Succession Plans Do Have Value Mr. Welch

As usual Mike Welch takes a thoughtful view of a timely issue for credit unions. In his Publisher’s Column “Don’t Get Carried Away With Succession Plans June 23) -he makes many good points for not going overboard on the need for formal planning. My concern is that credit union boards and CEOs will use the weight of Mike’s argument to justify not doing anything about succession. There is a big difference between not being dependent on a plan that anoints one person as the next CEO and taking appropriate steps to better prepare future leaders. I am not a succession-planning consultant, but I have seen first hand the many positives that come from comprehensive succession planning. The early part of my career was spent in Human Resources with General Electric where I administered the succession planning process for its Lighting Business. GE’s approach to succession planning is world-renowned. That recognition has primarily been focused on its CEO succession, but the fact is that succession planning is a discipline throughout its management ranks. It is not just a once-a-year activity; it is part of the fabric of the organization. The GE formula for growing future leaders has many elements. Its basics are to hire high-potential people, challenge them with promotions to more responsible positions, expose them to many sources of formal leadership training and development, and provide mentoring, career counseling, and individual development plans to keep the process moving forward. And, the process doesn’t just focus on promotable managers. Weaker performers are systematically identified and moved out of positions that could be better used for the development of other future leaders. It is a survival-of-the-fittest environment. What is the value of this approach to leadership development? Well, Jack Welch came up through GE’s ranks to become a successor and great CEO. The multi-year competition to win the top job made all the would-be successors perform at higher levels. Obviously this was good for the company and its shareholders. And, the would-be successors, who do not get the coveted job, often go on to provide value to other organizations. Over the years hundreds of top leaders have been produced by the GE approach to succession planning. When GE’s board selected Jack Welch as CEO, one of his rivals for the job left GE and became CEO of Rubbermaid and then Goodyear, leading both companies to new heights of performance. Recently when Welch retired, the GE succession planning process had produced three strong contenders to succeed him. One of the runners-up (there were no “losers” in this group) became the CEO of Home Depot and the other became CEO of 3M. While credit unions do not have the resources available in GE, the principle is the same- succession planning produces leaders. A credit union CEO, that I know, bragged to me about the strength of his senior management team. He said that he had, years earlier, hired four of his top five managers as tellers. When I asked how senior executives resulted from teller hires, he responded: “I did not hire tellers.” Rather, he had hired high-potential people and then developed them. Another well-known CU CEO takes great pride in producing future CEOs for the CU industry. He uses the same proven formula – hire strong people, promote them, ensure they get formal training (his all get MBA degrees), identify their development needs, coach them, and send them off to a CEO position of their own. His credit union gains value from these talented leaders and then later, other credit unions value from them as CEOs. Bottom line the industry wins. So, take Mike Welch’s comments as good counsel, but do heed his caution – “Don’t get carried away.” Do not use his arguments to justify a reduced commitment to succession processes that develop CU future leaders. Mark Elliott Partner Member Value Network Moreland Hills, Ohio