Is your “spare tire” the right fit?

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.

In a fairytale world where we do all the right things, creating a succession plan is right up there with exercise and healthy eating. My experience suggests there are more bank executives jogging and eating carrots than there are doing succession plans.

Recently a bank board’s HR committee asked me to review its succession plan and to suggest improvements before it went to the full board for approval.

I had barely started the work when the CEO went on medical leave … and never came back.

What now?

You have to believe that he knew for some time that he would be incapacitated. The CEO had the best of intentions. He wanted to have a meaningful plan in place so he could step down with a clear conscience.

Unfortunately for this CEO—and his institution—his disease had a different timetable.

The committee had a choice of two candidates, both internal: the COO and the CFO.

The COO was the obvious replacement. Not so fast! He openly looked forward to his impending retirement and was bypassed.

Fortunately, the executive assessment process confirmed that the CFO was a highly capable leader ready for a bigger challenge. He stepped into the role on an interim basis and within a few months received the permanent seal of approval from the board.

The situation in this bank meets my definition of “better lucky than good.”

Replacement plans versus succession plans

It is common to find that what is billed as a succession plan is, in reality, a replacement plan.

A replacement plan identifies who can be tapped to step in when the incumbent is hit by the proverbial bus. The problem with a replacement plan is that it does not build capabilities for the future. The replacement plan puts a bandage over the immediate emergency and allows the organization to lurch along until the next crisis.

The preferred approach, one that fits the definition of genuine planning, is to implement a rigorous process that includes assessment of leadership strengths and weaknesses, 360-degree evaluations, and other professional-grade evaluation tools.

I like to use the term “assessment” because it suggests identifying degrees of readiness, rather than a pass/fail approach. The end game is to create a learning plan for individuals that, through identification of their gaps, prepares them for future promotion.

Done well, the succession plan starts from the top and, like a set of dominoes, cascades through all levels over time.

Benefits along the way, not just at the end

Organizations that openly practice succession planning and embed it as part of their culture send a strong message to their staff. For high potential employees in particular, the promise of professional development and an opportunity to hone leadership skills has high value—often more than a promotion or even more pay.

Think about this: If the only thing that high potential staffers wanted was a bigger paycheck, they would have left you a long time ago.

I’m not opposed to carrot eating, but organizational health is more likely to be promoted by succession planning.