Avoid Mergers With Strategic Planning That Includes Succession Planning

Week after week, this very publication reports on the various mergers happening among credit unions and each time I read one my soul dies a little. Many of these credit unions are what we call “boutique” credit unions, which of course can have their resource challenges and are notorious for avoiding risk. I would argue that in some areas they can take more risk.

What I can’t fathom is these credit unions that are merging because they allegedly can’t recruit a CEO or board members. This should be an integral piece of any good strategic plan. Lack of succession planning is one of the biggest risks of all. Yet credit union managers that are trying not to create risk for their institutions – which is why many merge with 20%-plus capital and very few loans on the books – are in fact one of the greatest sources of the risk.

When conducting your strategic planning, developing or reviewing your plan for who (or a description of the type of person you’d like) will run your credit union in the future is sound business practice for executives and volunteers alike, and seamlessly ties in with your annual strategic planning sessions. The fact that the NCUA is on the verge of requiring a succession plan from credit unions is both ridiculous and understandable.

I recently spoke with a boutique credit union CEO who’d merged into a smaller credit union, and immediately discovered the pent-up loan demand among its new members. It does exist.

All credit unions have to do is communicate the value of what they’re offering, which should come from a credit union’s mission and vision that’s created and reviewed annually. That value is not your loan or savings rates. It’s not the variety of products or services you’re offering. What credit unions offer is the value of membership and making people feel like they belong because they trust your institution to, yes, provide them a great deal, but also give the assistance they need to resolve the issue they’re having. This must be at the heart of every credit union’s strategic planning, and shoring up the leadership now and for the future plays a significant role.

Credit union leadership must be challenged to create meaningful change to succeed as members’ financial heroes. To maintain (or regain) relevance, we must question everything like an inquisitive toddler to dig down to your root “why.” Step into various perspectives; rigorously dig into critical facets of your credit union, like succession planning; and take responsibility for action with accountability. That is the entire purpose of strategic planning.

Executive Decision

Linda White, retiring CEO of the $100 million, Burlingame, Calif.-based Upward Credit Union, who served as CEO for 24 years, began talking with her board and planning for her retirement and successor about five years ago. She has worked at the credit union for a total of 37 years. That’s a heck of a lot of institutional knowledge to replace!

Linda recommended the current vice president of operations, Jason Mertz-Prickett, who took the helm Sept. 1. She had five years to coach him, work with the board and determine whether he would be the right fit. She shared that knowing she had someone at the ready was a great relief all the way around. Even if Jason hadn’t worked out, Upward could have determined that, too, and began a search knowing the type of executive leader that would suit the credit union. Succession planning is critical to meaningful strategic planning.

The role of succession planning in boutique credit unions is even more critical than at larger ones. Jason said it’s crucial for credit unions, and particularly boutiques, to maintain our uniqueness. It also hurts credit unions when our top talent thinks they don’t have a career path forward, so they leave for other opportunities – sometimes shutting the door on credit unions for the rest of their careers. Jason said he noticed the shift in Linda handing off certain work to him, and that he’s known her a long time and “there are not many fires I wouldn’t run into for her.” That’s an impressive leadership transition on both their parts and just one example how succession planning can be incorporated into a credit union’s strategic plan.

Volunteer Success

Nowhere near retirement age, Mark Dietrich, CEO of the $125 million, Quincy, Ill.-based United Community Credit Union, recognized the need for not only CEO succession planning, but succession planning for his board members. The credit union decided to incorporate that as part of its strategic planning session.

After developing a governance committee, outlining existing board members’ backgrounds, and developing and distributing a new volunteer application, the credit union could strategically pursue the gaps it had among its volunteers. UCCU followed the process and found Michelle Miller, a financial advisor with a background in banking who was elected to the board earlier this year. She’s also served on multiple local community boards, including Kiwanis and United Way, which gave her a well-rounded background to serve the credit union and represent its members.

Now UCCU has a proven method for ensuring its future and relevance thanks to including succession planning in its strategic plan.

Give a Damn

So many boutique credit unions with tremendous potential are merging due to failing their members in both strategic and succession planning. They’re squandering their members’ hard-won trust and hard-earned capital to feed it to another credit union whose members frequently become just a number. These stories are just two of thousands of boutique credit unions that can find a way forward by including succession planning as part of their strategic plans.

The transition between Linda and Jason at Upward has been an impressive collaboration at the executive level, while Mark and the board at UCCU has exemplified the responsibility credit unions have to their members at the board level. Strategic succession planning is part of providing excellent member service now and for the future of your credit union.

Your credit union can’t build a hero’s reputation, grow loans or gain market share on what you are going to do – only what you’ve accomplished. Strategic planning with a strong element of succession planning must be in the mix if a credit union is truly holding itself accountable to its members and their future success.

Bo McDonald is CEO of Your Marketing Co. in Greenville, S.C.