Sign In
Upcoming Event
Free Newsletter
With many CEO retirements looming, credit unions search for new leaders
Successful business owners are always thinking about their situation, running “what-if” scenarios on issues ranging from supply chain interruptions to new competitors. It’s a good practice, say experts, who add organizations should also consider what they’ll do in case of a sudden change at the top of the organizational…
Successful business owners are always thinking about their situation, running “what-if” scenarios on issues ranging from supply chain interruptions to new competitors. It’s a good practice, say experts, who add organizations should also consider what they’ll do in case of a sudden change at the top of the organizational chart.
For credit unions, the discussion is taking on a special significance, since nearly half of all credit union CEOs plan to retire in the next 10 years — with about one-quarter planning to step down in the next five — according to the Credit Union National Association, an advocacy and training organization.
“We have a formal succession-planning strategy,” according to John Fenton, president and CEO of Affinity Federal Credit Union. “It’s a comprehensive process that the board of directors and other individuals get involved in to ensure continuity.”
Some situations, like a retirement, can be easily pegged to a specific time. “But we also have to consider unplanned contingencies, like unexpected illness or a family relocation,” he noted. “We engage in scenario planning, consider different situations and then we rank them by probability.”
It’s all about preparation, he added, “engaging in robust training and development so someone’s prepared to take on the responsibilities. This means first understanding where people are now in their career cycle, and then training them so they can be effective in their current job while finding out where they want to be and providing them with the training to get to that point, too.”
It’s a process that Fenton — who started in the savings and loan industry more than 40 years ago, joining Affinity in 1995 as CEO — has gone through personally. As he rose through the ranks, Fenton picked up skills and other important information; now, in some ways, he’s paying it forward.
“I’m basically always grooming my successor,” he said, adding the choice of the next leader ultimately will be up to the board of directors. “I’m mentoring multiple people for their next position, and some who previously reported to me are now running a credit union themselves.”
At Affinity, succession planning benefits everyone, he added. The credit union gets a degree of stability, “but I also learn as I mentor and coach people.”
As a general rule, it’s not unusual for business owners to delay when it comes to succession planning, according to Wilmington Trust, a wealth advisory firm and wholly owned subsidiary of M&T Bank Corp. A survey the organization conducted found “58 percent of the respondents have yet to take this important step.”
While it may seem like the last box to check, “planning for the next generation of owners and managers well in advance usually leads to better operational, financial and tax outcomes,” noted Fred Hopkins, managing director of wealth strategies at Wilmington Trust. “That remains true whether the transition involves a sale to an outside buyer, passing to the next generation of family or selling to employees. As a business owner, you owe it to yourself, your family, employees and customers to plan ahead.”
One common excuse for putting off succession planning is that “I’m too busy,” he added. “There’s no denying that most successful business owners became successful because they stayed focused and kept their eye on the ball. But transition planning isn’t a distraction; it’s really another component of protecting and strengthening the legacy you have built. In other words, transition plans help you preserve your business and the wealth that you’ve created for retirement and future generations. Few things are more important.”
Transition planning can require serious forethought and dedicated time, but “many business owners plan effectively by meeting with a team of experienced advisors on a regular basis over a number of years,” he added.
Pay attention to the details
Ty Muse, CEO of Visions Federal Credit Union, qualified as a CPA and worked for process-driven organizations like PricewaterhouseCoopers, Goldman Sachs and General Electric before he jumped to a credit union — which may help explain the level of attention he’s brought to the succession-planning process at Visions.
“I make sure that our leadership gets formal leadership training at a ‘CEO School,’” said Muse. “We also bring in coaches to help out.”
Every three years, Visions executives — from assistant vice president on up — also go through a “gap analysis” where Muse considers and grades their CEO skills. It’s not a threat, he noted, but instead is positioned as a learning tool.
“Putting everything down on paper highlights where I need to do a better job of guiding them,” he reported. “The last gap analysis showed that some improvement was needed in strategic planning, so for the last two years I’ve directed more time and resources to that area.”
Muse said credit union succession planning has some unique aspects. “Other financial institutions, like banks, bring a lot of value to the market, but there is a different outlook at credit unions. It’s in the culture, and highlighting that element in a succession-planning initiative is important. Here, our focus is on adding value for our owner-members, instead of for outside shareholders’ bottom line. It’s a significant part of our mission, and any kind of succession planning has to incorporate that as a strategic component.”
Thomas O’Shea, CEO of Aspire Federal Credit Union, said he didn’t get much formal training during his previous jobs with other organizations, and was determined to change that when he joined Aspire.
“In my career I learned a lot by being self-driven,” he said. “Among other activities, I went to a lot of conferences and spoke with people, and I read a lot of management and other books.”
He likes the idea of formal succession training. “It prepares people more efficiently and can help them avoid some mistakes when they move into a high management position where the responsibilities are as much about dealing with people as they are dealing with numbers.”
He did add the credit union doesn’t have a set retirement age. “The board doesn’t seem to be in any rush to get rid of me, and I’m in no hurry to retire,” he said.
An inclusive process
Each year, O’Shea, 60, sits with Aspire’s board of directors and reviews the credit union’s succession-planning policy and activities. “Among other issues, I provide the board with an evaluation of who could replace me if needed, and how we could manage the transition.”
He also outlines short- and long-term suggestions, such as selecting an internal executive as interim CEO, and then evaluating him or her to decide whether the search should be expanded to outside candidates.
“I try to make my presentation in an efficient manner,” he said. “After all, I’m working with the potential candidates every day, so I know all the details. But even though I keep it simple, the discussion with the board is a deep and engaging one, where feedback is encouraged.”
All credit unions and other organizations, regardless of size, should consider some sort of succession planning, according to O’Shea. “The board of directors should also have a succession plan and groom people for the future. Our board has active discussions about this, and has been successful in reaching out to younger, diverse members with technology and other skill sets.”
Aspire’s formal succession planning is basically limited to the CEO’s position, O’Shea noted, “but I also regularly speak with my direct reports about their people, too. You could argue that we should have more structure in that process too, but typically with credit unions, if you groom a person for an executive position then at some point they’re ready to take on that role. If the opportunity isn’t there, they may jump to another credit union. Of course I’ve been able to hire people that way, too.”
