According to AARP, approximately 8,000 Baby Boomers are reaching retirement age (65) every day in the United States. Look around at your bank’s leadership and ask yourself – how many of them will be getting there shortly? Depending on your answer, you might also ask – how solid is your succession planning? If you’re wondering about this, you’re not alone. The 2018 Bank Director Survey showed more than 62 percent of banks say succession planning is either a Top 3 challenge, or they’re dissatisfied with it.
Those numbers are a little bleak and could signal a crisis in leadership if steps aren’t taken to correct it.
The fact is, succession planning is a touchy issue – a bit like talking to your spouse about getting a life insurance policy or your children wondering about what’s in your will. With some community banks that are family owned, the issue gets sticky as family members are in play.
Even if the bank isn’t family owned, there’s still the question of age, and few people leading banks (or any other organization) for decades like to think about the day they get “put out to pasture.” Many are offended that it’s even getting brought up. But a plan in place now can prevent a hasty scramble in the future. Your bank, and your customers, depend on it.
Here are a few things to think about:
The depth of your talent pool
What does your pipeline look like in terms of talent? Do you have a deep bench? If you’ve got a rich pool of experienced people, it’s time to start investing in them to get them ready to take over. If your pool is a little shallow, it’s time to start the search process to bolster those ranks while your CEO is still in place.
The top brass’ institutional knowledge
One of the pieces that is often missing from succession planning is institutional knowledge. You can have an ocean-deep pool of talent, but they still won’t know everything the CEO knows if he or she has been with the bank for decades. What the top people have learned, the experience and knowledge they’ve absorbed over the passage of time, is an invaluable piece of making any business, not just banks, successful. When they walk out of the door for the last time, if they haven’t passed that knowledge on, they take it with them. That’s why some industries appoint a successor a year or more before the CEO is ready to retire – not to make the CEO a lame duck, but to have the successor work alongside the retiring lion, gleaning all of the knowledge he or she can. It sets your bank up for a seamless transition.
It’s not just about succession
When the old guard retires, it can be a time to breathe new life into the bank. Now, with the disruption from Fintech changing everything, it’s more important than ever to gain fresh insights and ideas.
Think about long-term goals
Where do you want to see your bank in the next decade? Say one of your goals is to increase in size; you may want to look outside your bank for a successor who has experience working in larger banks.
Do you have an emergency plan?
Say you haven’t had a successor in place for a year or even a few months and you need one ASAP if your exec unexpectedly leaves the bank. It’s vital to have a short-term succession plan – someone at least to take the helm in the interim.
It may be uncomfortable to talk about succession planning, but savvy execs know that a strong, solid succession plan will ensure your bank’s future.