SAN FRANCISCO — What would your credit union do if the CEO was unable to show up for work for days, weeks or months, with no notice?
Holly Herman, CEO of AchievingSkills.com, Alexandria, Va., told attendees of the California and Nevada CU Leagues' Annual Meeting and Convention here they must prepare in advance for such an eventuality, including having a written succession plan.
Scary facts: 42% of CUs do not have a succession plan in place, and most spend an average of just two hours per year on succession planning. "Succession plans are not just for the CEO," she said. "Every credit union has key staff whose absence would impact business continuity if they did not show up."
It is important to know who would fill in on an interim basis if the absence is short-term, Herman continued. She noted a succession plan is for who will replace a missing executive in the short-term, not just who will be hired as the next CEO after a planned retirement. "It is possible the interim CEO will not be the next CEO, the board might hire someone from the outside," she said.
The possible reasons for absence are many: What if the president/CEO gets in an accident or has a medical emergency? What about a voluntary resignation? Or an involuntary termination? In any of these cases, CUs must have an emergency plan in place, including provisions for short-term versus long-term situations. Herman said these plans should include a series of response procedures that detail what the board and remaining management people need to do over the course of the ensuing one to three days, seven days, and longer.
"If there is a document that spells out the people, entities and phone numbers to call, it makes the response go more smoothly," she said. "Someone needs to have all the passwords, all the keys."
Training Day
Ongoing training is an important part of such an emergency plan because the people who are designated to fill in need to be able to take on the functions and responsibilities of the absent executive. On-the-job, practical experience ahead of time is the key, not waiting until there is an emergency, she advised. "Training should be ongoing."
The CU's state league will have resources, she added, while both CUNA Mutual and NCUA offer webinars and other resources. "Many credit unions think they do not have time for training people to take over for emergencies," she said. "One way to help is for the CEO to shut down. If the team is over-reliant on the CEO for every decision, don't answer the phone, don't respond to texts and force people to figure it out."
Part of training is coaching the potential substitutes, usually by having them shadow the other executive for a period of time. Herman said it is important to realize one person will not do things exactly the same way another does.
'A Living, Breathing Document'
The board of directors is responsible for having a succession plan in place, Herman said, adding the board does not get into the weeds of who is being developed and how that development takes place. The directors should review the document at least annually, she said.
"The succession planning plan needs to be a living, breathing document, which means it should be discussed regularly," she said. "A plan without any training or development can be disastrous. Every organization is different, which is why professional development is so important. Identify rising stars. Give people the chance and exposure on the job to get to the next level."
In the event a senior executive departs the CU and is not going to return, Herman said she believes the best strategy is to "fire fast, hire slow." The remaining management team, along with the board, should take time to review candidates because it is likely a senior management hire will be there for a long time. "Credit unions do not want high turnover at the executive level. If using a search firm, do due diligence: find out what other credit unions have used that firm."
One of the biggest mistakes is assuming someone in management aspires to take over the CEO position, she warned. Despite what others think about a person's potential, it could be that person is happy running operations or marketing or another department and has no desire to move up.
