Succession planning for Gen Z

Anita Drentlaw, president and CEO of New Market Bank, employs daughters Emily, 15 (right) and Mikayla, 18, as custodians at the bank’s Prior Lake, Minn., branch. Photo by Becca Dilley

Succession planning is an important task for every community bank, but what about when it comes to Gen Z, the generation that’s seeing the Great Resignation in action and believes side hustles are a way of life? We’ll look at how community banks can engage the youngest generation with the family businesses—and make plans for if they decide to forge their own path.

By Kelly Pike

When Jon Harrell’s son Max graduated from the University of Arkansas in 2018, he had his pick of jobs. The finance and banking major thought about becoming a bank examiner, working at a bank in a large market or in the corporate world.

Max ultimately chose to join his father at $745 million-asset Generations Bank, becoming the sixth generation of Harrells to work at the Rogers, Ark., community bank. Today, the 26-year-old is market president of the Rogers area, overseeing the growth of lending and deposit relationships, and community involvement.

It’s a proud moment for his father. Max’s involvement brings a level of excitement to planning for the future. While once upon a time it was assumed that a child would succeed their parent as bank president and CEO, today’s family-owned banks shouldn’t expect Generation Z, the 72 million Americans born between 1997 and 2012, to walk the same path.

Gen Z has come of age in an unpredictable world. The first post-9/11 generation, they have lived through both the Great Recession and a pandemic, with the latter shattering their expectations, taking away everything from prom and graduation to dorm rooms and dating. They have entered the workforce at a time of both unprecedented volatility and opportunity. Gen Z has experienced employment whiplash—going from a strong economy to pandemic-related job loss back to record-low unemployment. They’ve seen remote work replace days at the office.

Gen Z has been forced to regularly innovate and reinvent, adapting to new ways to do everything from attending school to dating and connecting with friends.

How, then, can a family-owned bank—an institution built on tradition—convince Gen Z that it can provide a challenging, interesting and rewarding career?

It’s possible—but it takes planning and patience.

What Gen Z wants

While it’s hard to label an entire generation of individuals, Gen Z is entrepreneurial. As digital natives, they also straddle the line of pragmatism and optimism. They have a strong sense of community and hold tightly to their values and the idea that the world can be a better place. When it comes to work, 84% of Gen Z says that responsible and ethical business practices play an important role in choosing an employer—but just 72% say their organization is committed to this goal, according to the Center for the Future of Work.

That creates an opening for family-owned community banks, which have a head start reaching out to this demographic to demonstrate values such as honesty, good corporate citizenry, family and public service.

“Values are huge in that Gen Z range. That’s the ‘why’ behind the business,” says Stephanie Larscheid, executive director of the Prairie Family Business Association, a resource for family-owned businesses nationwide, based in Sioux Falls, S.D. “If you can get the children championed around the values, it can have a lot more impact than just money or a corner office.”

One of the best ways to communicate those values immersing Gen Z in community banking culture. For the youngest members, that can mean high-level conversations about the successes and challenges of being a community banker or bringing them to state association and national banking conventions.

“That [attending community banking conferences] was a huge influence on me because I saw how my father interacted with his peers at other banks. There’s lots of camaraderie and they relied on each other for a lot of things,” says Anita Drentlaw, president and CEO of $193 million-asset New Market Bank in Elko New Market, Minn., and a fourth-generation community banker who succeeded her father.

“It helped me understand what banks do and how they help their community,” she adds. “He was always good about talking about that. That’s something I try to continue to do with my husband and kids.”

She’s also given her daughters, Mikayla, 18, and Emily, 15, jobs at the bank. Both work as custodians together at the Prior Lake branch—a family tradition dating back to her grandfather—and Mikayla is also a student teller.

“It’s interesting to hear her say her favorite customer came in today or for her to see the impact her position has on other people’s lives,” says Drentlaw, who was once a teller, too.

Meeting Gen Z where they are

While Gen Z has a strong sense of community, the communities Gen Zers prefer to call home are more suburban and urban than previous generations. Just 13% of Gen Z lives in rural areas. That’s a huge difference from millennials (18%), Gen X (23%) and baby boomers (36%) when they were the same age, according to Pew Research.

“We’ve been very intentional about growth strategies, the markets we want to be in and the markets where my son and his peer group want to live.”
—Jon Harrell, Generations Bank

It’s a trend Harrell noticed and took steps to address beginning in 2010 by relocating and expanding into more prosperous areas of his state so there would be more opportunity for growth and his son would inherit a viable business.

Jon Harrell and son Max work with each other at Generations Bank in Rogers, Ark.

“A lot of banks stay in rural markets and aren’t intentional about trying to move out,” he says. “Their kids or their spouses may not want to live there, and they may end up selling to someone bigger. We’ve been very intentional about growth strategies, the markets we want to be in and the markets where my son and his peer group want to live.”

That’s not the only change. “There’s a focus on work-life balance a little more with younger generations, which is a change from grandfather and dad,” notes Drentlaw. “Seeing parents work some at home and some in the office shapes their viewpoint of maybe what they want in the future.”

Growing up as the daughter of a fourth-generation banker, Maggie Groteluschen had always thought about becoming a community banker one day, but she had trouble wrapping her head around how she’d balance the career she dreamed of with the family she knew she wanted.

“My first introduction to banking was having a parent who loved going to work every day,” says the fifth-generation community banker and personal wealth manager at $1.7 billion-asset The First National Bank in Sioux Falls in Sioux Falls, S.D. “His career was demanding, but very fulfilling.”

To help his daughter realize the possibilities while still in college, chairman William “Bill” L. Baker gave Groteluschen the opportunity to shadow five women with high-level leadership roles in areas including lending, risk management, operations and—the area where she eventually found her calling—personal trust.

“I really found a mentor and a passion for a career path I had no idea even existed,” recalls Groteluschen, who earned her MBA and juris doctor degrees and spent two summers working in internal audit and one summer in personal trust to learn about all the business functions before joining the community bank full time in 2012. The two worked together for eight years. When her mentor retired in 2019, Groteluschen began leading the personal wealth team.

Groteluschen herself is a millennial, but she has a dozen cousins and second cousins who are Gen Zers ranging in age from college graduates to junior high school students. Groteluschen and the leadership at The First National Bank in Sioux Falls realize there’s an opportunity to repeat the process Groteluschen went through with young family members who might be interested in a role at the family-owned community bank. The bank offers internships and job shadowing to older high school and college students.

“We want to find a way to get [them] as much exposure as we can so they can get an idea of the many things they can do,” she says.

Maggie Baker Groteluschen, personal wealth manager, a fifth-generation banker at The First National Bank in Sioux Falls, S.D., is pictured here with (L-R) president Chris Ekstrum, CEO William “Bill” L. Baker and Bob Baker, business banking team leader.

Job hoppers

Generation Z is the generation most likely to be part of the Great Resignation. One Bankrate survey suggests that as many as 77% of 18- to 24-year-olds are in the market for a new job. It’s an understandable move for the generation that was most likely to lose their jobs—typically entry level or in the service industry—when the COVID-19 pandemic hit. Combine that with stories of worsening customer behavior in retail establishments, and the family bank can be a tempting alternative.

“The next generation is always welcome here, but we don’t push it aggressively. They must show interest, engagement and a willingness.”
—F. Austin Jones, Grinnell State Bank

F. Austin Jones, president, CFO and chief trust officer at $450 million-asset Grinnell State Bank in Grinnell, Iowa, recently welcomed his 17-year-old grandniece, Bella, as a part-time teller. She asked to join the bank after frustrating experiences and harsh treatment working at national coffee shop and donut shop chains.

“I’m extremely impressed by her. She’s very hardworking and friendly,” says Jones, whose grandfather, father and brother have all led the family bank. “She’s been very impressed by how employees and customers are always appreciative of how they are treated.”

When Bella Jones, 17, recently joined Grinnell State Bank as a teller, she followed in the footsteps of her grandfather, great uncle, father and brother.

While college is in Bella’s future, it remains to be seen if a banking career is. “It’s not something that we’ve pushed,” says Jones. Both he and his brother have two of their three 30- and 40-something children working at the bank. “The next generation is always welcome here, but we don’t push it aggressively. They must show interest, engagement and a willingness.”

Both community bankers and family business experts agree that family members, including Gen Z, need to earn their place at the bank.

Gen Z family members also need to be prepared to be held to a high standard. Many family-owned banks require family members to gain outside experience for several years, often securing a promotion, before the bank will hire them. They must apply for an open position and are often supervised by a non-family member.

It’s not just good for family dynamics; it also helps family members prove their worth to coworkers. Jones saw this firsthand during the first six months of his nephew’s tenure as a loan officer. Employees saw the new hire sitting around his dad’s office, creating the perception that he wasn’t doing much when he was, in fact, actively listening, learning and taking notes, Jones recalls. The family decided to have the young banker report to the senior credit officer, a non-family member, instead of his dad, who is the bank president.

“When you’re part of the family business, all eyes are on you, and you can’t get away with anything,” says Jones, whose grandniece reports to a direct supervisor who isn’t a family member. “You need to work harder, faster, stronger and better.”

Harrell notes that while his son still has a lot to learn about banking, that doesn’t mean he isn’t ready for responsibility. He includes Max in long-term strategic planning and invites his input.

“We older bankers have to realize that the younger generation wants more opportunities and responsibility,” says Harrell. “If they show acumen, we’re selling ourselves short if we’re not providing that opportunity for them.”

5 tips for attracting and retaining Gen Z

Want to make your family-owned bank an attractive option for Gen Z family members? Stephanie Larscheid, executive director of the Prairie Family Business Association in Sioux Falls, S.D., offers five best practices.

1. Require outside experience. Families should consider requiring Gen Z family hires to gain outside experience at another company—whether it’s two, three or five years—before applying for a job at the family bank. Some banks even require they earn a promotion first. This reinforces the idea that joining the family bank is a choice the child gets to make.

2. Ensure a good fit. It can be a mistake to give a family member a job just because they are down on their luck or are struggling to find the right workplace. Make sure a family member’s skills make sense for the job.

3. Establish expectations. Have policies in place to set expectations and pay attention to how family hires interact with customers and staff. Family members shouldn’t be direct supervisors of other family members.

4. Talk about values from an early age. Some families hesitate to talk about business or money because they fear it will make the children feel entitled. Don’t just talk about success—talk about values like honesty and giving back to the community.

5. Communicate. The strongest families have a foundation of trust. The sooner these relationships are developed, the better.

The value of a family council

Not everyone is cut out for a community banking career, but that doesn’t mean non-employee family members can’t play an important role in keeping a family-owned bank independent.

Family councils are one way to keep family members engaged in the bank without a full-time commitment. Some families elect members who then meet quarterly. Others host retreats where a few hours are dedicated to talking business.

“[Our] family ownership council tries to introduce ways to connect our values with some of the younger shareholders and future shareholders,” says Maggie Groteluschen of The First National Bank in Sioux Falls in Sioux Falls, S.D. “We want the bank to be something that seems tangible and meaningful.”

First National used a consultant to help create a family ownership council, including guidelines for family members who work from the bank. While COVID has prevented the community bank from hosting a family retreat, Groteluschen is hopeful that one can be held in the not-too-distant future.

Kelly Pike is a writer in Virginia.