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How to Create an Effective Succession Plan: A Guide for Bankers

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The leadership of a bank isn't just about steering today's operations; it's about ensuring the institution thrives into tomorrow and beyond. The question then emerges: Does your bank have a solid succession plan in place to face the future? This isn't a matter to be shelved for later consideration. The progression, stability, and growth of your bank depend on it.

Here's what we'll cover in this post:

  • The Importance of Succession Planning
  • Potential Challenges
  • How to Create an Effective Succession Plan
    • Identify Key Positions
    • Understand the Roles of the Key Positions
    • Review Your Talent
    • Create Individual Development Plans
    • Monitor and Measure

Now let's dive into each of these for a better understanding.

The Importance of Succession Planning

Succession planning is critical for banks as it ensures the continuity of leadership and the ability to navigate future challenges. With an aging workforce and the retirement of experienced leaders, banks need to have a plan to identify and develop the next generation of leaders. Succession planning also enables banks to maintain stability and preserve their unique culture and values. In today's fast-paced financial environment where change is the only constant, such strategic foresight is indispensable for banks aiming to thrive.


Potential Challenges

Before creating a succession plan, it's wise to be aware of potential hurdles you might face. Understanding these challenges can help you navigate them more effectively. Consider the following points and think about how your bank could tackle each one.

  • Limited candidate pool: Smaller communities mean fewer people to choose from for future leadership roles. Finding the right talent could be tricky.
  • Competition from big banks: Bigger banks with more resources might lure away your top candidates. They have the advantage of offering more to attract the best talent.
  • Transferring knowledge and culture: New leaders need to grasp more than just their job roles; they must also get the essence of your bank's culture and its community impact.
  • Resistance to change: You might encounter pushback against new ways of doing things, especially in banks that are community staples or have long-standing traditions.
  • Resource constraints: Smaller banks might not have the workforce or budget to scout and prepare future leaders.
  • Lack of formal planning: Without a solid plan for leadership development, maintaining your bank’s operations and core values could become difficult.
  • Family business dynamics: For family-owned banks, family issues can complicate decisions about the bank’s future direction.
  • Ensuring buy-in: Successful change requires agreement and commitment from everyone involved, from stakeholders to employees.

While not every challenge will apply to your bank, it’s good to think about these issues and how you might address them. Now that you have a clearer understanding of potential obstacles, let’s move on to creating an effective succession plan.


How to Create an Effective Succession Plan

1. Identify Key Positions

The foundation of an effective succession plan is the identification of critical roles within the bank. These are positions where vacancies could significantly disrupt operations, potentially jeopardizing the institution's stability and performance. To identify key positions, banks need to take several steps, including the following:

  • Conduct an analysis: Determine which positions are critical to the bank's operations and goals. This involves assessing the impact of each role on the bank’s performance, the difficulty of replacing the role, and the role’s unique contribution to the bank’s success.
  • Review organizational structure: Examine the current organizational structure to identify roles that are pivotal in maintaining smooth operations and driving the bank's objectives.
  • Engage with stakeholders: Consult with various stakeholders, including senior management, department heads, and board members, to gather insights on which positions are deemed essential for the bank’s future growth and stability.
  • Assess risk of vacancy: Identify roles with a high risk of vacancy due to factors like retirement, high turnover rates, or skill scarcity. Ask yourself, "Who would we be most concerned about if they left?" Focusing on these positions can help mitigate potential disruptions by preparing for succession in advance.


2. Understand the Roles of the Key Positions

Understanding the nuances of each key position is crucial for effective succession planning. This involves the following:

  • Job shadowing and interviews: Implement job shadowing programs where HR personnel or potential successors spend time observing incumbents in their key roles. Conduct in-depth interviews with current role holders to gain insights into daily responsibilities, challenges, and success factors. This firsthand experience and knowledge sharing provide a deeper understanding of the role's intricacies.
  • Role-specific competency mapping: Develop detailed competency maps for each key position, outlining the necessary skills, knowledge, and behaviors that contribute to success in the role. This mapping should cover both technical competencies specific to the banking sector and soft skills such as leadership and communication.
  • Stakeholder feedback: Gather feedback from a range of stakeholders who interact with the key position, including peers, subordinates, and customers. This feedback can offer a comprehensive view of the role's impact, expectations, and areas for improvement, enriching the understanding of what makes the position crucial.
  • Scenario analysis: Conduct a scenario analysis to understand how each key role responds under different circumstances, such as market changes, regulatory updates, or technological disruptions. Analyzing these scenarios helps in comprehending the role's adaptability, importance, and the potential impact of decisions made by individuals in these positions.


3. Review Your Talent

With a clear understanding of the critical roles, the next step is to review the bank's existing talent pool to identify potential successors. This process involves:

  • Talent Assessment Tools: Using tools that are designed for talent assessment can help the bank more effectively evaluate the skills, capabilities, and performance of employees. These tools can help in identifying individuals whose skills and career aspirations align with the requirements of the key positions.
  • Open Conversations: Talk with promising employees to understand their professional aspirations, strengths, and development needs. This dialogue helps in aligning individual career goals with organizational needs.
  • Leadership involvement: Engage the entire leadership team in the process. This collective involvement ensures a diverse perspective in identifying and agreeing on high-potential employees.
  • Talent sources: Analyze both internal and external talent pools to ensure a wider selection of candidates for future roles.


4. Create Individual Development Plans (IDP)

Once potential successors have been identified, the focus shifts to preparing them for their future roles. This is achieved through IDPs, which involves the following:

  • Skill Gap Analysis: Conduct a detailed skill gap analysis for each potential successor to identify the specific areas where further development is needed to prepare them for their future roles. This analysis should compare the current competencies of the individual with the requirements of the key positions.
  • Customized Learning and Development Initiatives: Design customized learning and development initiatives based on the skill gap analysis. These could include targeted training programs, e-learning courses, workshops, and seminars focused on developing the specific skills and knowledge identified as gaps.
  • Job Assignments and Project Involvement: Provide potential successors with job assignments and involve them in projects that offer practical experience and exposure to the challenges and responsibilities they will face in their future roles. This hands-on approach facilitates real-world learning and development.
  • Leadership Coaching and Mentoring: Pair potential successors with experienced leaders within the organization for coaching and mentoring. This relationship can offer invaluable insights, advice, and guidance, helping to accelerate the development of leadership skills and organizational awareness.
  • Regular Review and Feedback Sessions: Schedule regular review and feedback sessions with potential successors to monitor their progress, provide constructive feedback, and make adjustments to their IDPs as necessary. This ensures that the development process remains dynamic and responsive to the evolving needs of the individual and the organization.
  • Exposure to Senior Management and Planning: Involve potential successors in meetings and planning sessions where senior management is present. This exposure not only familiarizes them with high-level decision-making processes but also helps them understand the strategic direction of the bank, fostering a broader organizational perspective.


5. Monitor and Measure

The final step in succession planning is to monitor progress and measure success. Remember that a succession plan is a living document, meaning it's constantly being updated as time goes on. This includes the following:

  • Internal promotions: Tracking the number of internal promotions to leadership positions can indicate the success of the succession plan. Higher rates of internal promotions suggest that the bank is effectively preparing and developing its future leaders.
  • Employee satisfaction and engagement: Regularly measuring employee satisfaction and engagement can provide insights into the effectiveness of succession planning. Higher levels of satisfaction and engagement among employees can indicate the success of leadership development initiatives.
  • Performance of successors: Assessing the performance of individuals who have assumed leadership roles through the succession plan can help determine the effectiveness of the plan. Positive performance outcomes indicate that the successors were well prepared and able to effectively lead the bank.
  • Long-term organizational success: Ultimately, the long-term success and growth of the bank are key indicators of the effectiveness of succession planning. If the bank continues to thrive and achieve its goals, it suggests that the succession planning efforts have been successful.
  • Adjustment and Flexibility: Ensure that the succession plan includes mechanisms for flexibility and adjustment based on feedback and changing organizational needs. This adaptability is crucial for addressing unforeseen challenges, changes in direction, or shifts in the external environment that may impact the bank's operations and talent needs.



In conclusion, having a succession plan is a must for banks looking to secure their future in an ever-changing financial landscape. It's not merely about filling positions but about fostering a culture of continuous development, strategic foresight, and adaptability. By identifying key positions, understanding roles, reviewing talent, creating individual development plans, and monitoring progress, banks can ensure a seamless transition of leadership. This not only helps in overcoming potential challenges but also in capitalizing on the opportunities that come with fresh perspectives and innovative leadership.