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Succession requires long-term planning

Part 10: Look ahead—far ahead—and you won’t face crises

Succession requires long-term planning

Over the next few years, a wave of generational change already underway will accelerate in the nation’s community banks. This series has been exploring common mistakes made in management succession plans, and how they can be avoided. For links to the entire series, click here. Editor

Last week, I spoke of  the challenge of keeping the best of a “witch/magician” while clearing up the worst. My previous post ended with the bank’s H.R. Committee having agonized over a decision to promote its high output manager, Martha. The committee had decided to engage a coach for Martha, to help her overcome an approach that lead to kudos from management and hatred from her employees.

Martha was making excellent progress in becoming a more empathetic leader who listened to her staff, then engaged them in aligning their efforts with the bank’s goals.

But that wasn’t the end of the H.R. Committee’s task.

Who will be our next “Martha”?

Then the committee stumbled over the next problem—there was no one to take over Martha’s job! 

During the recession, the bank did what most financially strapped organizations do; it switched off two common expense items:

• It cut training and development expenditures to the bone.

• It eliminated most hiring.

Normal attrition had reduced the overall headcount by 15% at a time when the workload had increased significantly.

Management called this a “productivity improvement.”

Employees call it “stressed out of my mind.”

And now that the sun was coming out again, the bank had forgotten to turn the switches back on.

Martha’s department had plenty of eager and enthusiastic employees—especially now that Martha was providing more effective supervision. However, little had been done to build new competencies or leadership practices.

The committee faced a number of choices, none of them ideal:

Go outside—the most obvious solution. Bringing in someone from outside would cost more and it might demotivate Martha’s staff at a time when they were coming around quite nicely.

Delay promoting Martha until a successor was ready.  As Martha was badly needed to take on additional responsibilities, this would only solve one problem while creating another.

Fast track development for potential successors. This solution avoided the problems discussed above, but it came at a cost too.

Martha and others would have to provide various forms of technical and managerial support to the successors while they mastered new roles.

Succession demands continuous planning

There is no simple happy ending here.

The answer requires a longer-term view.

Planning staffing requirements is a strategic exercise in matching hiring and development to forecasts of future needs. Entry-level positions are the easiest to plan for and fill. As we move up the hierarchy in branches and the head office, complexity increases exponentially.

Need can be influenced by significant business changes like:

Strategy: What areas will receive more or less emphasis, e.g. systems, customer service.

Changes in markets or customer base, e.g. shifting more business to the internet

Business or line of business expansion or contraction

Major projects: Staff up to support; reduce when older systems are phased out

M&A activity: Workforce integration

Anticipation of change: Planned retirements, voluntary turnover.

This approach may appear to be quite linear and straightforward.

It’s not.

There are other dynamics at work here. Certain job categories are in high demand, especially those in IT and social media. It will take longer to fill those positions and turnover will likely be higher. Other roles have a long learning curve, such as those related to commercial banking relationships.

(Editor’s Note: Blogger Ed O’Leary has been writing about the coming generational change in commercial lending. Check out these columns.)

It all boils down to a supply/demand model with identifiable inputs and influences.

This bank’s H.R. Committee decided they had better build one to avoid the next crisis!

John Szold

John Szold is the CEO of Planning for Succession Inc. He can be reached at 800-487-0395 or [email protected]

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