If anyone had it in their plan or risk assessment that we would be sitting in 2020 with one of the greatest economic surges in our lifetime to see it all come to a crashing halt in a few short weeks-good for you! The reality is that this is the making of a horror film, oh wait someone already did that a few times-Walking Dead, Contagion, Outbreak, and on……

As the funding of this round of the PPP ends, it might be time for you and your board to dust off a couple of very important documents-ESP (Emergency Succession Plan), and the LTSP (Long Term Succession Plan).  We recommend two plans-for the ease of communication and transparency. The ESP should be readily available and shared with key members of the executive team, and full board.  Having two separate documents allows you to keep your long-term plans and ideas on succession to a closely held group such as the Executive Committee or the Compensation Committee of your BOD.

This COVID-19 virus has taken a terrible toll on a population that resembles some of our boards and executive leadership teams.  The average age of our board members is 73, with the median CEO age of 58. The risk factor of age is in and of itself enough to make sure both of your succession plans are updated and shared across key stakeholders but consider for a moment how many of our community bank leaders and board members have some other underlying health condition. This is where we could see a catastrophic loss of life, stability, and knowledge. Let’s make sure that does not happen.

This crisis undoubtedly feels different than the credit collapse we experienced between 2008-2010. There is not anyone that can tell us for certain when this will come to an end, or if we will see a round two.  As an advocate for Small Business, and Community Banking we must make sure that our Community Banks are prepared for the absolute worst-case scenario and that could include the loss of a board member, or senior executive or both depending on our ability to flatten the curve.

The economy was on fire, and we all hope that it returns to pre-pandemic numbers as quickly as it fell apart, but we all know that it will not be that easy.  A global pandemic was probably not the most concerning risk factor in remaining independent.  Activist investors will look at this as an opportunity to pounce if there is not a good actionable plan in place at every community bank in America.

We can start our action plan with what we learned in the last crisis-many bankers lacked the depth of credit, risk management and workout experience needed to weather a sustained period of economic loss. As an industry we have an opportunity to groom and promote a new generation of bank leaders. This generation of banker will talk to their children and grandchildren about the incredible human and financial global damage from this virus.  The war for talent must be fought on every front, and it starts with Succession Planning, and Employee Development programs.

Succession Planning requires a broad approach today and we expect that to go even deeper into your org chart in the coming years. A regulator recently shared with me that this is a topic they bring up as they examine banks. A Succession Plan for the executive team and even the board is now considered a must have; gone are the days of having an idea on a cocktail napkin, or the classic “I have it in my head”.

Let’s turn our attention on how to fix the problem. The first step toward developing an effective ESP, or LTSP is to review and evaluate the current situation, focusing on an analysis of the strengths and weaknesses of the existing internal talent pool.  Most of our community bank clients have highly qualified candidates in their own bank that need a little seasoning and training.

Next, it’s necessary to develop and implement an action plan. Required elements in the process include:

• Training and development program
• Knowing the A and B players
• Initiating a mentoring system
• Cross-training employees
• Nurturing your culture
• Developing a recruiting and hiring plan
• Developing retention strategies
• Embracing Social Media
• Communicating the plan

Once developed, the action plan is not static. Successes and failures must be monitored, assessed, and revised. It is always important to look back at the past twelve months and fine tune the plan, factoring in changes in the organizational structure and executing contingency plans for unexpected developments (i.e. Pandemics). With increased M&A activity, this could be another resource for attracting talent. A social recruiting strategy is essential to your overall marketing, communication and recruiting plan.

The last three weeks has placed a significant burden on all our banks to help small businesses across the country.  The sliver lining in this is many of our younger bankers had never had to work under this much pressure with so much at stake. There are countless “hero” stories being shared all over Social Media on how Community Banks stepped up.  Our industry has a great opportunity to come out of this much stronger than what we were just a few short weeks ago.

The benefits of thoughtful succession planning are many, and they go beyond finding replacements for departing management. It reduces the likelihood of crisis if a key employee leaves and keeps the mission of the bank on track. Perhaps just as important, it forces accountability and talent assessment at least once or twice a year.

If you need help with either of your plans, Brian can be reached at (614) 686-4409, or brianr@rhonemusgroup.com.