Your financial institution needs to start succession planning
Succession planning is a vital strategy for helping to ensure the long-term success and stability of your financial institution. Faced with the challenges of an aging workforce, employee retention, competitive labor markets and the need for continuous leadership, taking a proactive approach to succession planning will give you an advantage over organizations that don’t do this.
Here’s what you need to know as you start developing an effective succession plan for your institution.
What is succession planning (and how does it help financial institutions)?
Succession planning is the ongoing process of preparing a new generation of leadership for your financial institution. Succession planning is not merely about finding replacements for departing staff; it is about developing and retaining talent within the organization.
- Unlike replacement planning, which is reactive and focuses on filling immediate vacancies, succession planning is proactive and aims to cultivate a pipeline of future leaders. This approach positions financial institutions to be prepared for transitions and to maintain continuity in leadership and operations.
- With roughly 10,000 baby boomers retiring each day, financial institutions are at risk of losing valuable institutional knowledge and leadership experience. Succession planning helps to mitigate this risk by identifying and developing potential leaders from within the organization.
- A good succession planning process also fosters a culture of growth and development among all staff members.
What are the key components of an effective succession planning process?
Business succession planning is an ongoing process, not just something you do once. Ideally, you should be continuously developing your internal talent to give your financial institution a deep bench to draw from. Key steps include:
1. Clarify your future needs
Financial institutions must identify the skills, knowledge and attributes required for success in key roles. By understanding the specific needs of each role, financial institutions can tailor their succession planning efforts to help ensure they are developing the right skills and competencies in their future leaders.
2. Assess internal talent
As part of your process, assess your team’s talent level. Engaging in discussions about talent from multiple perspectives helps to understand the depth of the talent pool.
Tools like the nine-box matrix can be used to evaluate the performance and potential of employees, guiding investment in their development. The matrix allows organizations to categorize staff based on their current performance and future potential, helping to identify those who are ready for advancement and those who may need additional development.
3. Identify successor readiness
Knowing the readiness of potential successors is crucial. Readiness charts can help track employees’ strengths and development needs, ensuring that the right employees are prepared for key roles.
These charts visually represent where employees stand in terms of their readiness for a promotion, making it easier to identify growth areas and address them through targeted professional development efforts.
4. Understand your team’s career interests
Financial institutions should engage with staff to understand their career goals and interests. This enables development efforts to align with a staff member’s aspirations, increasing the likelihood of retention and leading to higher job satisfaction.
Don’t assume anyone’s goals are static, though. Revisit career interests on an annual basis. People’s perspectives on their own employment journey shift along with their life circumstances, so what may have been a “no” or a “not now” in the past can easily become a “I’m ready to go” response.
5. Develop your talent
Continuous development through stretch assignments, special projects, coaching and mentoring is essential. This ongoing process helps to address potential gaps and prepares staff for future responsibilities.
Stretch assignments and special projects provide opportunities to develop new skills and gain experience in different areas. Meanwhile, coaching and mentoring offer personalized guidance and support.
Should an unanticipated vacancy occur, development activities also help identify high-potential staff members who may be best positioned to take on increased levels of responsibility.
6. Conduct an ongoing review
Regular reviews of your succession planning program keep it relevant and effective. Promising practices suggest evaluating your succession plan every nine to 15 months and adapting plans as needed based on changes in your institution’s strategic priorities and staffing needs.
But don’t lock yourself into this schedule. Whenever there is a significant shift in strategy or loss of critical staff members, review your succession plan regardless of the passage of time. These reviews help ensure alignment with goals and adaptability to any changes in the external environment.
How does growing generational diversity affect succession planning?
As you conduct your succession planning, consider how changing generational demographics will affect your organization. Here’s what’s projected to occur over the next decade:
With millennials and Gen Z now making up 61% of the workforce, it is important to invest in proactive, intentional development efforts to prepare employees for assuming greater levels of roles and responsibilities. Recognize that succession planning isn’t just about leadership positions — it encompasses all key roles.
However, it is equally important to continue the development of Gen Xers, the youngest of whom have another 20 years before reaching the traditional retirement age of 65. Development should be as inclusive as possible, not exclusive.
Your employee retention strategies should include succession planning
Succession planning is just one element of a broader retention strategy. Retention doesn’t just happen; it requires proactive, intentional action to support an organization’s most important asset — its people.
Research by the Work Institute suggests that upwards of 75% of turnover could be prevented by addressing the reasons that cause employees to resign. To compete and distinguish themselves as high-quality institutions invested in and supportive of their staff, organizations should consider that:
- Leveling up leaders is crucial. Provide foundational education and mentoring for supervisors, including ongoing training, group coaching sessions and culture leaders who can help supervisors work through various developmental areas.
- Incentives matter. Consider strategies such as competitive compensation and benefits, flexible working environments, professional development opportunities, career path opportunities, mentorship programs, building a sense of empowerment and autonomy, fostering connectedness and enjoyment among staff, and, of course, succession opportunities.
- Assessing the current environment is essential for achieving a desired future state. Conduct compensation studies, organizational structure reviews, personal development plan assessments, engagement and culture surveys, stay interviews, exit interviews and focus group discussions to identify areas for improvement. Assessing your environment and leaning into data, facts and anecdotal information provides an abundance of information on which to act.
Additionally, focus on creating a positive staff experience. The staff experience represents an employee’s perceptions, observations and interactions with the organization from pre-employment through the end of the employment life cycle. Culture is at the heart of the staff experience, and every experience matters.
Succession planning is not a luxury but a necessity for financial institutions. It requires a commitment of time, energy and resources from everyone. By investing in the development of your staff, your institution can develop a continuous supply of talent, maintain its culture and achieve long-term success.
How Wipfli can help
Get help implementing an effective succession planning process. Ask us to collaborate on strategy, process and developing your talent so that you’re not just ready for a future transition, but to thrive right now. Start a conversation.
Let’s talk succession planning
