The Definition of a Great Board: 2021 Edition

The role of a board member of any organization is constantly evolving.  Economic cycles, leadership transitions, market dynamics, competitive changes, governance activists and even political shifts can impact board composition and best practices in corporate governance seemingly out of the blue.  Then add the unexpected challenges of a global pandemic, and the environment changes quickly again.

There are certain constants, however, which have proven useful over time as essential elements of the most successful boards.  In defining a great board, we suggest these for your consideration:

Governance as a defining characteristic of a high performing board may feel like stating the obvious.  Except the board’s role is precisely that—to govern and not manage.  The old saying “nose in, fingers out” still rings true today.  Boards exist in large part to oversee management on critical issues such as strategy, risk, CEO succession and transactions, and to provide sound counsel to the CEO and leadership team.  Despite what some directors may still think, the board’s job is to guide and advise management and not to run the business.

R  Risk is a critical aspect of appropriate board oversight, and has become increasingly more complex over time.  The impact of a “black swan” event like we have recently experienced with the global pandemic is a prime example.  Boards should be regularly updated on the strategic risks facing the company, and must ensure that appropriate procedures for compliance, controls and reporting are in place and functioning well across the organization.

E  Engagement as a director is often overlooked.  Throughout our firm’s experience advising boards, it is all too common that we encounter directors who are simply not engaged in governing.  Often these Directors do not properly prepare for meetings, worry about the time and length of the meeting, and do not partake in constructive conversations.  Whether due to overly lengthy board tenure or outdated skills, a lack of consistent engagement may drive consideration for offboarding.

A  Accountability.  Boards in some organizations do not hold management truly accountable for results, which is a crucial element of governing.  Such boards at times may find excuses for poor performance or reward management for underperformance or tenure, rather than pushing back to explore why goals may not have been achieved. Sometimes there are legitimate reasons why an organization does not perform (external factors; lack of resources; faulty expectations; global pandemic, etc.). Boards need to make sure the company leaders have what is needed to succeed going forward, and then hold them accountable to deliver.

Talent-Centric.  Well-governed organizations have boards that are consistently focused on CEO succession and executive talent development.  Some firms are so focused on crafting an awesome strategy that they forget about the other side of the coin—execution of the plan.  Talent is the biggest variable in execution, and boards need to make sure that the CEO and leadership team are consistently focused on and held accountable for the attraction, development and retention of talent above the norm.

B  Broadly-skilled boards are comprised of people with an appropriate mix of relevant talents and experiences, to enable proper guidance and provide a variety of useful viewpoints.  This skill mix should be both functional (for example, financial, technology, marketing, human resources) as well as industry (reflecting competitive dynamics, customer segments, emerging markets, etc.).  Too many directors with similar backgrounds, or a lack of broad and current skills, compromises the value derived from the board table.

O  Open-Minded.  Boards benefit from directors who are informed, insightful, and inquisitive.  In other words, willing to challenge assumptions, consider new ideas and approaches, and are able to think outside the box.  A room full of directors with blinders on, who operate with “group think,” or who want to pretend that this is still “the good old days” does not enhance governance or add value.

A  Awareness of the dynamics taking place outside the organization is important as well. This may apply to the competitive landscape in your market or industry, or knowledge of the external factors which could significantly impact the business. Also included here could be the potential for regulatory impact or strategic transactions—wanted or unwanted—which could quickly reshape the organization.  Ongoing director education to remain current and relevant is critical.

R  Respectful.  Often times boards are called upon to make tough calls, or push back on management regarding critical issues.  These types of messages are never easy, but need to be delivered firmly yet respectfully.  Boards have an obligation to be courageous in the face of difficult decisions which may arise, including at times whether to allow underperforming directors to continue serving. Respect also needs to extend to the viewpoints of other directors, always, even when disagreeing.

D  Diversity is the order of the day!  As has been well documented, boards comprised of leaders with diverse perspectives generally make better decisions.  Boards representing of a robust variety of backgrounds and life experiences—whether diverse by race, gender, ethnicity, or other criteria, are not only appropriate but vital for success in today’s business and social climate.  In addition, having diverse role models on the board and at the top of the organization sends a very strong positive message to current and prospective employees.

The willingness to truly govern and tackle the important business challenges are hallmarks of great boards.  However, the dynamics of crafting a board with the right blend of skills, relevant experiences and diverse perspectives remains difficult for many institutions.  A thoughtful approach to board composition, recruitment and succession will enhance both the quality of corporate governance as well as organizational performance.

Alan J. Kaplan is Founder & CEO of Kaplan Partners, a retained executive search and board advisory firm headquartered in suburban Philadelphia.   You can reach him at 610-642-5644 or alan@KaplanPartners.com.

Penn Community Bank Welcomes New Directors

Perkasie, Pa., January 28, 2021Penn Community Bank, the largest mutual bank headquartered in eastern Pennsylvania, is proud to welcome Kelly Finch Mobley and Brian G. Peirce to its Board of Directors.

“We are pleased to welcome Kelly and Brian to Penn Community Bank’s board,” said Bill Larkin, Chair of the Penn Community Bank Board of Directors. “Both bring a wealth of business and community experience and will immediately make a positive impact as we work to ensure Penn Community Bank remains the leading independent, mutual bank in the region.”

“At Penn Community Bank, we’re committed to our long-term mission of serving as a catalyst for growth and functioning as an integral part of the local economy,” said Jeane M. Vidoni, Penn Community Bank president and CEO. “Kelly and Brian share our core values and their impressive backgrounds will provide important new strategic voices to the conversation of how we deliver Penn Community Bank’s mission to more individuals, families, businesses, and communities throughout our markets.”

Mobley joins Penn Community Bank with over 35 years of experience in financial services, most recently serving as Executive Vice President, Director of Retail Workforce Readiness with PNC Bank, N.A. She serves on the boards of Ursinus College, Fortress Arts Academy, and the Philadelphia Dance Company. Mobley holds a BS in Applied Mathematics and Economics from Ursinus College and an MBA from the Wharton School of the University of Pennsylvania.

Peirce is the president and CEO of Montgomery Co.-based Peirce-Phelps, LLC. one of the nation’s largest distributors of HVAC equipment, parts and supplies. He serves on the board of Airline Hydraulics and is the past chairman of Heating, Air Conditioning, and Refrigeration Distributors International (HARDI). Peirce holds a BA in economics from Franklin and Marshall College and an MBA from the University of Chicago.

About Penn Community Bank: Penn Community Bank holds more than $2.5 billion in assets, employs more than 300 people, and offers banking, lending and investments at 22 bank branches and three administrative centers throughout Bucks and Montgomery counties, Pennsylvania. As an independent, mutual financial institution, Penn Community Bank is not publicly traded and operates with its long-term mission in mind: to help businesses grow and prosper, to provide financial resources to individuals and families throughout their lifetimes, to strengthen the local economy, and to partner with local organizations to act as a catalyst for positive growth in every market it serves.

Northwest Bank Names EVP & Chief Human Resources Officer

Warren, PA —  January 21, 2021 — Kyle Kane has been named Executive Vice President and Chief Human Resources Officer for Northwest Bank, according to Ronald J. Seiffert, Northwest President and CEO.  In his role, Mr. Kane will be responsible for the development and execution of the bank’s strategy for talent acquisition, development and retention and will manage all key functions of its Human Resources Department, including employee inclusion and engagement, compensation and benefits, succession planning, compliance and operations.

Northwest Bank conducted a nationwide search to identify the bank’s next human resources leader with the assistance of Kaplan Partners, a nationally known boutique retained executive search and board advisory firm specializing in the financial services sector.

Throughout his 25-year career, Mr. Kane has gained extensive knowledge and experience in designing the human resources agenda for complex businesses within multifaceted global organizations. Most recently, he served as Vice President of Global Human Resources for Diebold Nixdorf, headquartered in North Canton, OH, an American multinational financial & retail technology company specializing in the sale, manufacture, installation and service of self-service transaction systems such as ATMs. During his tenure with Diebold Nixdorf, he led several strategic HR initiatives including organizational transformation, cultural change management and mergers and acquisitions.

Previously, Mr. Kane served as Senior Vice President and the Head of Human Resources for Global Business Services at Fidelity Investments. In this role, he led an HR organization supporting over 6,000 employees across India, Ireland and China.

In making the announcement, Mr. Seiffert said, “At Northwest, our people are our greatest resource and the key to our success. Kyle’s proven leadership in managing HR strategy to align with business objectives will be indispensable as we evolve our company culture and customer experience.”

“Building a high-performance culture where employees can contribute and grow – and feel valued — is critical to becoming a company that sets itself apart,” Mr. Kane said. “I’m thrilled to join the impressive team at Northwest to help lead its transformation.”

Mr. Kane earned a Marketing degree from Stonehill College and has completed executive development programs in organizational effectiveness, leadership and change management. He resides in Hudson, OH, with his wife and their two children.

Northwest Bank operates 162 full-service offices and 8 free-standing drive through locations. Founded in 1896, Northwest offers a complete line of personal and business banking products including employee benefits, investment management services, insurance and trust. Northwest Bancshares, Inc. is the holding company of Northwest and is listed on the NASDAQ Global Select Market as NWBI. More information about Northwest can be found online at www.northwest.com.

Essex Savings Bank Announces Successor to President & CEO

Essex, CT — January 14, 2021  — The Board of Directors of Essex Savings Bank is pleased to announce that Diane Arnold, Senior Vice President and Chief Lending Officer of Essex Savings Bank, will be assuming the role of President and CEO in July 2021, upon the retirement of current President and CEO Gregory Shook.

Mr. Shook has served in his role for 21 years overseeing steady growth in deposits and loans, geographic expansion, the development of the Trust Department with over $600 million in assets, and integration with Essex Financial Services, its wholly-owned wealth management subsidiary with over $2.8 billion of managed assets. In addition to inheriting Mr. Shook’s role, Ms. Arnold will also serve on the Board of Essex Savings Bank, and on the Board of Essex Financial Services, Inc. 

Douglas Paul, Chairman of the Essex Savings Bank Board of Directors, stated, “Greg Shook has been an exemplary leader, and our Board engaged in a very extensive and comprehensive process to select his successor. Ms. Arnold is an outstanding choice with the attributes and qualities necessary to propel Essex Savings Bank into the next era of banking as a leading community bank.”

Ms. Arnold began her banking career in 1983 and she worked in a variety of departments at two different banks before joining Essex Savings Bank in 2002, where she ultimately rose to her current position. During her 19 years at the bank, she has been particularly influential in developing the commercial loan portfolio and in mentoring many individuals. She has been involved in a number of community organizations for many years, and in 2017 she received a Women of Fire Award, recognizing key female leaders in the Finance, Insurance and Real Estate sectors.

Ms. Arnold earned a B.S. degree in Economics from Quinnipiac College and is also a graduate of the Connecticut School of Finance and Management. “I am honored to have been selected by the Board to assume the role of President and CEO upon Greg Shook’s retirement,” said Ms. Arnold. “I look forward to building upon our solid foundation of serving the local community and continuing to flourish in an ever-changing banking environment.” Mr. Shook stated: “I am so pleased the Board has selected Diane Arnold as the next President and CEO and the first woman to serve in this role at our institution. I have known Diane for many years and look forward to working with her to insure a smooth and successful transition.”  

Essex Savings Bank is a FDIC insured, state chartered, mutual savings bank established in 1851. The Bank serves the Connecticut River Valley and shoreline with six offices in Essex (2), Chester, Madison, Old Lyme and Old Saybrook providing a full complement of personal and business banking. Financial, estate, insurance and retirement planning are offered throughout the state by the Bank’s Trust Division, Essex Trust and wholly-owned subsidiary, Essex Financial Services, Inc.

Flagstar Bank Hires Karen Buck as EVP & Head of Operations

TROY, Mich., Jan. 6, 2021 —  Karen Buck has joined Flagstar Bank (NYSE: FBC) as executive vice president and Head of Operations. In this role, she is responsible for the Customer Engagement Center, retail and commercial operations, banking operations, and business risk and internal controls.

Buck has over 30 years of experience in the financial services industry, most recently as executive vice president of commercial, retail, and payment operations at TD Bank in New Jersey, where she led a team of more than 2,200 employees across the bank’s commercial and retail segments.

“With Karen on board, we look forward to driving operational excellence at Flagstar to a new level and giving our customers another reason to bank with us,” said Alessandro DiNello, president and CEO of Flagstar. “She is a true professional and a standout in her field. We’re fortunate to have her in this important position to support the future growth of our retail and commercial businesses.”   

Buck was recognized by The American Banker as a member of The Most Powerful Teams in Banking, by South Jersey Biz magazine as one of 25 Women to Watch, and by NJBIZ Journal as one of the Best 50 Women in Business.

Flagstar Bancorp, Inc. (NYSE: FBC) is a $29.5 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 160 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 87 retail locations in 29 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $227.4 billion of loans representing slightly over 1.1 million borrowers. For more information, please visit flagstar.com.

Maryland Bankers Association Names New President & CEO

December 4, 2020    Annapolis, MD  –  The Maryland Bankers Association (MBA) announced today that Ramon O. Looby of Fulton, Maryland, will become the new President & CEO of the Association. Mr. Looby will replace long-time President & CEO, Kathleen Murphy, who left the Association in August. For the last four years, Mr. Looby served as the Senior Vice President and Public Policy Lead at Bank of America, working with legislators and associations in a number of states including Maryland.  Prior to that, he was a Senior Director with the Consumer Data Industry Association based in Washington D.C.  Throughout his career, Mr. Looby has held numerous leadership positions with various government and trade industry associations. He is a graduate of the University of Florida where he earned his Bachelor of Arts in Sociology and his Master of Arts in Political Communication.  Mr. Looby’s expected start date with the MBA is January 11, 2021.

Mr. Looby was selected from an extensive list of candidates from around the country. The search was conducted by a committee comprised of MBA board members, headed by Committee Chairman William Pasenelli, CEO, Community Bank of the Chesapeake and MBA Chairman Robert “BJ” Goetz, President & CEO, Middletown Valley Bank.  The MBA also engaged Kaplan Partners, a nationally known retained executive search and board advisory firm specializing in the banking industry, to assist with the search process.

“Following an extensive nationwide search, the Maryland Bankers Association is pleased to welcome Ramon Looby as its new President & CEO,” said B.J. Goetz. “His combination of experience in banking and with national trade associations will serve our members and the community well.”  “I am honored and excited to join the MBA in early 2021 and look forward to leading this historic Association into the future,” said Looby.

For additional information please contact B.J. Goetz, MBA Chairman and President & CEO of Middletown Valley Bank at (301) 371-3055.  For information on the MBA, please visit www.mdbankers.com.

Founded in 1896, MBA represents community, regional and large nationwide banks and thrifts of all sizes and charter types which hold $140 billion in deposits in more than 1,400 branches across the State.  Maryland banks employ more than 26,000 professionals who dedicate on average 100 hours of community service annually.  MBA serves member banks as a legislative and regulatory advocate at all levels of government, as the public relations voice for the industry, as a provider of professional education to members and a promoter of financial education to the community.  The MBA will celebrate its 125th Anniversary in 2021.

ConnectOne Names Bank President, Hires Chief Risk Officer

December 2, 2020    Englewood Cliffs, N.J   —   ConnectOne Bancorp Inc. named Elizabeth Magennis president of its unit ConnectOne Bank. Magennis, who previously served as the executive vice president and chief lending officer of the bank, assumes her new role immediately.

The company also disclosed that Michael O’Malley has been hired as executive vice president and chief risk officer of ConnectOne Bank. His career includes serving most recently as director of enterprise risk and strategic initiatives and head of operational risk at On Deck Capital Inc.  He has extensive risk management experience across a wide array of financial institutions, including Fintech lending, global banks, commercial banks, investment banks, broker-dealers and wealth managers.

Prior to joining On Deck Capital, O’Malley worked with MUFG Securities Americas, Ernst & Young, Bank Leumi, and Trillium Trading.  At ConnectOne, he will be responsible for providing effective and proactive risk leadership, and ensuring that the organization is fully prepared to comply with the regulatory standards applicable to larger banking organizations.  In this new role, O’Malley will report directly to Chairman & CEO Frank Sorrentino, III.

In addition, Siya Vansia has been named senior vice president and chief brand and innovation officer of the bank. Vansia has been with ConnectOne for more than a decade.

For additional information, visit www.ConnectOneBank.com.

Community Bank System Adds Director

November 19, 2020   Syracuse, N.Y.  —  Community Bank System, Inc. (NYSE: CBU) (the “Company”) announced today the election of Susan E. Skerritt to its Board of Directors as a new independent director. Ms. Skerritt has extensive experience in banking and financial services, having served in leadership positions at premier banking institutions, including Deutsche Bank, Bank of New York Mellon, and RBC U.S. Group Holdings LLC. Ms. Skerritt is currently a Senior Advisor with Promontory Financial Group, an IBM company that provides consulting services to financial institutions on regulatory, governance, and risk management matters.

Ms. Skerritt’s election expands the Company’s Board to 13 Directors, 12 of whom are independent. Ms. Skerritt was also appointed to the Board of Directors of Community Bank, N.A., the Company’s wholly-owned banking subsidiary. The Board has determined that Ms. Skerritt is a qualified financial expert and she will serve on the Board’s Audit and Compliance Committee and the Risk Committee.

“We are pleased to welcome Susan Skerritt as a new independent director to the Board of Directors of Community Bank System, Inc. and Community Bank, N.A.,” said Sally A. Steele, Chair of the Board of Directors. “Her decades of experience in leadership roles at high caliber banking institutions will be a tremendous asset to the Board and we look forward to her contributions in the areas of operational, financial and regulatory matters. Her appointment reflects the Board’s continued focus on enhancing the Board’s depth of experience and diversity to ensure an appropriate level of expertise and perspective to provide effective oversight of the Company and its subsidiaries.”

Mark E. Tryniski, President and Chief Executive Officer, stated “Adding Susan to our Board of Directors is an exceptional win for our organization. She brings a wealth of banking and financial industry knowledge and leadership skills and her perspective will assist us in continuing to deliver exceptional returns to our shareholders.”

Over the course of the last 35 years, she has served in various executive leadership positions, including serving as Chairwoman, Chief Executive Officer and President of Deutsche Bank Trust Company Americas, Deutsche Bank’s U.S. commercial banking entity from 2016 to 2018. Previously at Deutsche Bank, she led the transaction banking businesses in North and South America, and also led the global correspondent banking business. Prior to Deutsche Bank, Ms. Skerritt spent seven years at Bank of New York Mellon Trust Company, N.A. where she served as an Executive Vice President in a variety of increasingly important roles in cash management, trade finance and securities servicing businesses, including co-leading the acquisition and integration of the JPMorgan Corporate Trust business. She also served as an executive member of the Board of Directors of Bank of New York Mellon Trust Company, N.A. Earlier in her career she held various leadership roles at Morgan Stanley, Treasury Strategies, Inc., Ernst & Young and Manufacturers Hanover Trust Company.

Ms. Skerritt’s corporate board experience includes service as an independent director on the Board of Directors of the RBC U.S. Group Holdings LLC, the intermediate holding company for Royal Bank of Canada’s U.S. operations, where she served as the Chair of its Human Resources and Corporate Governance Committee, as well as a member of its Audit and Risk Committees. She currently is a director on the Board of Directors of Tanger Factory Outlet Centers, Inc., a New York stock exchange listed public company that owns and operates upscale outlet shopping centers, serving on the Audit Committee and Compensation & Human Capital Management Committee, and the Falcon Group, a leading inventory management solutions business headquartered in London and Dubai.

In recognition of her leadership and expertise, Ms. Skerritt was recognized on the American Banker’s list of Most Powerful Women in Banking ranking for multiple years, and was included in WomenInc.’s Most Influential Corporate Board of Directors in 2019.

Ms. Skerritt graduated from Hamilton College with a B.A. in Economics and has served on its Board of Trustees since 1994. She received her M.B.A. in Finance and International Business from New York University’s Stern School of Business and continued her education completing the Leading a Global Enterprise – 2013 Program at the Harvard Business School. She is currently a member of the Women’s Forum of New York, The Committee of 200, and has been a Director of The Brooklyn Hospital Center since 2013 and now serves as the Board’s Vice Chairman.

About Community Bank System, Inc.

Community Bank System, Inc. operates more than 230 customer facilities across Upstate New York, Northeastern Pennsylvania, Vermont, and Western Massachusetts through its banking subsidiary, Community Bank, N.A. With assets of over $13.8 billion, the DeWitt, N.Y. headquartered company is among the country’s 125 largest banking institutions. In addition to a full range of retail, business, and municipal banking services, the Company offers comprehensive financial planning, insurance and wealth management services through its Community Bank Wealth Management Group and OneGroup NY, Inc. operating units. The Company’s Benefit Plans Administrative Services, Inc. subsidiary is a leading provider of employee benefits administration, trust services, collective investment fund administration and actuarial consulting services to customers on a national scale. Community Bank System, Inc. is listed on the New York Stock Exchange and the Company’s stock trades under the symbol CBU. For more information about Community Bank visit www.cbna.com.

 

How to Crisis-Proof Your Bank’s Succession Plan

In an ideal world, the departure of a key leader at a community bank would be an anticipated and carefully orchestrated event. A retirement date would be set. The successor would have plenty of time to learn from their predecessor. It would be a smooth transition.

But we don’t live in an ideal world.

If COVID-19 has taught us anything, it’s that resiliency must be integrated into every aspect of community banking—including succession planning.

Bank presidents, CEOs and other C-suite executives aren’t immune to the coronavirus or other unexpected events. Morgan Stanley CEO James Gorman was diagnosed with COVID-19 in March, running the company while quarantining and recovering at home. Meanwhile, JPMorgan Chase & Co. CEO Jamie Dimon was sidelined for a month in March after emergency heart surgery, so the bank’s two co-presidents filled in. And the CEO of Credit Suisse unexpectedly resigned in the aftermath of a spying scandal.

“This pandemic has put succession planning on the front burner as something that must be dealt with.”

“For any board of directors or management team that has been unwilling or unable to grapple with the concept of executive succession, this pandemic has put succession planning on the front burner as something that must be dealt with,” says Alan Kaplan, founder and CEO of Kaplan Partners, a retained executive search and board advisory firm in Wynnewood, Pa.

Crisis-proof succession planning

A good succession plan is designed to be as crisis-proof as possible. It addresses both long-term and emergency succession needs, identifying roles that need to be filled and the personnel on deck to fill them.

Like a strategic plan, a succession plan is a living document. It should be reviewed at least annually, though more frequent reviews can be triggered when there are departures from the bank, says Greyson Tuck, attorney and consultant at Gerrish Smith Tuck Consultants and Attorneys PC, a community bank legal and consulting firm in Memphis, Tenn.

“The best coaches are the ones who make half-time adjustments. They’ve been through half, have seen what’s working and what’s not, and make changes,” says Tuck of keeping succession plans up to date. “They have the conviction to actually make those changes.”

Among those changes are potential vulnerabilities revealed by the pandemic. For instance, it may have been necessary to assess whether employees in a given functional area can operate without a key leader or team member, says Julia A. Johnson, director of organizational performance at Wipfli LLP, a national accounting and consulting firm in Milwaukee. These are the kinds of insights that show where succession planning is needed.

The board should be reviewing succession for the CEO, the C-suite and all direct reports to the CEO at least annually and more often if there’s a looming retirement. The succession plan should also include any other critical role. For example, the chief technology officer may report to the chief financial officer, Kaplan says. If someone is in a vital role and there’s no in-house talent to elevate and replace them, that’s something the board needs to know.

It’s also important to look beyond the vacated position. A single change can result in other shifts that will require a community bank to recalibrate the plan to keep it relevant, Johnson says.

Kaplan likes to see a bank dig two or three levels into upper and middle management to identify employees with high potential, particularly going deeper as the bank grows. Smart community banks will take steps to help maximize their talent and get them ready for their future roles internally.

“Grow your people. Always let that be your first option,” Kaplan says. “The more you can do on your own internally, the more long-term the successors, the better off and smoother transitions will be.”

Don’t forget to plan for temporary absences like the one experienced with Dimon at JPMorgan. While CEOs in many industries have contracted COVID-19, few have died. Instead, many found themselves ill and unable to work at full capacity for an extended period of time. These interim and emergency plans need to be updated. “Ask yourself, ‘What would we do if we have half a CEO for three months?’” Kaplan says.

Johnson suggests identifying current team members who can assume higher roles of responsibility for extended period of time or implementing strategic partnerships to outsource functions.

How to start as CEO during a pandemic

Robert White had a strategic plan for his first 30 days at 1st Colonial Community Bank when he joined as president and CEO at the beginning of February. He was going to focus on getting to know his new institution and its customers to understand what makes the community bank in Collingswood, N.J. successful. After that, he’d work toward the board goals of growing the customer base and diversifying the business mix.

That all changed with the COVID-19 pandemic.

Aggressively testing the disaster recovery plan and all the technology needed to work remotely became a top priority, along with fast-tracking technology platform upgrades from the community bank’s core provider. Customers needing loan deferrals and existing small business customers needing Paycheck Protection Program (PPP) funds took precedence over reaching out to new businesses, and a third-party service was brought in to help the preferred Small Business Administration (SBA) lender prepare for the PPP. White had to remotely build relationships with the employees he was just getting to know.

The good news for 1st Colonial Community Bank was that its new president and CEO was prepared to handle a crisis. A former chief risk officer with 30 years of banking experience, White had the skills to identify and assess the challenges posed by the pandemic and implement strategies to limit the potential risks.

“We adapted pretty well,” he says. “The best answer is to stick to your plan. Be agile and don’t be too reactive. Things will calm down and return to some level of normalcy.”

Find the right successor for your bank

While the COVID-19 pandemic was unexpected, the reality of a crisis shouldn’t be.

The banking industry is good for a crisis every decade or so, making it essential that management has the ability to adapt during a crisis, Tuck says. That makes the current pandemic an opportunity to actively observe the community bank’s best performers and see how they handle challenges like problem loans or employee issues.

“People’s true character and abilities show in times of crisis,” he says. “It’s a great opportunity to look at somebody new or that is the chosen successor and note: How did they handle this? What did they do well? What didn’t they do well? It’s somewhat of a proving ground and a live audition.”

Keep an eye out for agile leaders who are able to adapt to an ever-changing business landscape, Johnson says. Other competencies include strategic thinking, outside-of-the-box thinking, influencing, relationship-building, collaboration, and written and verbal communications.

Many folks on the team stepped up [during the pandemic] and said, ‘We’re in this for the long term. whatever you need, we’re here to support you.’”

—Robert White, 1st Colonial Community Bank

Robert White was recruited to take over as president and CEO of $595 million-asset 1st Colonial Community Bank in Collingswood, N.J. He started in early February and didn’t have much time to get to know his team before the pandemic forced everyone to work remotely. Upon joining the community bank last winter, he began to assess the talent he was working with.

“I can’t say enough about the team we are very fortunate to have in place,” White says. “Many folks on the team stepped up and said, ‘We’re in this for the long term. Whatever you need, we’re here to support you.’”

1st Colonial Community Bank is now updating its succession plan. White and his team are using the insights from the early days of the pandemic to ensure the right people are in place for executive succession. “In many cases, it [the crisis] clarified what I initially thought,” he says. “A couple of folks were elevated as a result of their efforts and commitment.”

Training also plays an important role, as does company culture. Kaplan recommends fostering a culture of mentoring and talent development by telling staff that they need to be developing someone below them to take over their role—and that person must be as good, if not better—if they want to be promoted. Work with human resources to include succession planning objectives like mentoring in the matrix for performance reviews and compensation.

“It is quickly becoming a best practice to have a professional development plan for the majority of employees within a bank,” Johnson says. “At a minimum, they should be developed for those high-potential employees, right from the point of hire.”

Banks that don’t have succession plans in place often end up making mistakes and end up being sold, Kaplan says. He once saw a bank board promote a talented board chair as CEO. The man was a smart lawyer, so the rest of the board trusted he could do a good job. It turned out, however, that he didn’t have all the competencies the bank needed.

Other boards, faced with an unexpected leadership transition without a succession plan, have chased after a buzzy candidate only to discover they don’t fit the culture, he adds.

“Continuity of leadership promotes continuity of strategy, which is a good thing,” Kaplan says. “If you don’t have continuity of strategy, you might find yourself jumping from idea to idea and get in a downward spiral.”

Prepare for the next crisis

While there is no one correct approach to succession planning, it’s essential to a community bank’s long-term survival. It’s also part of the regulatory review process. Banks that treat it as a check-the-box exercise are missing out on the opportunity to plan for the future, develop talent and build those needs into how the bank operates and does business every day, Kaplan says.

I truly don’t believe anything is fully crisis-proof when it comes to people. We can only strive to mitigate the risk through effective development of the team.”

—Julia A. Johnson, Wipfli, LLP

As community banks move past the blocking and tackling that helped them navigate the uncertainty of COVID-19, they’ll need to reevaluate their succession plans, Tuck says. While the best succession plans he’s seen involve transitions lasting 24 to 36 months, with the successor gaining increasing authority and the predecessor retaining veto power, those kinds of transitions aren’t always possible.

That’s why it’s important to give high-potential employees on-the-job training and autonomy. You’ll need staff members to have the skills to navigate the next crisis. They might just be the bank’s best chance for strategy continuity. There are no guarantees—only preparation.

“I truly don’t believe anything is fully crisis-proof when it comes to people,” Johnson says. “We can only strive to mitigate the risk through effective development of the team.”

The path to choosing an emergency successor

When a crisis hits and takes a leader out of commission, someone has to take their place until a permanent replacement can be found. This shouldn’t be a game-time decision. The board’s succession plan should include an emergency interim successor who can serve six to 12 months in their place while evaluating longer-term leadership options.

Alan Kaplan, founder and CEO of Kaplan Partners, an executive search and succession planning firm in Wynnewood, Pa., offers these four approaches for choosing a short-term successor.

1. Promote the planned successor early

If someone at the community bank has already been identified as the successor, put that person in the role. It gives the board a chance to evaluate their performance in that role before making a long-term commitment. “I have seen situations where the heir apparent being groomed was elevated earlier than expected and did a spectacular job,” Kaplan says.

2. Bring back a retired executive

Faced with a sudden departure, Kaplan recalls a $1 billion-asset community bank that asked its former CEO, who had retired two years earlier and left the board a year before, to return on an interim basis. The CEO made it clear he was not interested in a long-term gig. Kaplan says this solution worked only because the CEO hadn’t been out of the banking world for very long. If a succession plan involves bringing back a retired employee, make sure that employee is still capable of doing the job when you reevaluate the plan each year. You don’t want to call someone up to the majors only to find out they’ve long since left the game.

3. Promote another high-performing executive

If you have a chief financial officer or another executive that really shines, having them fill in as temporary president or CEO gives you a chance to audition them for the role. You can then decide to give them the job or choose to hire outside.

4. Hire a temporary executive

While they aren’t common in the community banking industry, it’s possible to hire a temporary CEO. These are typically turnaround experts who work with struggling institutions.


<To read the article in its published format, click here https://independentbanker.org/2020/11/how-to-crisis-proof-your-banks-succession-plan/>

Alan J. Kaplan is Founder & CEO of Kaplan Partners, a retained executive search and board advisory firm headquartered in suburban Philadelphia.   You can reach Alan at 610-642-5644 or alan@KaplanPartners.com.

Kelly Pike is a writer in Virginia.  She interviewed Alan J. Kaplan for the Independent Banker Magazine.

 

Kaplan Partners Highlights Key Third Quarter Success Stories

Despite the dual impacts of the global pandemic and challenging economy, this past summer our firm was quite busy continuing to work diligently on behalf of our clients.  Some of our recent success stories:

  • President of Community Banking, Flagstar Bank
  • President & CEO, Community Bank/CB Financial Services
  • EVP & Imminent President & CEO, Bankers Cooperative Group/NJ Bankers
  • VP-Finance, Connecticut Water
  • Board Member, First Internet Bank
  • Chief Financial Officer, Howard Bank
  • Corporate Controller, Project Management Institute

These assignments took place in six different states across the Midwest, Mid-Atlantic and Northeast regions.  Kaplan Partners’ prime focus continues to be on financial institutions nationwide, as well as corporate financial roles and high growth/investor owned middle market firms.  For more information contact Founder & CEO Alan Kaplan at alan@KaplanPartners.com.