With retirements looming for many executives, it’s important for banks to have succession plans in place to ensure successful transitions. Succession planning shouldn’t just be the responsibility of the outgoing executive or the HR department, but should be spearheaded by the Board of Directors. Even then, the board’s role in the process isn’t simply choosing the new CEO (or other executive). But rather, creating the succession plan and overseeing its succession execution.
Creating a succession plan
- Succession plans should be in writing, so that they can be communicated clearly and concisely to others, both within the organization and to those outside, such as regulators.
- There should also be plans for different kinds of succession, such as those that are unexpected (death or resignation) or expected (retirement.)
- The plans should establish timelines, identify specific recruitment sources, and even have suggestions for interim replacements, especially for emergency replacement situations.
Executing a succession plan
- The plan should address the transfer of knowledge that will occur in the event of a retirement. Will the replacement work under the outgoing executive for some time to learn the ropes, both in terms of the culture and practices, before taking over?
- During the transition period, the board should work with the outgoing and incoming executives to coordinate organizational changes.
A succession plan for the Board of Directors
Finally, there's the matter of having succession plans for directors. A succession plan for the Board of Directors should establish, in broad terms, where the pools of candidates should come from.
- Should they be member of the local community or can they come from other cities or even states?
- Can they be investors? Customers? Should they be former executives?
- In what industries should they have worked?
- As the directors are to set the overall strategy for the bank, it may be important to ensure that they represent a diversity of backgrounds in terms of age, sex, or ethnicity, in order to address the overall market.
A proper succession plan can be difficult to create and even more difficult to execute. However, it’s important to ensure smooth transitions and continuity of the business.