EW Business Partners CEO Sandra Dickerson authored this article for the November issue of the Western Independent Banker’s HR & Training Digest:
Expanding your View of Succession Planning
Succession planning is an essential board function and one regulators and stakeholders consider a priority. The financial industry has been challenged in recent years by a seemingly endless number of crises that have diverted time and attention away from this critically important area. Institutions face many risks when succession planning is either ignored or given only perfunctory attention including financial losses, critical talent exodus or takeover vulnerability.
As the industry emerges from relentless crisis mode to a more settled, albeit still challenging environment, it is an opportune moment to move succession planning to its appropriate place in the Board’s oversight agenda. The banking environment has been forever changed by recent events so it may also be the perfect opportunity to move away from the traditional succession management process to a more comprehensive and innovative talent development model.
Traditional succession planning focuses primarily if not exclusively on the CEO. Often the current CEO drives the process or anoints an heir apparent with little or no Board input other than a perfunctory approval. In that scenario the Board may lose the opportunity to determine the kinds of future innovative and organizational needs the organization may have in order for the new CEO to forge a new direction. The other common scenario in traditional succession models is a Board that fails to fully assess internal organizational talent, assuming the only qualified candidates must come from outside. The outsider only approach can be expensive and may result in a more difficult transition. Assessing skills and prior success is fairly simple, but assessing cultural fit can be a tricky endeavor.
Succession planning is too critical a Board responsibility and the consequences of a poor selection too risky to rely on anything less than a comprehensive succession model that encompasses the broadest possible range of options and opportunities.
The talent development model of succession planning considers the whole organization and takes a broader view of succession planning beyond just the CEO replacement. This model builds, maintains and continuously evaluates an internal and external talent pipeline and creates a transition strategy that will address either emergency or normal course of business successions.
So how does a board begin implementing a talent development model for succession planning? The first and most essential step is a commitment by the board and the current CEO and recognition that they will be engaging in a process that involves emotions, egos, politics and “peeling the onion” …a process that will also require resources (both time and money). Success can only be achieved if they align the business strategy with the “best fit” opportunity for future leadership. The process requires defining the current and future needs of the organization and determining the skills, aptitudes and personality traits essential to filling the key leadership positions within the organization.
Once the Board defines and understands the current and future needs of the organization, they begin the next step which forms the foundation of this process: that of assessing the organization’s current talent. Small banks may have an easily identifiable group of leadership candidates. Larger institutions should look not only at the obvious top tier but also reach deeper into the organization. Existing talent should be fully assessed for training and development needs. The Board and CEO can utilize this information as the basis for creating and implementing a talent development program. Effective talent development programs require resources of time and money.
One component of these should be properly administered assessment tools. These will help identify those employees most likely to succeed, and training can be customized by employee. Training and assessment budgets are often first on the budget chopping block but such a shortsighted approach will leave the organization without essential talent at critical moments.
Identifying outside talent is more challenging but can be accomplished through creating and maintaining networking channels. The CEO and Board members all play a role in the process and outside talent should be incorporated into the succession strategy.
Using a talent development model will provide a stronger candidate pool and improve overall organizational health and morale. A reputation for providing strong career development is an outstanding recruiting tool to attract the best possible candidates. Employees who are encouraged in their career development path and provided the tools and resources they need to grow are far less likely to seek opportunities with your competitors. The implementation of a talent development approach to succession planning takes much of the uncertainty and guesswork out of the succession process but it has the added benefit of building a stronger organization from which to choose the next leadership team or to attract the right outsider if that is determined to be the best course of action.