Many credit union CEOs have delayed retirement to steer their credit unions through tough economic times—and to nurse their recession-depleted retirement funds back to health.
Only 6.3% of credit union CEOs plan to retire in the next two years, according to the 2010-2011 Complete Credit Union Staff Salary Survey Report, published by the Credit Union National Association (CUNA). After that, however, retirement rates probably will accelerate.
The average age of a credit union CEO is 53, CUNA’s survey reports, and about half are older than age 55. Nearly 65% of CEOs in credit unions with more than $500 million in assets fall into that category.
“There will be a pent-up demand for retirement at the CEO level when the economy turns around,” predicts Gene Mandarino, organizational development manager at HRN Management Group, Salt Lake City. CUNA’s research finds that 20% of CEOs at credit unions with more than $100 million in assets plan to retire within the next five years.
The need for succession planning is clear, especially when you factor in unexpected CEO departures as a renewed job market beckons, or through illness or death. Many credit unions are ready: 58% overall have a formal plan in place and 16% will by year’s end, reports CUNA’s salary survey. But others clearly have work to do: 25% of credit unions say they don’t expect to have a plan in place this year.
A strong bench
Replacing a CEO can be a lengthy process, indicates Robert Reh, chief information officer at $340 million asset Nassau Financial Federal Credit Union, Westbury, N.Y., and vice chair of the CUNA Technology Council. “When you lose a CEO, the credit union can lose direction,” he says. “A succession plan helps ensure business continuity, and the time to develop a plan is before you need it.”
Regulators expect to see a succession plan, adds Laida Garcia, president/CEO of $285 million asset floridacentral Credit Union, Tampa, Fla., and a CUNA Board member.
“It’s not yet a requirement, but it could become one and it behooves you to be prepared and ahead of the game,” she says. “Also, you can better ensure the continuation of a stable management structure by identifying and preparing interested, capable employees to occupy leadership positions, including that of the CEO.”
That creates a capable pool of managers ready to step in as needed. “You want a strong bench if the CEO leaves. The most appropriate person to replace him or her will depend on the environment at the time,” says Mandarino. “Your board will be much more comfortable if you have a plan that names several possible successors they can choose from.”
Every credit union needs an emergency succession plan, he asserts. “It should outline what you’d do tomorrow if something happened to your CEO—who would take charge on an interim basis, what their role would be, if you’d create a temporary board committee to help them, and who would assist with a candidate search. It’s pretty straightforward, and you can find templates online to assist.”
The next step—the blueprint for a planned succession—is more involved. “It should include your current and projected organizational structure and show what the organization will look like in, say, five years when the CEO retires,” says Mandarino. “It should define what you’re doing to prepare potential successors: an assessment of their abilities, what competencies they need to develop, and what you’re doing this year to accomplish that.”
It should also detail the current CEO’s role during the transition. “You might have the heir apparent run the credit union for several months before the CEO retires,” he suggests. “The CEO can ease out of operations and act as a mentor.”
When Mandarino assists credit unions with CEO succession planning, he usually works with the CEO to develop the plan and they submit it to the board for approval. “Sometimes the board has a succession committee, which works well,” he says. “The committee provides input to the succession plan and helps finalize it for the full board’s approval. Then the committee makes sure the CEO reviews and updates the plan annually.”
Some boards also get involved in approving policies for expenses such as tuition reimbursement or continuing education. These allow CEOs to invest in potential successors so they’ll be ready. “You can’t have a really good succession plan if you don’t allocate resources to develop people,” says Mandarino.