Make Succession Planning a Board Priority

One-quarter of CUs still need a formal CEO succession plan.

September 8, 2010

Attorney Karen Saul says boards must make it "crystal clear" that a CEO succession plan is a top priority. In an interview with, Saul explains boards' succession planning responsibilities and best practices.

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Q. CUNA's 2010-2011 Complete Credit Union Staff Salary Survey Report shows 58% of CUs have a CEO succession plan, 16% plan to by year's end, but 25% don't have one at all. What are the consequences of not having a succession plan in place?

A. The consequences are myriad and not pretty. A credit union with a leadership vacuum cannot deliver products and services as effectively or efficiently as necessary in today's competitive market. Remaining key executives may leave if they perceive the credit union is losing direction or market share, or if they become embroiled in a poorly designed contest to fill the leadership void. Morale degrades when leadership falters.

Board members find themselves inundated with the responsibility of finding new leadership on an emergency basis (the word "volunteer" has a hollow ring at these times) and credit unions often make poor choices with long-term consequences under these pressures. Succession planning can offer a great opportunity to shape the future and foster leadership, so the lack of planning squanders this prospect.

Q. What are the board's roles and responsibilities when it comes to succession planning?  

A. The board has the "general direction and control of the affairs of the credit union" under the Federal Credit Union Act (see 12 U.S.C. Section 1761b). State acts have similar provisions. The board is charged with doing "all things necessary and proper to carry out the purposes and powers" of the credit union. This includes hiring and overseeing the CEO and setting policies to ensure smooth operations even during management transition.

Succession planning requires collaboration between the board and the paid management team. It also requires strategic planning and forecasting so that management needs are anticipated, leaders are groomed and mentored, and the right tools are in place to encourage the retention and attraction of talent (e.g., employment contracts, deferred compensation plans, etc.). The board must make it crystal clear that succession planning is a high priority item and ensure it happens. 

Q. What are succession plan best practices CUs should consider?

A. Examine the succession plan as part of the CEO's annual performance review and during each annual planning retreat. Use succession planning to increase diversity within management ranks with many attendant benefits (including compliance with equal protection and affirmative action laws). Boards must identify the talent needed to reach the credit union's full potential (e.g., a strategic plan). They also must have:

  • A recruiting plan ready for internal and external candidates;
  • Basic employment law training to avoid making mistakes during the interview and background check processes;
  • A sense of how much time it will take to fill the leadership role; and
  • A plan for interim leadership during that time.

In short, a credit union succession plan must cover forecasted departures (retirement being the most common), as well as emergency departures created by death, illness, or involuntary termination based on misconduct, for example.

Q. What should CUs with succession plans do to ensure they stay current and meaningful?  

A. Review the succession plan and update it at least annually with input from the CEO and other managers in the organization. Attend seminars offered on the subject. Consider whether it would be useful to have the plan reviewed externally by a qualified consultant. Stay abreast of industry trends and consider how they affect your succession planning. Remember that a great strategic plan is meaningless without the talent to execute it.

Q. Additional advice for CUs and their boards?

A. Computer science pioneer Alan Kay said, "The best way to predict the future is to invent it." Succession planning is not theoretical. It's a crucial step in fulfilling the board's responsibility to maintain the general direction and control of the affairs of the credit union. When it's considered as an opportunity to invent the future, it becomes a lot more exciting.

KAREN SAUL is of counsel at Farleigh Wada Witt, Portland, Ore. Her practice focuses on employment law.