technically qualified and meet the board’s criteria. The search firm takes care of all of the legal requirements in the recruiting process as well as keeping the board informed of the legalities in interviewing candidates. The whole process may take several months. The board’s job is to select the candidate they feel comfortable with and fits the culture they are seeking to either maintain or change.
Your members will also be looking closely at your ultimate choice as well.
There are several critical success factors to take into consideration. Are there any internal candidates at risk? You need stability in the senior management levels, especially with a new CEO. Ask the candidate what the first 100 days in the organization may look like. What how does the culture need to be changed or improved? Why would the candidate want to work for your organization?
Become familiar with what a SERP is and how it can be used as a retention tool to help the candidate while protecting your credit union.
Employment contracts are not really a necessity but be sure you have clear termination language in the offer letter in case the relationship does not work out.
Many search firms offer some type of candidate guarantee as part of their fee.
Remember, this is only an overview of what to expect. Once the journey begins to find the right CEO and you are successful, that will be the reward for the hard work ahead of you.
Michael F Petti is board chair at Nutmeg State FCU, Rocky Hill, Conn.
203-565-3357 or email@example.com