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Continuity: the Missing Ingredient in Most CEO Succession Plans

Friday, March 14, 2014   (0 Comments)
Posted by: Susan Dyer
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By Scott Albraccio

Too many CEO succession plans won’t ensure a good transition because they are actually one of two things:

  1. An emergency CEO replacement plan: Your CEO and/or board chooses a senior executive they’ll ask to step in if the CEO leaves suddenly. This person would be considered an interim CEO and may be given the job permanently—that will be decided when the time comes.
  2. A horse race: The current CEO identifies the most promising candidates to become the next CEO, and periodically updates the board on the candidates’ progress. If the candidates know they’re on such a list, it may spark a less-than-healthy competition.

Designating a specific person to take over on short notice is prudent. And identifying the best talent in your credit union is a good idea. But neither of these are a true succession plan. What’s missing is a consistent, continuous process of developing leaders. Give your succession plan a strong “leadership continuity” focus, and back it up with meaningful incentives that will help keep your best leaders from taking their talents elsewhere.

Four Keys to Leadership Continuity
Engage the board in the process. An effective business continuity strategy goes far beyond a general commitment to promote from within. It transforms CEO succession from an event into a continuous process. As this requires committing credit union resources, your board must buy into it. Also, the board is in a position to take some of the responsibility for mentoring the next CEO away from the current CEO. This may be necessary if the board foresees changes in your marketplace, technology, competition, etc., that will require your next CEO to have a different skill set than your current CEO.
Another role for the board is scenario planning. Taking educated guesses at circumstances under which a new CEO will be chosen can help guide your leadership continuity efforts.

Select a champion. Few volunteer boards have the expertise and resources to design and maintain a leadership continuity program. Your top human resources executive may be the best person to run the plan on a day-to-day basis, and to put the incentives in place. The senior HR person can also fill the role of objective interpreter: The board needs someone who’s on site daily and can report on the plan’s progress constructively, without politicizing the issues.

Create a hands-on cross-training program. Management development courses and training materials can help, but they can’t replace hands-on training in your credit union. Executives should cross-train in key departments. This not only helps groom them for promotion, it helps prepare your credit union for sudden disruptions that may require people to adapt and assume more responsibility quickly.
To the extent possible, offer cross-training and management development opportunities throughout your organization. A future CEO may be at a teller station right now—it’s never too early to begin encouraging your employees to learn and grow.

Establish incentives for top performers: As your leadership continuity program begins to bear fruit, don’t stand aside and let banks or other credit unions pluck that fruit. Strengthen your bond with top performers with incentives such as a supplemental executive benefit plan (SERP).

You can easily design SERPs not just for CEOs but for the top one, two, or three management tiers. And you can design SERPs so they return the credit union’s initial investment and won’t represent a net loss over time. Common SERP instruments include nonqualified 457(b) and 457(f) programs, and split-dollar life insurance programs.

These can be set up as “golden handcuffs” that reward executives only when they’ve achieved certain goals for your credit union over a set period of time.
 
Following these steps is a major commitment. But they can transform your credit union from a training ground for other organizations’ leaders into a place where top talent wants to stay and is ready to take the reins.
Scott Albraccio is the Sales Specialist Manager for Executive Benefits at CUNA Mutual Group. Contact him at (800) 356-2644, ext. 665.6542.

Proprietary insurance is underwritten by CMFG Life Insurance Company.  Proprietary and brokered insurance is sold by CUNA Mutual Insurance Agency, Inc., a wholly owned subsidiary.  This insurance is not a deposit and is not federally insured or guaranteed by your credit union.  For more information, contact your Executive Benefits Specialist at 800.356.2644.  CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates.