An aging chief executive of a community bank might put his bank on the block for many sound reasons. But one common motivation, the lack of a management succession plan, is clearly avoidable.

Frequently, community banks sell out because their managers and board members fail to recruit and retain the next generation of leadership. But with some foresight and planning, even the smallest community banks can ensure a seamless management change.

"I think if community banks have a desire for an independent basis long-term, succession planning is really critical to their future," says Thomas R. Sullivan, 48, who was recently named the next chief executive officer of $603 million-asset Firstbank Corp. in Alma, Mich.

Getting top executives to give succession planning the attention it deserves is not easy. Inevitably, the subject dredges up a variety of thorny personal issues for veteran CEOs, such as declining health and the boredom they fear will accompany retirement.

"I can see how the process is a real letdown, where CEOs almost go into a depression," says John A. McCormack, 63, Firstbank's current CEO. "One day you're making decisions that impact shareholders, customers and employees, and then you envision your wife asking you to take the garbage out."

Mr. McCormack plans to hand the reins of power to Mr. Sullivan by early next year.

For executives prepared to confront the problem, developing home-grown talent is the first matter they must address, says John R. Putney, who recently took the top job at Warren Bancorp in Peabody, Mass., after spending 11 years moving up the ladder at the bank. This point is critical, he says, because companies that can fill the post from within are in a better position to handle the change than those forced to seek outside talent.

With an internal candidate, "the directors in the existing management team are familiar with the person who is going to fill the slot, and I think you can simply move forward with your business plan without any upset," he says. "If you go outside, I think there's time involved in the outside person understanding the culture of the entity as well as the internal people adapting to the style of someone new."

Mr. McCormack agrees that having a deep talent pool to draw on is an advantage. He said it enabled him to understand Mr. Sullivan and identify him as a person with outstanding management capabilities and a confident personal style. From there, it was just a matter of grooming him, a process which began in 1997 when Mr. Sullivan was promoted to executive vice president after joining Firstbank in 1991.

Still, having a talented bench to chose from can often be a double-edged sword; sometimes, outgoing chief executives are reluctant to make a selection out of concern that they might slight the losers. To avoid this scenario, Mr. McCormack believes management must take pains to stroke ruffled feathers so unsuccessful individuals understand their importance to the company.

Of course, one of the key ingredients of a successful succession plan is to start early at least a year before the current CEO plans to step down. That gives the bank time to find and train the right replacement.

But the choice of a successor is only half the battle; getting past the company's board of directors presents another obstacle. According to Mr. McCormack, Mr. Sullivan cleared this roadblock by making it a point to present a clear and concise concept of the bank's future to the company's other leaders.

Once a successor is found, Mr. McCormack says the outgoing CEO must involve the individual in the day-to-day running of the bank as much as possible.

Mr. Sullivan says Mr. McCormack's strategy paid off. "We are expecting a very smooth transition because Mr. McCormack has included me in many of the major decisions that have affected our company over the past few years," he says.

Indiana United Bancorp. in Greensburg, Ind., is another bank to survive the succession gauntlet. In June, the $980 million-asset company announced that its 60-year-old CEO, Robert E. Hoptry, would pass the torch to James L. Saner Sr. And like Firstbank's Mr. Sullivan, the 48-year-old Mr. Saner, who had served as IUB's president and chief operating officer, says working in tandem with his predecessor made all the difference.

"He treated me as a co-CEO and we discussed any and all major issues," he says.

But swelled egos sometimes get in the way, Mr. Saner warns. Although he did not experience this roadblock himself, he says that CEOs are sometimes fearful of being overshadowed by their successors, and as a result, avoid coaching them.

CEOs who want the company to survive, however, must check their ego at the door, Mr. Saner says.

"I would hope that most of us would want individuals who are brighter, smarter, and have more vision than we have," he says.

Family-owned banks may experience more succession difficulty than their publicly-traded counterparts. According to Robert W. Klockers, community bank consultant and president of VASA Group in Middleton, Wis., the process is often riddled with jealous infighting that can strain family relations.

As a result, succession decisions are sometimes made along emotional lines rather than sound business reasoning.

"While public banks look at performance, family-owned banks have a tendency to be less intellectual about succession planning and center the decisions around love, respect, and commitment to siblings," he says. "And in many respects, that's the wrong way to go about it."

To avoid poorly-thought-out decisions, Mr. Klockers recommends that family leaders talk openly about inheritance, death, favored family members, and other subjects that are typically avoided. Only in this way, he believes, can a true family consensus -- and an effective CEO transition -- be achieved.

But regardless of whether the bank is publicly or family-owned, Mr. Putney of Warren Bank believes CEO succession can be managed if executives act now to address the inevitable management changes of tomorrow.

"If in fact you've thought about it, and you have a plan, it's not such a sticky issue," he says.

This article first appeared on American Banker Online.

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