Succession Planning: The Urgency Builds

As baby boomers begin to retire, CUs will see turnover at all levels.

September 1, 2012

Plan for lots of new faces during the next two decades. Approximately 10,000 baby boomers will turn 65 every day for the next 18 years, reports the Pew Research Center.

While decimated retirement funds and economic uncertainty are keeping many boomers in the workforce longer, eventually they’ll retire. And this will affect all levels of the credit union, not just the CEO.

Plan for emergencies

One example is Vikki Kaiser, president/CEO of $550 million asset Great Lakes Credit Union, North Chicago, Ill., who’s within five years of retirement. “There are a number of employees in the same age group,” she says. “Some will work beyond age 65, but in the next five years I think we’ll have double the number of retirements we normally do.”

She’s not worried, though. “We’ll follow our succession plan and it will play out normally. We know who’s interested in promoting up and waiting for people to retire.”

Staff will continue to train and prepare to replace retirees, she says. “We prefer to promote from within, but it’s not always possible.

“We periodically ask staff if they’re interested in promoting up, and we work with those individuals,” says Kaiser. “It’s possible for tellers and financial services representatives to rise through the ranks to become managers, and we expect managers to work with staff to do that.”

To help educate employees, the credit union closes early on Wednesdays for all-staff training sessions. And supervisors mentor employees on an ongoing basis, including time spent in different departments.

“We think it’s really important for lenders to understand what collections staff do, and why it’s important to get comprehensive information from applicants in case a loan goes into collections,” Kaiser explains. “We also like to send people to our call center to answer phones.”

Senior leaders mentor managers who want to be executives. And at the top level, two executives are interested in succeeding Kaiser. “After they told me they were interested, I looked at their skills and experience to determine what we needed to do to ensure it’s a possibility,” she says.

“I had one of them take over operations for a time to learn those areas, and then lending and other departments,” she continues. “We meet regularly one on one, and I help them get well-rounded industry knowledge. I assign various projects they can learn from, and I sent one to executive management training.”

Part of the credit union’s written succession plan allows its board to also look outside for candidates. “It includes the qualifications—education, knowledge, experience—for a CEO, and identifies recruiting firms the board can use,” says Kaiser.

The written plan is critical, she stresses—including how to deal with emergencies such as a CEO death or termination. “The board needs to know what you’re looking for, who would step in as interim CEO, who is potentially qualified, and what recruiting firms to use.”

NEXT: Groom for succession

Groom for succession

When he became president/CEO of Pioneer West Virginia (Charleston) Federal Credit Union, two years ago, Dana Rawlings committed to developing a succession plan.

At his departure, he didn’t want the board chair to have to run the credit union. “That can tend to stall forward momentum while you get a new CEO on board,” he says.

Rawlings plans to retire in about three years and is grooming an executive to succeed him. The $142 million asset credit union has several other employees approaching retirement, but they aren’t in the most critical roles.

“All of our executives are in their 30s and 40s, and that’s by design,” Rawlings says. “Through a combination of retirements, reorganizations and growth, we had an opportunity to hire talented, younger employees.”

After becoming CEO, he talked with all managers and vice presidents one on one, and asked, “What’s your dream job five or 10 years from now?”

Every vice president and prospective vice president wanted to be a credit union CEO someday. “I said, ‘Let me help you get there,’” says Rawlings.

He also conducted an all-staff survey to see what skill sets and education levels his workforce included. “I didn’t realize what a talented organization we had,” he says. “I was amazed at how our cross-training enables the development of managers and executives.”

His succession plan includes an actual list of those potential leaders—along with recruiting firms, in case circumstances require his board members to look outside for a CEO. “They’d also ask the West Virginia League to help if there was a disaster and neither I nor my successor was available,” he says.

A succession plan is like an insurance policy, says Rawlings. “You have it in the hope of never using it. But if something happens, you won’t miss one beat.”

Update the plan

Isolation poses special succession planning challenges for $87.5 million asset MAC Federal Credit Union, Fairbanks, Alaska. “Anchorage is about 350 miles away and we’re a much smaller community, with harsher weather and fewer amenities,” says Raelynn Radway, president/CEO. “Our talent pool is, well, shallow.”

For key positions, the credit union often has to hire from outside. “I recently hired someone out of Seattle who had the right mindset and was ready for an adventure,” Radway says. “You can’t get everyone to relocate to Alaska.”

While she isn’t a boomer, Radway plans to retire from the credit union in eight years. And two credit union employees who are boomers plan to retire within 10 years. “We have potential successors for both of them, but a lot can happen in that time.

“I would handle the succession of key employees other than the CEO,” she continues, “so we place more emphasis on CEO succession. I developed a succession plan for the board that’s as complete as possible—including a list of accounts to remove my name from, how to appoint an interim CEO, what to look for in a candidate, and how to prepare others in-house so they know the plan in case something shifts.”

Succession planning is a regular part of the credit union’s strategic planning, she adds. “We update the plan at least annually.

“We assign promotion codes to potential successors—from one to four. One means ready to go. Three means they’ll need several years,” she explains. “We create career development plans for anyone not rated a one.”

The credit union has “key person” life insurance coverage for Radway, since there might be recruitment and relocation incentive costs to replace her.

MAC Federal has two potential successors for the CEO position, but they’re not ready for the job, she says. “I’m currently the only executive staff member, but I’d like to change that during the next couple of years.”