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SAN DIEGO – With an estimated 60% of credit union chief executive officers slated to retire in the next 10 years – 30% of them within the next three to five years – succession planning should be a priority for credit unions to ensure a smooth leadership transition, according to industry experts. “The turnover will create some major challenges that we haven’t seen in the marketplace,” said John Swensen, director of pensions and executive benefits for CUNA Mutual Group. Swensen, along with Gene Mandarino, management training director for HRValue Group, discussed the importance of succession planning during CUNA Mutual’s 2004 Discovery Conference here. The primary focus was on planned succession, not emergency succession caused by such things as a death or sudden unplanned departure. Mandarino noted that developing a planned succession plan is often neglected by credit union leaders. “They want to focus on the emergency, what would happen if we lost somebody for whatever reason,” he said. Swensen noted that the need for a good succession plan is mandated by the NCUA and state examiners. “The bottom line is the NCUA and the state examiners say it is (necessary),” he said. “They’re saying you need to have a good CEO succession plan because good employees may leave, die, they get sick just like in any other organization and they want to make sure there’s a good strategy in place because there’s going to be a lot of turnover. “The turnover is significant,” he added. Mandarino said that having a succession plan allows credit unions to identify leadership gaps that could create a risk. He urged audience members to think about what would happen if their CEO or other key management personnel were to suddenly leave the credit union. “Is there somebody capable of stepping in to take over,” he asked, noting that most CEO successors come from with the same institution. Because of that fact, he urged credit unions to help managers develop the skills needed to assume the top leadership role. He recommended officials create a “successor chart,” showing the various positions under the CEO and assigning “readiness codes” to each person. Those codes would show how quickly a person could step into a position of greater authority, whether it be the CEO’s slot or promotion into a vice president’s position. “Set and assign some kind of readiness for the people underneath the incumbent you’re trying to select successors for,” Mandarino advised. “It’s a tool to further clarify where the risk areas are. How ready are people. It’s illuminating.” Mandarino said that communicating with upper management – especially whether any of that staff was being considered for a top position – needed to be part of an overall succession plan. “You can communicate that you’re considering them as a possible successor but nothing is guaranteed,” he explained, adding that they should not be told where they rank on the readiness scale. However, he said staff members should be told on a one-to-one basis about their strengths and weaknesses. They also should be told that the credit union is willing to invest in them to develop their skills. “You need to talk to people about where they’re capable, what you see, what they want,” Mandarino added. “This (succession planning) forces that conversation.” Methods of assessing employee readiness can vary with the size of the credit union, he said. Smaller credit unions, he advised, do not have to do a rigorous assessment process. “You can sit down and have dinner and talk about it. When is this person going to be ready, are they ready, what do we need to do to make them ready,” he said. The situation, however, is different for larger credit unions. “As credit unions get bigger and more complex and there are more internal successors, the level of rigor used to assess potential successors becomes higher,” he noted. “And there are all kinds of tools that we can use to do it,” such as performance appraisals and tests which measure learning abilities and behavioral skills. Swensen also discussed retention plans designed to keep key executives at the credit union. -

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