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Bank Board Accountabilities

Management Succession – A Key Responsibility of the Community Bank Directorate

By: Debbie L. Meyers, Senior Consultant, Bank Strategies LLC

September 2013

One of the most fundamental responsibilities of a bank’s directorate is to select competent management and monitor their performance and contributions to the bank. There is a growing need, however, for the community bank directorate to more comprehensively plan for contingencies to ensure the bank can continue to successfully operate the bank even under adverse staffing situations, including turnover and illness, and other situations, especially retirements. Unfortunately, for smaller community banks, the absence of attention to succession management has ultimately contributed to further consolidation of the industry as aging management teams depart the institutions and turnover and illness has exposed the bank to key operating risks.

To formulate a comprehensive management succession policy and program, the following steps should be considered:

Determine those positions critical to the bank operations and performance – Succession plans should always include the CEO/President as a key position critical to the future bank operations.  However, further consideration should be given to including in the succession planning process any position that is responsible for a key business line important to the performance of the bank, which could include staff positions in the lending function, IT and operations areas, and fee-based services, among others. 

Investigate options to fill critical positions – Oftentimes, succession plans determine that an existing staff member can be promoted to fill positions vacated by key management personnel.  When this opportunity exists, a formalized training and succession gap assessment for those candidates should be developed once they are identified, and used as a guide for the development of the candidate’s succession preparation strategy.   This strategy should note the mentoring program and performance management goals established for the candidate, and outline a disciplined training program. This strategy must be continually reviewed and modified as necessary as the candidate progresses, and monitored by the board to ensure the proper preparation of the candidate for the position, should the need arise.  In those instances where suitable internal candidates are not available, the directorate needs to determine other alternatives to fill possible position vacancies, including interim replacements, until a suitable individual is retained. 

Review and update the succession plan annually – Annual strategic planning sessions for the community bank should address current staffing and would provide an excellent opportunity for the board to assess the status of the management succession program.  Ideally, however, the board should routinely review the plan, especially as changes occur in key positions at the bank.

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