How to Craft a Succession Planning Process

The financial services industry is facing a substantial succession bubble, with an expected 50% board and senior management turnover by 2025, driven by generational and business model changes. In addition, the recent pandemic accelerated the baby boomer generation to exit more rapidly than predicted prior to the pandemic.

Most experts agree: The high demand for senior leadership talent will continue into the foreseeable future. In the face of a highly competitive talent cycle, coupled with many banks increasing in business complexity, does your institution have confidence in the current board and senior leadership composition to guide your organization through the next five years?

Over the years, the Chartwell Partners’ Financial Services Team has helped clients evaluate their board and senior leadership team against the strategic plans for the bank to help our clients make confident leadership decisions. We have successfully used a four-step process we find effective that includes:

Step 1: Intake
Engage a third party or appoint a director to lead the planning. Meet with key stakeholders, such as the chair, lead director or CEO to understand the business strategic objectives, the current leadership dynamic and unique cultural elements that drive effective leadership transition plans. The ultimate goal is to align leadership decisions to the future business objectives.

Step 2: Planning
Create a tailored plan to define outcomes, outlining defined action plans and a timeline. In our case, we work with the decision-making team to provide guidance on executing against the defined plan – whether it’s testing a current succession plan or executing internal leadership assessments and processes to provide leadership insight supporting board or management changes.

Step 3: Assessment
Leveraging in-person executive assessments, coupled with data-driven online assessment service, the point person should meet with the select executives and provide in-depth insights into the leadership team. They can also provide perspective on the leadership team compared to outside executive options to provide the decision makers a thorough leadership analysis.

Step 4: Reporting
Following assessment, the project lead should produce a report based on the desired outcomes defined by the decision team, which may include a well-defined succession plan or a guide to an internal leadership selection process. Reports should be tailored to the specific needs of the bank, so key stakeholders can be confident in the executive leadership decisions.

At the conclusion of the four steps, it is important to communicate the plans with the team and instill board confidence in the organization. In addition, it is critical to consistently evaluate the leaders against the strategic plan and ensure they are growing and developing leaders the organization can follow. Ultimately, the board owns the responsibility for the CEO and holds them accountable for the development of their team; however, it is always important the designated committee of the board be in touch with management team succession planning. Effective succession planning takes intentional focus from the board. Banks that are proactive about succession planning increase the likelihood of a successful outcome transitioning boards and management teams.