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Leadership Succession Presents a Growing Risk to Community Banks

February 10, 2016

By: Debbie Meyers, Senior Consultant


Community banks face myriad risks, from increasing shareholder value to cybersecurity to management continuity and institutional longevity. Often the latter two risks are just minimally addressed by strategic plans. Many succession policies address only contingency and backup staffing in case of an unexpected event involving a member of executive management.


If it’s unprepared for long-term management succession, a community bank’s board may look to hire an outside CEO. When this approach fails to produce a suitable candidate, the lack of succession plan can become a de facto decision to sell the bank. Under these conditions, the selling bank must negotiate from a vulnerable position, reducing the sale price. Thus, leadership succession must be a top-of-mind risk for a community bank wanting to avoid this predicament.


To ensure your bank remains a sound investment and a long-term survivor, bear in mind these elements of an effective succession plan:


Plan in advance of need. Because no two banks are alike, succession planning revolves around special circumstances isolated to the bank. Timeframes must take into account the dynamics affecting the lead time needed—composition of the current management team, training, and so on.


Secure a commitment to the process. The plan must be implemented in a way that ensures accountability from all participants,

including both those responsible for implementing the plan for their successor and the succession candidate.


Expand succession needs beyond the CEO. Some succession plans consider only the most senior position. Yet other key staff are often responsible for critical functions that also warrant succession planning attention. A comprehensive staffing risk assessment can provide valuable insight into the depth of planning necessary.


Develop comprehensive development plans for succession candidates. For succession planning to work, identified candidates must receive the right guidance, training, and opportunities to prepare them to assume the new role. In addition to outside education, think about adding lateral moves, coaching, special projects, or other effective grooming strategies to the mix.


Build a partnership between the board and the CEO regarding succession. To fulfill its governance responsibilities in the area of sound management, the board must monitor the effectiveness of management succession plan objectives. Make this a periodic board agenda item and a strategic planning topic.


About Bank Strategies LLC 

Bank Strategies, LLC is a Denver, Colorado based consulting firm founded in 1982 that provides a wide array of enterprise-wide risk management solutions which assist executive management teams and Boards of Directors of mid- and lower-tier size financial institutions in improving overall performance and profitability, assessing and controlling risk profile, and strengthening shareholder value.   Bank Strategies LLC and its team of professionals are well known and respected in the community banking sphere of banking institutions, attorneys, CPAs, trade association executives, and the press due to their quality of service, expertise and knowledge. More information is available at www.bankstrategiesllc.com.

To learn how the Bank Strategies LLC team can put more than 100 years of collective industry experience to work in helping your institution reach its potential as a high performing bank, call 303-903-9369. Or email Jim Swanson at jim@bankstrategiesllc.com.


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Contact Information

Phone: 303-903-9369

Mail: 75 S. Joyce Street, Golden CO 80401

EMail: Jim@bankstrategiesllc.com