As the industry focuses on the operational requirements of the next few years, the next decade's strategic realities could be obscured as tried-and-true talent transitions out and, potentially AI-assisted, novice talent steps in to carry on the cause. Baby boomers are turning 65 at a clip of 10,000 a day and Gen Z will represent approximately 30% of our workforce by 2030, according to the U.S. Bureau of Labor Statistics. As institutional knowledge and wisdom voids are created, credit union leadership and governing bodies must recognize that yesterday's succession strategies will not appropriately address the reality that 32% of U.S. adults score below the baseline proficiency level in adaptive problem solving and that a growing number are "clustered at the bottom levels of proficiency," according to the Institute of Education Sciences. Succession must shift beyond a check-box regulatory exercise and be more broadly centered on securing long-term operational continuity for 2030 and beyond.
Succession philosophy and practice start at the top. There is an observable correlation between the rigors, or lack thereof, of succession planning within the governance bodies and the success of the CEO, executive team and mid-level talent ranks. When a board myopically focuses on the CEO position, there is also an increased chance board succession planning will not be addressed until the next CEO is in place. In turn, the legacy board that hires the CEO will be different from the board that ultimately manages and holds the CEO accountable over time. This puts the new CEO in an avoidable and challenging position. Similarly, succession and development might not be as much of a priority within the executive and management ranks, decreasing retention rates.
Alternatively, if an organization embraces succession planning as a strategic imperative, their long-term success, operational continuity and relevance become priorities. Strategic succession planning requires assessing the current portfolio of talent against future benchmarked needs, in all leadership and governance ranks, uncovering any blind spots, and revealing opportunities to both develop talent and advance the organization's objectives. The recommendation is to attend to the following three central tenets of strategic succession planning.
1. Regularly align and declare the future of the role.
As the organization becomes more complex and sophisticated, talent must also become sharper and gain new skills. Proactively declaring and framing how the majority of key roles within the organization will need to evolve for 2030 will galvanize and organize resources to prepare for such shifts before the "game speeds up on them." Whether it is the board, executive, or mid-level talent layer, the base-level of financial acumen present directly enables or inhibits the sophistication of strategic dialogue.
During a board development and succession planning event, a chair realized the unintended impact of their long-standing governance model, "Yesterday's $100k decision is today's $1M. We need to change our approach because tomorrow it'll be $10M." It's the board's responsibility to acquire and develop relevant "functional domain expertise" in the governance bodies. More plainly said, boards that are assessing the current representation of their technical proficiencies (e.g., artificial intelligence, enterprise risk management, cybersecurity and payments, to name a critical few) against the needs of the strategy are accelerating their succession plans. This allows them to ensure the oversight capabilities of tomorrow's board are more ready to provide proper guidance in the deployment of the members' precious resources.
The technical and leadership proficiencies of executive positions have never been more demanding. Executive leaders, especially outside of the CFO position, who understand the nuances of optimizing the balance sheet have a strategic leg up on others. Their decisions are likely more focused on long-term positioning versus short-term growth.
Within operations, pushing decisions down to the lowest possible ranks creates untold amounts of growth and accountability opportunities. When organizations espouse that they want to be more nimble and innovative, it is likely because too many decisions are bottle necked at the top. The best practice is to outline and frame who, how and where decisions and actions will be executed in the future. This creates a line of sight destination and path for development and accountability. It is important to remember that leaders want to be held accountable.
2. Invest in experiential learning and development programs.
The head of Learning and Development for a large organization once sincerely inquired, "Can you teach our VPs to be strategic in a one-day workshop?" Being strategic is not a task, it's a perspective. Shifting a team's orientation to strategically tackling emerging challenges isn't a blue pill exercise. To truly develop strategic leaders, they must have the opportunity to experience a rigorous and intensive program that will challenge them to unlearn habits, forge new skills, and experience the bounds of their potential by both losing and winning. The rewards and recognitions for these types of programs are not just wall-hanging certificates, they are the repeated demonstration of new behaviors that add strategic value to the organization.
For many boards, this may be as uncomfortable as it is stimulating. It is not unheard of for a director, during a board-development intensive workshop, to create an opportunity for an up and comer by stepping down. For most directors, these types of programs stimulate the most strategic conversations they have ever had; the linkage of strategic possibilities, governance framework and talent portfolio is very tangible, relevant and can be more exciting than looking at delinquencies.
For high-performing executive teams, the outcome is achieving hyper alignment on how and where they need to remove friction and increase execution and retention efforts. Inevitably, executive teams seek to achieve the same results deeper within the organization because keeping pace with a steady stream of evolving threats and opportunities cannot be accomplished solely through the top-down dissemination of organizational priorities.
The long-term strategic opportunity lies with developing mid-level talent to be the champions and protagonists of strategic change. Today, mid-level talent is expected to translate strategy into purposeful action. At times, their efforts are frictionful, misguided or narrowly impactful. The sanctioned development and execution of relevant-strategic projects that both further the organization's priorities and represent how they "stretched" their capabilities can bind leaders' career paths with the organization's future.
3. Demonstrate commitment and outcomes.
A harsh reality is that despite receiving the title of vice president, chief, CEO or chair, people are not magically imbued with extraordinary leadership capabilities and strategic competencies. An emerging leader program participant asked their C-level sponsor what that executive saw as growth potential for the manager, "To be more strategic." "Agreed. But what does that mean?" "... Uh, be more strategic." The emerging leader then wondered if the inarticulate response might actually have just revealed an under-developed strategic perspective.
One of the fastest ways to build successors within an organization, is the regular demonstration of development opportunities and advancement outcomes. Executive teams that are the benefactors of highly strategic board-level discussions are only encouraged to continue bringing their "A game." The outcome of an operationally inclined board encourages executives to present more tactical solutions and results. The same dynamic is present for CEOs that frenetically lead, their executives are more focused on spinning all the plates thrown at them versus strategically and dynamically allocating resources toward meaningful goals.
Absent a declared growth and succession path, it is harder to demonstrate the outcomes of learning. The encouragement here is for executives to invite emerging leaders into the strategic and critical thinking conversations. Let them observe how raw dialogue evolves into polished strategy. Invite them to then execute part of the charge. Then, be daring and ask for feedback. Encourage the development of their observation skills and solicit rich feedback on the executive team's alignment and strategic dialogue.
Retaining C-level executives through the CEO transition period is no longer just a wise move, it is table stakes. Progressive boards and CEOs are looking beyond that leadership layer and securing operational continuity by "putting their money where their mouth is" because as more of the next generation of leaders acquire leadership experience, their candidacies become more marketable. The organizational demonstration of commitment (i.e., deferred compensation) to the next generation of talent is a small investment that will engender loyalty to an organization that believes in their succession potential.
President Kennedy summarized it best: "The world is changing. The old era is ending. The old ways will not do … It would be easier to shrink from that frontier, to look to the safe mediocrity of the past ... but I believe the times demand invention, innovation, imagination, decision … It is a time for a new generation of leadership…to cope with new problems and new opportunities."
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