Plan Now for the Next CEO

Seventy percent of CUs don't have a formal succession plan specifying a replacement from within the CU for their CEO.

TALENT POOLS FOR ALL positions, including credit union executives, will shrink dramatically within the next 10 years.

In 2010, baby boomers will make up almost two-thirds of the American work force. In 2011, they'll begin retiring in droves, and most will be retired within the following two decades.

Nearly one-quarter of all credit union executives are expected to retire in the next five years, says the 2004 Complete Credit Union Staff Salary Survey, published by the Credit Union National Association.1

Yet only about three of 10 credit unions have formal succession plans specifying a replacement from within the credit union when the CEO or manager leaves the position. Does this sound like seven of 10 trains on their way to a wreck?

Not necessarily, but it's a potentially serious situation, says Mark Brennan, president/CEO of Clearview Federal Credit Union, Moon Township, Pa., with $607 million in assets.

"I'm hoping that number-70% with no succession plans-will revise downward," Brennan says. "All credit unions must recognize they may need to find a new CEO someday, sooner than they might have thought. If they're unprepared, confusion can result. And the last thing you want is uncertainty among staff, because they're the people the members see every day."

Why do so many credit unions neglect succession planning? Brennan speculates that when boards of directors complete the difficult task of selecting a CEO, they want to assume they won't have to do it again soon.

Say what you want about die obvious future benefits of succession planning-that operations will continue uninterrupted and members won't lose confidence. Most management teams are too busy handling the increasing challenges of daily operations and competitive pressure. Succession planning simply takes a backseat.

The immediate payoff

Maybe if succession planning is seen as useful for meeting today's challenges and for serving future needs, it will get more attention from managers and directors. That certainly has proved true at Clearview Federal. Brennan reports that succession planning yielded immediate benefits because it was linked to leadership development.

When planning for retirement, Clearview Federal's previous CEO instituted a leadership development program in 2002 with the help of an outside consultant. It involved 360-degree assessments for all vice presidents, based on feedback from peers, direct reports, and manager. With the assessments and a mentoring component, the leadership program clarified possible career paths for these executives.

"When the CEO retired in fall 2004, several management folks had benefited from this program," Brennan says. "We all had an opportunity to be considered for the CEO job."

Clearview Federal since has extended its leadership development program to assistant vice presidents. As a result, managers are more likely to stay on, knowing they have opportunities. And Clearview Federal's 70,000 members saw a seamless transition when Brennan took over as CEO.

Gina Prince, president/CEO of Coastal Community and Teachers Credit Union, Corpus Christi, Texas, agrees about the importance of succession planning. Being smaller than Clearview Federal, with 29,000 members and $147 million in assets, Coastal Community and Teachers may have had less time and fewer resources for planning.

The former president announced his retirement in March 2004 and left four months later, after 20 years in that position. His longevity had created some inertia at the credit union, says Prince, and succession planning didn't become important until the end of his long career. The main problem with not having a plan, she observes, was the ripple effect of the president's leaving.

"You have to consider how a CEO's retirement will affect other areas. Promoting from within is good, but then you have to fill other positions," she maintains.

Prince had to fulfill some duties of her previous position after she was promoted. Had Coastal Community and Teachers taken more time for even a simple plan, she suggests, it could have filled vacancies systematically and avoided double-duty from anyone.

Succession planning needn't be complex, says Andrew Hunter, president/CEO of Patelco Credit Union, San Francisco, with $3.5 billion in assets and 205,000 members. Succession planning at Patelco is encompassed within the CEO's goals, one of which is to develop all six senior vice presidents to take over in the CEO's absence.

"Generally, we want all senior vice presidents to be capable of taking over, even though none of them is designated to do so within a formal succession plan."

The vital elements

It may be reassuring to busy executives to hear succession planning can be relatively simple. But some critical elements bear keeping in mind.

First, says Hunter, make sure the plan includes all key positions, not just the CEO, so no position is vacant for long. The entire management team should be in on the planning.

Prince agrees planning should involve input from all managers concerning how any team vacancy will affect their department.

Second, Brennan notes, get an assessment of each potential executive, using feedback from colleagues on all sides. Brennan believes Clearview Federal's use of an outside leadership consultant was important for getting complete and useful assessments. People believed they were giving feedback anonymously, and the evaluations likely were more honest.

Third, get the buy-in of the board of directors, Brennan says. Boards often drive the planning process. When they don't, the plan won't be effective, he adds.

Fourth, plan for emergencies. Clearview Federal added an executive vice president. All vice presidents report through the executive vice president, who is set to lead the team in the CEO's absence.

Perhaps the most important factor is a leadership development component. For all three CEOs, developing management skills within the credit union either was or would have been immensely helpful for making a smooth transition through a change in leadership.

"All people who are or might be executives should get educated about all aspects of managing the credit union," says Hunter.

For Patelco managers, this means mentoring, frequent interactions with directors, and seminars within-and outside-their areas of expertise.

At Clearview Federal, Brennan is committed to provide tools and opportunities for improvement for all executives and managers.

"Providing career paths is critical," Brennan insists. "It gives good managers reason to stay, and it helps everyone make a smooth transition through any time of change."

1 Visit buy.cuna.org, Stock No. 25732.

Copyright Credit Union National Association, Inc. Jun 2005
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