Does Second Place Count?
Board Responsibilities for Succession Planning
By Deedee Myers
There is no second 'First Place." Once the baton is dropped
in the leadership race . . . your credit union is at risk.
The Purpose of your credit union is to Serve Your Members.
Strategic Succession Planning is a critical step to serving
that Purpose and mitigating unnecessary risk. If for any
reason your CEO departs and you have not identified or
groomed a "step in" or "drop in" candidate, your members are
not being served. You have not adequately mitigated risk.
This is not a gray area but very black and white.
There are many reasons why a CEO may no longer be available
for work. Regardless of the reason; the board has a
responsibility to have potential successors ready to serve.
A strategic succession plan covers all the bases for CEO
departure for any reason:
- Incapacitating illness
- Sudden demise
- Surprise departure
- Under performing
- Normal retirement
- Organization restructure
Succession Planning is a process to ensure that the right
people are in the right places at the right time. It is not
a 'Drive By' event that leaves leadership to chance and
risks the purpose of the credit union. The board of
directors is responsible for hiring the CEO and,
consequently, that future potential successors are
identified and available when needed. The CEO is
responsible for the development of potential successors.
Ensuring proper succession to the CEO desk is a
responsibility with an outcome that materially impacts the
members, employees, community and the future of the credit
union. It should be taken seriously as it is could be the
most important decision the board will make. This article
describes a systematic process for the board to ensure that
the right people are ready at the right time so they can be
in the right place.
One Page Interim Plan- A Warm Up
Replacement Planning is different than Succession Planning.
Replacement Planning is what most organizations do in a
reactive state. It is mitigating, reducing the negative
outcomes of catastrophic effects from the unplanned loses of
key personnel.
Without a replacement (interim) plan, your credit union
loses, overnight, the ability to effectively compete in its
marketplace. Think of it as a race. It is impossible to
cross the finish line, at a reasonable pace, without
training and without viable race participants. It's like
having a party and you forgot to send out the invitations.
A good place to start is to develop an Interim Replacement
Plan. If the board does not have a Succession Plan they need
to develop an interim plan that addresses who will step into
the role of the CEO in the case of a sudden demise, an
unexpected departure or an incapacitating illness. This is
an interim step that would help allay issues that might
arise from an unplanned catastrophic event. Once the Interim
Succession Plan is completed, the board will need to start
addressing a structured approach to ensure that the CEO
position has worthy successors.
Here are guidelines for what information should be included
in an Interim Plan:
- The first step is to communicate the information about
change in status of the CEO. Be sure to include contact
information of internal and external constituents who need
to know and react accordingly to the status change.
- Next, create a list of potential candidates selected from
current employees, external consultants, or in the rare
case, an existing or retired board member if they possess
the required expertise. Summarize your current
understanding of the strengths and weaknesses of the
potential interim successors. Create an understanding of
how to provide the selected successor with required support
to be successful in the interim.
- Include a list of search consultants who should be called
upon to provide an effective search. Ideally, these
consultants should be interviewed by the board prior to the
need for their service. The board should be familiar with
how the search consultant works their process for
identifying and recruiting top talent, the extent of their
network and a fee structure. Decide if you want to hire a
search firm that exclusively handles the credit union market
or if you are open to a search firm that specializes in
financial organizations. Do the ground work in advance so,
with a telephone call, your search consultant is ready to
provide a service without delay.
The Interim Plan is brief and, in most cases, a single page.
Again, this plan is temporarily suited for organizations
that do not have a Strategic Succession Plan and are in the
process of developing one in a systematic process. It does
not replace the necessary robust and strategic succession
plan that mitigates potential risks in leadership gaps.
Board Checklist
Creating an effective Strategic Succession Plan is not a one
time event. It requires effort and contribution from the
entire board and the necessity to ask the right questions
and the tough questions. This is serious work with an
outcome that helps move the credit union forward in many
ways not previously explored or ventured.
Here is a checklist for the Board to use in their commitment
to ensuring that the right people are in the right places at
the right time for the CEO job.
- The board will assume responsibility for developing
a CEO Succession Plan, complete with competencies, and
assign a core group of board members with the responsibility
to guide the process.
- The board should insist on 'ready now' or 'drop in'
candidates who are trained for the CEO role.
- The board of every credit union should have an
understanding, at all times, of who are the potential
successors and their competency development issues.
Understand how each individual would perform in certain
circumstances. Minimize surprises that can put the credit
union at risk.
- Assuming that the CEO does not have imminent plans
for retirement or departure from the credit union, he/she
should be requested to present an annual evaluation of
potential internal and external candidates to the board.
- If the CEO is to retire within two years, every
board meeting should include a serious succession
discussion. The board should understand what the CEO is
doing to ensure a smooth transition.
- The board should consider an economic incentive for
the current CEO to motivate their progress in succession
development of potential internal candidates. This can be
one of the measurements included in a performance review
metric.
- The board will update the CEO position description
as part of the annual strategic planning session.
The Starting Point is the Most Important Place
There are two types of competencies when deciding what type
of person is needed in a particular job. The first type is
what we call Technical Knowledge and Job Skills, or what are
commonly called Hard Skills. The second competency type is
Performance Skills, or Soft Skills. Deciding what the CEO
job needs to effectively lead is the responsibility of the
Board; not the current CEO.
The starting point for these decisions is in your strategic
plan. Pretend it is five years in the future, the year
2008. What will your credit union look like? Who will it
serve? How will it serve? What products and services will
it offer?
A word of caution . . . pretend that there is no one in the
CEO job now and that the job can talk. If the job could
talk, "What would it say?" This is the most effective way
to move forward. This is the most effective way to move
forward. If your CEO is retiring, she can provide input but
should not be used as an example of what is needed five
years in the future. Think of it like this - if your CEO
plans on staying for another 15 years, she will need to
develop, update and strengthen her competencies in order to
be the best CEO of your credit union over the next 15 years.
The waves keep coming and the sails need to be adjusted
accordingly.
The next important step is to understand "What decisions
will the CEO make?" Typically, there are three decisions
the CEO should make:
- What businesses should we be in?
- Who will lead the business units?
- How will resources be allocated?
Using these three decisions as a framework is the starting
place for developing a list of competencies for the CEO
position. What Hard skills are required to make these
decisions? What Hard Skills are required to use knowledge
effectively? Individuals typically develop their hard
skills in a formal education setting and on the job. Often,
they are not transferable across industry lines. Soft
skills include communication, work habits, style and
teamwork. They are transferable across industry lines and
products and services.
Hard Skills
Be specific in articulating your requirements. For example,
if a college degree is required, name the disciplines that
are acceptable. If prior management expertise is necessary,
define the scope and depth of that experience. Constantly
refer to your strategic initiatives and the future of the
credit union to develop leadership competencies that will
meet the requirements of your strategic plan.
Soft Skills
Articulating the soft skills is difficult but rewarding. To
be effective in defining these competencies you will need to
behaviorialize your statements. Behavioralizing a statement
means that you convert a phrase like 'effective verbal
communication' to 'clear articulate speech' or 'skilled at
influencing others.' A behavior is an action that you can
observe, describe and verify. Members of your board need to
agree on what behavior is acceptable. To be acceptable, the
behavior needs to be observed, described and verified by two
or more people. For example, what does it really mean when
someone manages conflict? Do they hand out candy bars to
stop the fighting? Do they reduce the performance incentive
payout? Or, are they able to express opinions directly and
clearly without abuse or manipulation? Does she listen to
opinions and feelings of others and demonstrates
understanding by restatement? Does he communicate
disagreement to persons in authority as necessary; asks for
negative feedback in order to learn?
External Resources: When to Use Them and Where are They?
In creating a robust Succession Plan for the first time may
require the guidance of a trained professional with
expertise in team coaching, facilitation, competency
development in a financial organization and, preferably, a
discipline in People Development and Succession Planning.
Along the path to your desired outcome you may encounter
boulders and obstacles that need to ignored, traversed or
destroyed. Some issues, intentionally or unintentionally
arise, involve diversity and dominance. If left to an
unstructured process most succession plans will result in a
"CEO look alike." Human nature naturally is comfortable
with someone that looks and acts just like the current CEO
especially if he is popular with most of the board. A
systematic and structured process will ensure that the right
questions are asked that lead to a purposeful and informed
decision: What skills, knowledge and personal competencies
are needed to live our strategic plan? Another reason to
use a facilitator is to structure a domain where all board
members are heard equally instead of one or two board
members dominating the process.
Your Succession Planning Facilitator should have access to
web enabled tools to structure competencies and to build a
Succession Plan that can be tracked and updated. Using a
template designed for succession planning both eases and
empowers the process. Your requirements are fed into the
system along with assessments of potential successors. A
Gap Report is automatically created and a structure for
building an individual development plan for each potential
successor is easily updated and viewed.
Summary
Creating a robust and fail safe Succession Plan requires a
structured and systematic process. It is the boards'
responsibility to decide what competencies are required to
meet present and future needs of the credit union. Use the
strategic plan as a beacon for developing a list of
competencies, both hard and measurable skills and soft,
personal mastery skills. Competencies need to be defined so
there is no misunderstanding of how to measure performance
of that competency. A Succession Plan needs to be updated
every time there is an update in the strategic plan. The CEO
Position description needs to be reviewed and updated on an
annual basis. A written position description should include
measurable work habits and personal skills required to
achieve a work objective.
Using a qualified facilitator for your first time through a
systematic process will provide a foundation for moving
forward and updating your Succession Plan every year. There
are certified coaches with specific disciplines in
Succession Planning and on-line templates to document and
create performance yardsticks for competencies. This is
deep and serious work that will strengthen the
organizational competencies and capabilities. As a member
of a board that creates a Robust Succession Plan you will be
adding value that will positively impact your credit union
for years to come. . . . the baton will be passed in the
Leadership race.
Deedee Myers
DDJ Myers, Ltd.
Phoenix, AZ
ddjmyers.com
About the Author
Deedee Myers is a certified executive and leadership coach with 16 years expertise in recruiting and competency development for financial firms. She founded DDJ Myers, Ltd. and the Advancing Leadership Institute to work with boards, executives, managers and supervisors to develop leadership cultures.
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