AN EXCERPT FROM THE BOARD GOVERNANCE INFOSIGHT CHANNEL
There’s no such thing as an overnight success. The average “overnight success” is years in the making and takes considerable planning, likewise with credit unions. Credit unions that fail to plan for their future strategic and operational success plan to fail. The safety and soundness of credit unions greatly depends upon maintaining healthy continuity of leadership, and credit union board members should make the development of future leadership a key priority. The loss of a CEO or other high-level leader can disrupt the normal functioning of the credit union, thereby resulting in at least a temporary loss of direction, productivity, and effectiveness. Yet, while 50% of credit union CEOs will be eligible for retirement in the next 15 years, only half of credit unions with a CEO nearing retirement have formal succession plans in place, according to CUNA. Succession plans provide for an acceptable transition in the event of loss of the CEO, key management, or employees. By planning ahead to manage turnover at the top, credit unions ensure they have the leadership they need to successfully address the challenges of both emergency and planned CEO, board, and key staff vacancies.
An effective succession plan not only helps to keep critical operations going by maintaining stability and minimizing disruption during a leadership change, it is also a vital tool that will enable the credit union to anticipate future position needs, identify leadership gaps that could pose a risk, and improve professional development. Succession plans also satisfy regulators’ demands for detailed and documented succession policies and procedures.
The Role of the Board of Directors
It is the duty of the board to look ahead to establish the strategic and operational direction of the credit union. Succession planning is the architectural blueprint that the credit union will use to construct the future it has created. Boards play a critical role in succession planning by ensuring that the credit union will be able to continue to serve its members effectively even if key staff or directors are unable to continue in their position. An integral part of management succession plans involves cross training both management and staff to ensure necessary backup for vacant positions. The board should have in place a succession plan that addresses the steps necessary for finding a new CEO, board members, or key personnel in the event of termination, retirement, resignation, or other event.
While a board may charge a committee or board member with overseeing the groundwork and individual directors maybe more involved in specific parts of the process, the full board should be involved in CEO succession planning. The entire process should not be delegated to a committee.
Donya Parrish is the VP-Risk Management for Montana’s Credit Unions. She welcomes questions or comments on this material. You can email or call her (406-324-7374).