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Boards and executives are recognizing now, more than ever, the corporate performance ‘premium’ associated with having the right leadership in place — particularly at the top spot. Customers and their needs are changing. Digitization is influencing most industries. Collectively these influences have increased the complexity of the business environment and are driving the imperative for strong leadership. Effective succession planning, therefore, has become one of the most top-of-mind and discussed issues among corporate boards and executive teams across industry sectors in Canada.
The leadership premium is no less true for credit unions, as is the requirement for a sound approach to leader succession. British Columbia’s Central 1 Credit Union’s 2015 study Leadership Transitions estimated that between 9 and 25 per cent of all chief executives and general managers across Canada have planned retirements for 2017, with another 13 per cent planned for 2018.
So the pressure for credit union boards to have a well-thought-out plan for CEO succession is immense. When you consider statistics across all industries estimate one third to half of new CEOs fail in the first 18 months, the process of picking the right person and helping them settle in becomes even more important. Having a plan to do this is good; having the right plan is even more important.
A Plan is Just the Beginning
A sound approach to succession has a number of important components and includes the transition process that helps the new CEO be successful. The transition part of the process should help new CEOs effectively navigate some of the political and other challenges that may impede their progress.
An effective succession process and plan should clarify everyone’s roles in the process. While the credit union’s board is clearly responsible for CEO succession, a number of other stakeholders must also play an important role in the process.
Whether the candidate is being recruited from external or internal sources, the CEO has a number of responsibilities in succession planning. Along with the board, he or she needs to help identify the capabilities most relevant for the business moving forward and translate these into the requirements for his or her successor. In that regard, succession must be viewed, not as about the CEO, but more as being about the organization.
In a recent Harvard Business Review article, (December 2016), Ram Charan writes this shouldn’t be a laundry list of capabilities, but rather should include two or three key capabilities that will be integral for the business moving forward. These capabilities must be clearly linked to the strategy of the business.
For credit unions, this likely means an increasing emphasis on digitization and digital banking, specifically. As well, it means the agility to work within a fast changing sector, driven by increasingly diverse membership and shaped by the increased pace of consolidation. However, the capabilities for any given credit union need to be specific to that organization.
The CEO’s role can also involve helping to develop an internal candidate, which can lead to challenges itself – if not effectively executed. Once the board has selected an internal candidate, the CEO can work with him or her, coaching them on how he or she made decisions on key issues, how certain aspects of the business work, on team dynamics, etc.
The human resources (HR) leader also plays an important role in getting the process right. Their role typically starts with having a clear picture of workforce needs and a talent strategy aligned to those needs. The talent strategy should have as an essential element the establishment of strategies and plans for developing staff and management.
Once a new leader is in the door, the HR leader can assist them by becoming a key counsel for people and culture-related issues. This means helping the new leader understand and navigate team politics and dynamics, understand who the other executives are and provide feedback on how the new leader’s messages are being received within the organization.
All of this is not to ignore the central role of the board, which has principal responsibility for the selection of the new CEO. As well, the board must also continue to support the new candidate, including creating clear expectations for communicating with the board, and checking in with the new CEO in the early days.
Succession Success: It’s Important for all Executives
CEOs are not the only members of the executive suite / management team of credit unions who need to plan for transitions. Successful selection and transition of other members of the executive team will be an increasingly important trend for credit unions to address. The CEO succession may create a sort of domino effect for succession in other parts of the executive team and in the executive team’s direct reports, when the chosen successor is one of the CEOs direct reports. Having planned approaches similar to those described for CEO succession for other executives and managers will be an important part of the overall talent strategy for the credit union.
Succession: A Talent Challenge for Credit Unions of All Sizes
Whether a credit union is large or small, succession can still be an issue. And getting it right is equally important, whether you have 20 employees or 1,000 employees. Matching the needed capabilities for your credit union will still be a key factor in determining the kind of leader required to meet the needs of the new business. Supporting a new leader in their transition will also be important – regardless of the size of the credit union.
How the potential leadership gap is addressed may differ, depending on the size of the organization. In some instances, a merger might be considered an option to address the leadership needs of a smaller credit union. The options for addressing a leadership need will be influenced by a myriad of factors including location, size of the institution, the availability of internal talent and the availability of local external talent.
In a sector where changes in business models and structures, consolidation and the role of digitization are all reshaping the needs and requirements of leadership, one thing is certain: the credit union sector is not immune to the demographic trends the majority of industries are subject to. As such, the need to ensure a thoughtful approach, tailored to the needs of each credit union, exists to address the inevitable need for new leaders and the transition of old leaders.
To learn more about credit union talent and succession issues, please contact Kathy Parker at [email protected] or 416.263.7074.
Related Topics:Succession Series
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