Texas Bank Report, February 2022 Page: 4
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Succession Planning is Planning for Success
By: Gordon AndersonSuccession planning, for a variety of reasons, is a topic often
unaddressed by community banks.
Between establishing and monitoring policies and procedures,
keeping pace with regulatory changes, navigating cybersecurity
concerns, and overseeing the bank's overall performance, bank
boards of directors have multiple and significant responsibilities.
Its members may simply not have had the time to develop a solid
succession plan.
The issue can also be a sensitive one, much like discussing your
will with family members. As some community banks are family
owned; the issue can become even more delicate. Finally, some
board members may just not know how develop a plan or where
to start.
At its most basic level, a succession plan is a strategy for transfer-
ring roles when key individuals resign or retire, and the lack of
one can leave your bank in a vulnerable position. Having a plan in
place can help stabilize your bank's operations and avoid disrup-
tions when a long-tenured director or officer departs. Plus, suc-
cession plans offer banks an opportunity to assess the skills and
competencies of potential executives and identify and cultivate
these individuals.Directors often come from the ranks of the legal profession or
business professions that require certain aptitudes and skill sets.
However, just as boards seek to diversify the business backgrounds
of its members to enhance its pool of knowledge and expertise, a
good succession plan is also your opportunity to address another
element often missing among board members: a diversity of age.
Age diversity in the boardroom is an important consideration.
According to Bank Director magazine, the median age of board
members who participated in a 2019 compensation survey was 64.
Seventy-two percent of CEOs surveyed were 55 or older, and 2%
were older than 74.
A range of ages among board members allows for the transfer of
practical experience and institutional knowledge, which can help
transition your bank into the future. Plus, younger members may
have a greater appreciation for technology than older members and
be better positioned to offer counsel and insight regarding mobile
banking, virtual currencies, cybersecurity, and other aspects of our
modern financial system.
There are, however, a myriad of challenges facing community
banks when considering the topic of succession. This is especially
true for small and rural banks, where the depth of talent may be
limited relative to larger institutions.The Department suggests keeping various characteristics in mind when
searching for a successor, including the following:Honesty and
Integrity
Engagement
Analytical Skills
Business
Community
Banking
Has Time To
Complementary
AttributesPuts bank interest ahead of personal
Avoids actual & perceived conflicts of interest in life, work, and while serving
Thinks independently, rather then simply following the pack
Is inquisitive
Provides constructive guidance and opinions
Asks tough questions and expects satisfactory answers
Voices constructive dissent when appropriate
Draws analogies between past experiences and current challenges
Is willing to lean and develop new skills
Is strategically engaged but operationally distant
Possess financial, business and managerial acumen
Actively engages in the field of employment
Has connections with other businesses and industries
Has knowledge of the communities served
Actively engages in and with community groups
Has a basic understanding of banking, regulatory systems, laws, and regulations
Is willing to fill knowledge gaps
Learn the business & pursue professional development opportunities
Staying abreast of bank affairs
Commit to Board Activities - Preparing and attending meetings, reviewing examination and
audit reports, & ensuring responsiveness
Independent of bank management
Posesses a skill set that complements those of the other directors
Has skills that support the bank's long-term vision
Enhances board member diversity4 * Texas Bank Report February 2022
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Texas. Department of Banking. Texas Bank Report, February 2022, periodical, February 2022; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth1454274/m1/4/: accessed May 30, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.