How to crisis-proof your bank’s succession plan

Robert White

Robert White joined 1st Colonial Community Bank as president and CEO right as the pandemic was ramping up. Photo by Matt Stanley

Succession planning is a critical tool for community banks to identify up-and-coming talent and provide a long-term strategic vision. But how has COVID-19 affected these plans? Experts discuss strategies for making sure your community bank’s succession plan can withstand this crisis—and the next one.

By Kelly Pike


In an ideal world, the departure of a key leader at a community bank would be an anticipated and carefully orchestrated event. A retirement date would be set. The successor would have plenty of time to learn from their predecessor. It would be a smooth transition.

But we don’t live in an ideal world.

If COVID-19 has taught us anything, it’s that resiliency must be integrated into every aspect of community banking—including succession planning.

Bank presidents, CEOs and other C-suite executives aren’t immune to the coronavirus or other unexpected events. Morgan Stanley CEO James Gorman was diagnosed with COVID-19 in March, running the company while quarantining and recovering at home. Meanwhile, JPMorgan Chase & Co. CEO Jamie Dimon was sidelined for a month in March after emergency heart surgery, so the bank’s two co-presidents filled in. And the CEO of Credit Suisse unexpectedly resigned in the aftermath of a spying scandal.

“This pandemic has put succession planning on the front burner as something that must be dealt with.”

“For any board of directors or management team that has been unwilling or unable to grapple with the concept of executive succession, this pandemic has put succession planning on the front burner as something that must be dealt with,” says Alan Kaplan, founder and CEO of Kaplan Partners, a retained executive search and board advisory firm in Wynnewood, Pa.

Crisis-proof succession planning

A good succession plan is designed to be as crisis-proof as possible. It addresses both long-term and emergency succession needs, identifying roles that need to be filled and the personnel on deck to fill them.

Like a strategic plan, a succession plan is a living document. It should be reviewed at least annually, though more frequent reviews can be triggered when there are departures from the bank, says Greyson Tuck, attorney and consultant at Gerrish Smith Tuck Consultants and Attorneys PC, a community bank legal and consulting firm in Memphis, Tenn.

“The best coaches are the ones who make half-time adjustments. They’ve been through half, have seen what’s working and what’s not, and make changes,” says Tuck of keeping succession plans up to date. “They have the conviction to actually make those changes.”

Among those changes are potential vulnerabilities revealed by the pandemic. For instance, it may have been necessary to assess whether employees in a given functional area can operate without a key leader or team member, says Julia A. Johnson, director of organizational performance at Wipfli LLP, a national accounting and consulting firm in Milwaukee. These are the kinds of insights that show where succession planning is needed.

The board should be reviewing succession for the CEO, the C-suite and all direct reports to the CEO at least annually and more often if there’s a looming retirement. The succession plan should also include any other critical role. For example, the chief technology officer may report to the chief financial officer, Kaplan says. If someone is in a vital role and there’s no in-house talent to elevate and replace them, that’s something the board needs to know.

It’s also important to look beyond the vacated position. A single change can result in other shifts that will require a community bank to recalibrate the plan to keep it relevant, Johnson says.

Kaplan likes to see a bank dig two or three levels into upper and middle management to identify employees with high potential, particularly going deeper as the bank grows. Smart community banks will take steps to help maximize their talent and get them ready for their future roles internally.

“Grow your people. Always let that be your first option,” Kaplan says. “The more you can do on your own internally, the more long-term the successors, the better off and smoother transitions will be.”

Don’t forget to plan for temporary absences like the one experienced with Dimon at JPMorgan. While CEOs in many industries have contracted COVID-19, few have died. Instead, many found themselves ill and unable to work at full capacity for an extended period of time. These interim and emergency plans need to be updated. “Ask yourself, ‘What would we do if we have half a CEO for three months?’” Kaplan says.

Johnson suggests identifying current team members who can assume higher roles of responsibility for extended period of time or implementing strategic partnerships to outsource functions.

How to start as CEO during a pandemic

Robert White had a strategic plan for his first 30 days at 1st Colonial Community Bank when he joined as president and CEO at the beginning of February. He was going to focus on getting to know his new institution and its customers to understand what makes the community bank in Collingswood, N.J. successful. After that, he’d work toward the board goals of growing the customer base and diversifying the business mix.

That all changed with the COVID-19 pandemic.

Aggressively testing the disaster recovery plan and all the technology needed to work remotely became a top priority, along with fast-tracking technology platform upgrades from the community bank’s core provider. Customers needing loan deferrals and existing small business customers needing Paycheck Protection Program (PPP) funds took precedence over reaching out to new businesses, and a third-party service was brought in to help the preferred Small Business Administration (SBA) lender prepare for the PPP. White had to remotely build relationships with the employees he was just getting to know.

The good news for 1st Colonial Community Bank was that its new president and CEO was prepared to handle a crisis. A former chief risk officer with 30 years of banking experience, White had the skills to identify and assess the challenges posed by the pandemic and implement strategies to limit the potential risks.

“We adapted pretty well,” he says. “The best answer is to stick to your plan. Be agile and don’t be too reactive. Things will calm down and return to some level of normalcy.”

Find the right successor for your bank

While the COVID-19 pandemic was unexpected, the reality of a crisis shouldn’t be.

The banking industry is good for a crisis every decade or so, making it essential that management has the ability to adapt during a crisis, Tuck says. That makes the current pandemic an opportunity to actively observe the community bank’s best performers and see how they handle challenges like problem loans or employee issues.

“People’s true character and abilities show in times of crisis,” he says. “It’s a great opportunity to look at somebody new or that is the chosen successor and note: How did they handle this? What did they do well? What didn’t they do well? It’s somewhat of a proving ground and a live audition.”

Keep an eye out for agile leaders who are able to adapt to an ever-changing business landscape, Johnson says. Other competencies include strategic thinking, outside-of-the-box thinking, influencing, relationship-building, collaboration, and written and verbal communications.

Many folks on the team stepped up [during the pandemic] and said, ‘We’re in this for the long term. whatever you need, we’re here to support you.’”

—Robert White, 1st Colonial Community Bank

Robert White was recruited to take over as president and CEO of $595 million-asset 1st Colonial Community Bank in Collingswood, N.J. He started in early February and didn’t have much time to get to know his team before the pandemic forced everyone to work remotely. Upon joining the community bank last winter, he began to assess the talent he was working with.

“I can’t say enough about the team we are very fortunate to have in place,” White says. “Many folks on the team stepped up and said, ‘We’re in this for the long term. Whatever you need, we’re here to support you.’”

1st Colonial Community Bank is now updating its succession plan. White and his team are using the insights from the early days of the pandemic to ensure the right people are in place for executive succession. “In many cases, it [the crisis] clarified what I initially thought,” he says. “A couple of folks were elevated as a result of their efforts and commitment.”

Training also plays an important role, as does company culture. Kaplan recommends fostering a culture of mentoring and talent development by telling staff that they need to be developing someone below them to take over their role—and that person must be as good, if not better—if they want to be promoted. Work with human resources to include succession planning objectives like mentoring in the matrix for performance reviews and compensation.

“It is quickly becoming a best practice to have a professional development plan for the majority of employees within a bank,” Johnson says. “At a minimum, they should be developed for those high-potential employees, right from the point of hire.”

Banks that don’t have succession plans in place often end up making mistakes and end up being sold, Kaplan says. He once saw a bank board promote a talented board chair as CEO. The man was a smart lawyer, so the rest of the board trusted he could do a good job. It turned out, however, that he didn’t have all the competencies the bank needed.

Other boards, faced with an unexpected leadership transition without a succession plan, have chased after a buzzy candidate only to discover they don’t fit the culture, he adds.

“Continuity of leadership promotes continuity of strategy, which is a good thing,” Kaplan says. “If you don’t have continuity of strategy, you might find yourself jumping from idea to idea and get in a downward spiral.”

Prepare for the next crisis

While there is no one correct approach to succession planning, it’s essential to a community bank’s long-term survival. It’s also part of the regulatory review process. Banks that treat it as a check-the-box exercise are missing out on the opportunity to plan for the future, develop talent and build those needs into how the bank operates and does business every day, Kaplan says.

I truly don’t believe anything is fully crisis-proof when it comes to people. We can only strive to mitigate the risk through effective development of the team.”

—Julia A. Johnson, Wipfli, LLP

As community banks move past the blocking and tackling that helped them navigate the uncertainty of COVID-19, they’ll need to reevaluate their succession plans, Tuck says. While the best succession plans he’s seen involve transitions lasting 24 to 36 months, with the successor gaining increasing authority and the predecessor retaining veto power, those kinds of transitions aren’t always possible.

That’s why it’s important to give high-potential employees on-the-job training and autonomy. You’ll need staff members to have the skills to navigate the next crisis. They might just be the bank’s best chance for strategy continuity. There are no guarantees—only preparation.

“I truly don’t believe anything is fully crisis-proof when it comes to people,” Johnson says. “We can only strive to mitigate the risk through effective development of the team.”

The path to choosing an emergency successor

When a crisis hits and takes a leader out of commission, someone has to take their place until a permanent replacement can be found. This shouldn’t be a game-time decision. The board’s succession plan should include an emergency interim successor who can serve six to 12 months in their place while evaluating longer-term leadership options.

Alan Kaplan, founder and CEO of Kaplan Partners, an executive search and succession planning firm in Wynnewood, Pa., offers these four approaches for choosing a short-term successor.

1. Promote the planned successor early

If someone at the community bank has already been identified as the successor, put that person in the role. It gives the board a chance to evaluate their performance in that role before making a long-term commitment. “I have seen situations where the heir apparent being groomed was elevated earlier than expected and did a spectacular job,” Kaplan says.

2. Bring back a retired executive

Faced with a sudden departure, Kaplan recalls a $1 billion-asset community bank that asked its former CEO, who had retired two years earlier and left the board a year before, to return on an interim basis. The CEO made it clear he was not interested in a long-term gig. Kaplan says this solution worked only because the CEO hadn’t been out of the banking world for very long. If a succession plan involves bringing back a retired employee, make sure that employee is still capable of doing the job when you reevaluate the plan each year. You don’t want to call someone up to the majors only to find out they’ve long since left the game.

3. Promote another high-performing executive

If you have a chief financial officer or another executive that really shines, having them fill in as temporary president or CEO gives you a chance to audition them for the role. You can then decide to give them the job or choose to hire outside.

4. Hire a temporary executive

While they aren’t common in the community banking industry, it’s possible to hire a temporary CEO. These are typically turnaround experts who work with struggling institutions.


Kelly Pike is a writer in Virginia.

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