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 grey 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
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 losses 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 be
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 board's
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.
Copyright DDJ Myers, Ltd. 2007
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.
Editor's Note
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