The CEO who wouldn’t leave

Over the next few years, a wave of generational change already underway will accelerate in the nation’s community banks. This series will explore common mistakes made in management succession plans, and how they can be avoided. To read Part 1, click here.

Len (not his real name) had been CEO of the bank for over 15 years.

Len was a strong leader who built an impressive business through acquisition and created a cohesive management team. He enjoyed excellent relations with his board members. He had not only grown into the job, but redefined it. He expanded the CEO’s role into M&A, government relations, and industry leadership.

As Len turned 67 he made a deal with the board. He would gradually retire over the next two years while he finished grooming two possible successors.

Len asked me to validate his choices and help develop learning plans to transition the identified successors into their new roles. This can be an effective succession strategy: Learning plans describe what the role will look like in the future in order to determine the kind of development a successor may require.

In the beginning everything went smoothly…

Stuck in the CEO’s chair

Executive assessments confirmed that Len had hired and prepared the two executives—let’s call them Dave and Samantha—very well.

The plan was that Dave, head of lending, would become the new CEO. Samantha, the I/T head, would take over running risk management and back office operations in a power-sharing arrangement.

Happily, the two successors got along well. It looked like a simple matter of implementing the plans and backfilling the holes the promotions would create.

But as I questioned Len about the CEO’s job in order to redesign it, he became evasive.

Promises to meet to discuss the project were not kept. Phone calls were not returned. I was puzzled as to why a project that had started so well had suddenly come to an abrupt stop. After six weeks of silence, I concluded that I had been surreptitiously fired.

Then it dawned on me. Len perceived that the moment he turned over the keys to the CEO’s office, he would have nothing to challenge him.

In his mind, he would not only be out of a job; he would no longer have a purpose in life.

Faced with the frightening uncertainty of that future, Len took the avoidance approach of delaying action as long as possible.

And more than three years later, Len is still firmly ensconced.

Transition periods must do exactly that

Len isn’t alone. CEOs who lack a post-retirement plan will sometimes cling to power to the detriment of their successors and organizational performance. Worse still, potential successors have the uncanny ability to sense promotional paralysis and they will jump ship.

During the last 24 months of tenure, a CEO, with support and encouragement from the board, can step back from day-to-day operations, shifting from hands-on leadership to mentorship.

This transition can be very positive, and the beginning of a new chapter for the retiring leader. One thoughtful CEO client organized a program for up-and-comers in which he runs sessions to share philosophies on leadership and culture as part of a formal knowledge transfer. Post-retirement, he’s parlayed that experience into a teaching gig at a business school.

Apply skills to new ventures

Adjusting one’s personal life can be more challenging. But a dynamic CEO leaving his or her post can meet this challenge.

I don’t give golf lessons but I do encourage CEO’s to apply their wealth of experience to governance in other organizations, especially not-for-profits.