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:

G: 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, 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 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 Whether due to overly lengthy board tenure or outdated skills, a lack of consistent engagement may drive consideration for offboarding.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 that company leaders have what is needed to succeed going forward and then hold them accountable to deliver.

T: 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 — the 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 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. Oftentimes 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 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.

<To read this article in its published format, click here: https://hometown-banker.thenewslinkgroup.org/the-definition-of-a-great-board-2021-edition/>

Alan J. Kaplan is the 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..

Kaplan Partners is an Associate Member of the PACB.

Diversity, Equity and Inclusion in Banking…Room for Improvement!

Someone once said that “diversity is being invited to the dance; inclusion is being invited to dance”.  If this is true, then more banks than ever in New Jersey are dancing!

Our industry has had an imbalance for a long time.  While a majority of many banks’ employees are often female, those ranks get thinner as you move up the food chain. Non-gender diversity statistics are even more challenging.  However, the question remains:  how do we rectify this severely unbalanced situation, so that the next woman or person of color to serve as a New Jersey bank CEO or NJBA Chair will simply be part of the normal course of events, rather than an outlier?

On a basic level, while diversity means different things to different people, a desired outcome is often to broaden the range of thought, perspective and experience—while leveling the playing field and seeking to optimize business decision-making.  That being said, in order to achieve this broader perspective, organizations need to recognize the importance and value of a wider representation of diverse talent in both senior leadership positions and on their board of directors. After all, your bank’s customer base and growth markets are all getting less homogenous, as is your future employee base.  Customers in the important Gen Y and Gen Z demographics are buying homes and starting to save for their kids’ college education.  This important demographic in particular typically cares a lot about diversity, ethical and responsible corporate citizenship, and equal opportunity. 

Sadly, too many community banks fall short here, victims of their own unconscious bias and preconceived demographic perceptions.  We can do better!  Not to mention that our regulatory agencies are moving “diversity” onto their front burner agendas.  For publicly traded companies, the risk of criticism for a lack of diversity, equity and inclusion in the management ranks and on the board is even higher.

There is no secret sauce that will solve this systemic challenge for the industry, especially since this is a long term issue. However, there are a few basic steps which can begin to help move the banking industry along on this journey, and create an organization where inclusion has real meaning and belonging is no longer aspirational for diverse employees:

  • Start by really listening to your colleagues who are black, brown, Asian or female, to better understand their experiences inside the organization, and where the bank can evolve to make it feel more welcoming to all employees.  The lack of real inclusion is where many firms fall short, despite good intentions. 
  • Address the very real challenges of unconscious bias.  To be sure, we all have our own internal biases, and they affect how we might approach people—whether a coworker, future employee or bank customer.  Education in this arena is an absolute must—across the organization.  Lead from the top.
  • Take a hard look at your leadership team and board of directors.  If these groups are homogenous (whether in gender or ethnicity), the message being sent is not helping.  Potential diverse employees will not see the role modeling at the top to validate that the bank is serious about equal opportunity, diversity and creating an inclusive environment.
  • Review your organization’s job descriptions at every level, to ensure that the qualifications you outline are not unintentionally creating a perception of exclusion via “requirements”, rather than inclusion by open-mindedness. 
  • Consider partnering with local high schools, community colleges and other educational institutions in your markets to better inform all students about the opportunities in banking.  Take a ground floor approach to developing a more diverse workforce over time.

Lastly, consider how your bank goes to market for new employees in general, especially for entry level jobs and new graduates.  Instead of the traditional boring job advertisements that banks are known for, we need to focus on what resonates with younger Gen Y and Gen Z.  Something like “if you want to work for a technology-driven business that cares deeply about its customers and gives back to its communities…come talk with us!”  As a potential employer—technology, customer-centricity and a focus on communities—are very meaningful to rising generations and diverse populations.

It’s clear from the NJ Bankers’ DEI Initiative, and the active engagement on this important topic from many banks, that the message is getting through.  Hopefully, the day will come when a woman elected as CEO of a NJ Bank, or Chair of NJ Bankers, will be business as usual.  That will represent real progress!

We are not approaching the end of the DE&I journey but rather are at the beginning.  If community banks in NJ and elsewhere are going to continue to thrive and survive, then grappling with the challenges of equality, diversity and inclusion must be more than a project.  They must become an integral part of how our banks do business every day.

<To read the article in its published format, click here, https://emflipbooks.com/flipbooks/NJBA/NewJerseyBanker/Issue1_2021/>

Alan J. Kaplan is Founder & CEO of Kaplan Partners, a retained executive search

and board advisory firm headquartered in Philadelphia.   You can reach Alan at

610-642-5644 or alan@KaplanPartners.com.

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.

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.

 

Diversity AND Inclusion in PACB Leadership…it’s About Time!

Someone once said that “diversity is being invited to the dance; inclusion is being invited to dance”.  If this is true, than PACB is finally dancing!

After over 140 years serving community banks throughout the Commonwealth, PACB has its first woman Chair, Lori Cestra, EVP & COO of Enterprise Bank in Pittsburgh.  This milestone has been a long time coming.  Hats off to Lori for her willingness to commit to the role and to supporting community banks across the state.  And, to their credit, Lori’s peers on the PACB Board recognized her energy and talent, and welcomed her into the inner circle of PACB leadership.

However, the question remains:  how do we rectify this severely unbalanced situation, so that the next woman or person of color to serve as PACB Chair will simply be part of the normal course of events, rather than an outlier event?

On a basic level, while diversity means different things to different people, a desired outcome is often to broaden the range of thought, perspective and experience—while leveling the playing field and seeking to optimize business decision-making.  That being said, in order to achieve this broader perspective, organizations need to recognize the importance and value of a wider representation of diverse talent in both senior leadership positions and on their board of directors. After all, your bank’s customer base and growth markets are all getting less homogenous, as is your future employee base.  Customers in the important Gen Y and Gen Z demographics are now buying homes and starting to save for their young kids’ college education.  This important demographic typically cares a lot about diversity, ethical and responsible corporate citizenship, and equal opportunity.

Sadly, too many community banks fall short here, victims of their own unconscious bias and preconceived demographic perceptions.  We have to do better!  Not to mention that our regulatory agencies have begun moving “diversity” onto their front burner agendas.  For publicly traded companies, the risk of criticism for a lack of diversity is even higher.

There is no secret sauce that will solve this systemic challenge for the industry, especially since this is a long term issue. However, there are a few basic steps which can begin to help move the banking industry along on this journey, and create an organization where inclusion has real meaning:

  • Start by really listening to your colleagues who are black, brown or women, to better understand their experiences inside the organization, and where the bank can evolve to make it feel more welcoming to all future employees. The lack of real inclusion is where many firms fall short, despite good intentions.
  • Address the very real challenges of unconscious bias. To be sure, we all have our own internal biases, and they affect how we might approach people—whether a current or future employee, or a bank customer.  Education in this arena is an absolute must—across the organization.
  • Take a hard look at your leadership team and board of directors. If these groups are homogenous (either in gender or ethnicity), the message being sent is not helping.  Potential diverse employees will not see the role modeling at the top which would indicate that the bank is serious about equal opportunity, diversity and inclusion.
  • Consider partnering with local high schools, community colleges and other educational institutions in your markets to better inform students about the opportunities in banking. Take a ground floor approach to developing a more diverse workforce.

As part of this, consider how your bank goes to market for new employees in general, especially for entry level jobs and new graduates.  Instead of the traditional boring job advertisements that banks are known for, we need to focus on what resonates with younger Gen Y and Gen Z.  Something like “if you want to work for a technology-driven business that cares deeply about its customers and gives back to its communities…come talk with us!”  These aspects of a potential employer—technology, customer-centricity and a focus on communities—are very meaningful to rising generations.

It is indeed laudable that Lori is PACB’s first woman to serve as Chair.  For added perspective, the state’s other bank trade association, PA Bankers, has had only three women serve as Chair in its 125 year history.  The PACB Hall of Fame has six women members out of a total of 117 (5%).  The PACB Board is better, with 4 women out of 28 bankers serving (14%).  Nevertheless, in a state that at one point had many hundreds of community banks, 4 female Chairs between the two organizations in over a century leaves a lot of room for improvement.   We have an obligation to do better!

Lori’s elevation to PACB Chair is not the end of the journey but the beginning.  If community banks in PA and elsewhere are going to continue to thrive and survive, then grappling with the challenges of equality, diversity and inclusion must be more than a project.  It must become an integral part of how banks do business every day.

<To read the article in its published format, click here  https://hometown-banker.thenewslinkgroup.org/diversity-and-inclusion-in-pacb-leadership-its-about-time/>

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.

Who Sits on Your Board of Directors?

As companies large and small grapple with the business impacts of the Covid-19 pandemic, CEOs and their executive teams need all the help they can get. The Board of Directors or Board of Advisors should be one of the primary resources for organizational leaders.  But what if that board is not up to the task of providing strategic insight and offering the kind of valuable perspective needed to help the company navigate the new world order?

From our vantage point as strategic human capital advisors, we have had the opportunity to see hundreds of boards up close and personal.  Some are incredibly impressive and impactful.  Some other boards, unfortunately, are full of well-meaning people with homogenous thinking, dated skills, or business acumen that does not lend itself to great governance and strategic input.  Among the most critical roles of a board of directors is to: 1) decide who leads the organization and; 2) provide valuable oversight of business strategy and risk.  Directors whose own experiences do not align well with these vital responsibilities should perhaps be reevaluated for continued board service.

Now more than ever, organizations need board members who are not just great business leaders, but who also represent a diverse range of perspectives along with strong skills in key areas.  For example, as companies revamp their business models, directors with strong financial competency may be especially helpful.  Many firms have had to ramp up their work-from-home or online technological capabilities, and thus a strong digital director would be very useful at this time.  Executive compensation plans are under scrutiny as business forecasts evolve, and board members with relevant skills in this area might be particularly valuable.

Both the skills and life experiences of your board members really do make a difference.  It has been well documented that the more diverse the perspectives sitting around the board table, the more likely better decisions will be made.  A group of board members who think alike, look alike and see issues from a similar viewpoint are missing the opportunity to cast decision-making in the broadest possible light.  Considering this, how can a more diverse board not be beneficial?

According to Carol Johnson, a Director who sits on four corporate boards, “The CEO role has never been more challenging.  Board support and input, in partnership with the CEO and leadership team, should help the organization to think through strategic solutions, fresh opportunities, and how life will be different.  This is more important today than ever.”

The saga of the Board of Directors of Theranos, a now defunct blood testing startup founded by one-time Stanford student Elizabeth Holmes, is quite telling.  Holmes recruited luminaries including Henry Kissinger, George Schultz, William Perry, Sam Nunn, Bill Frist, Dick Kovacevich and Jim Mattis to her board with the promise of revolutionizing blood tests.  While this was a board of intelligent and accomplished leaders, they likely viewed the world similarly, and simply did not govern appropriately, ask the right questions, or properly assess the company’s risks.  And equally important, most of these big name directors did not have relevant experience with the company’s core business of blood testing.  As a result, the company is out of business and Holmes is awaiting trial.  Names alone do not make a great board.  It is the collective skills, nuanced insight, diverse backgrounds and perspectives, the courage to tackle tough issues, and the ability to present opposing views in a constructive manner that are the hallmarks of the most effective boards.

Needless to say, directors are expected to do their homework and prepare for board meetings beforehand.  Shockingly,  we see too many directors who do not review materials ahead of time, often belaboring discussions and sidetracking conversations, which wastes valuable board time.  The average public director now spends roughly 20 hours per month on their board duties, and advance preparation to optimize board time together remains critical to being a high performing board.

Companies with lesser skilled directors, or a board lacking in diversity, need to take a hard look at who is truly contributing and adding real value.  Perhaps it is time to have a difficult conversation or two regarding the need for current skills, along with the expectations of board performance.  As Bill McNabb, the former CEO of Vanguard has stated “Having the right directors on the board is the single most important factor in good governance”.  Well said.

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

 

 

 

 

Crisis Leadership 101

To view this article in its published format click here <PACB April 2020 – Kaplan (1)>

The global pandemic has struck terror into the hearts of nearly everyone.  Business leaders and board members are reeling from the rapid impact on their organizations, across public companies, small businesses, non-profit organizations and more.  Everyone has been affected.

One of the less discussed impacts, which is shaking boardrooms and executive suites, is the issue of leadership succession.  Deciding who leads is a board’s most critical responsibility.  While proactive succession planning has long been a best practice, too many institutions still do not emphasize leadership succession seriously enough or review their plans often enough.  And now, with the scourge of Covid-19 upon us, organizations and boards are quickly taking a long, hard look at the quality and quantity of their succession plans.

One only needs to review the headlines to know that the issue of succession reared its ugly head due to Covid-19.  The CEOs of Altria, Morgan Stanley, British Telecom and Madison Square Garden all confirmed that they had been infected.  British Prime Minister Boris Johnson was infected. Sadly, Jeffries & Co. CFO Peg Broadbent died from his Coronavirus infection.  Even before COVID-19, consider that JP Morgan CEO Jamie Dimon returned to work earlier this spring from a month-long absence, after emergency surgery for a major heart condition.  Succession is always a serious matter, and never more so than in 2020, when a random and unseen enemy could impact anyone at any time.What is a board or incumbent leader to do, particularly in more entrepreneurial organizations without a deep bench of talent?  Here are a few key strategies:

  • Designate an emergency successor immediately. There should always be someone appointed to keep the train on the tracks in times of crisis.  This also allows those in control (owners or directors) a bit of time to formulate a long term leadership strategy.
  • Review succession plans for all C-Suite and Key Executive roles (CEO, CFO, COO, etc.) with regular frequency. Regular means no less than annually on a formal basis, and more frequently if a planned orderly transition—such as a CEO retirement—is coming in the not-too-distant future.
  • Take a good look at existing talent development plans across your organization, especially those 2-3 levels below the top. What is being done to develop, coach, mentor, and strengthen the skills and leadership competencies of high potential talent within the institution?  These employees are your most valuable workers, and the ones with the most career options.  Are you truly taking care of their needs while also serving the organization’s future?
  • Centralize efforts at talent attraction, retention and development across the organization. Succession is a multi-faceted endeavor, and needs some level of consistent oversight to make sure that key players are not falling through the cracks or being shortchanged.  It happens all too often, and perceived greater career upside is the single biggest reason why a high potential often leaves.  Do you have a strategic HR leader to assist with these efforts?
  • Lastly, pay personal attention to those up-and-comers. If you’re a leader, whether the CEO, General Manager, Owner or C-Suite Executive, it’s your personal involvement with high potentials that makes them inclined to stick around.  Let your rising stars know that they have a bright future, and that you have plans for them. Communicating regularly does more than almost anything to keep them in the fold.  Then challenge them with special projects, new assignments, and out-of-the-box opportunities, to test them and to help them grow.

Two-thirds of our recent CEO succession projects arose from unplanned openings at the top—and this was before Covid-19’s full onset.  We see such leadership transitions all the time in our business, and companies should work to minimize the impact of unforeseen leadership changes.  Smooth transitions of power from within an organization are the least disruptive, and are typically most effective when the rising talent has been well prepared.  Unfortunately, unexpected things happen, and organizations need to be ready for leadership succession in good times and bad.  Hopefully one of the lessons from this global pandemic will be that more institutions will strengthen their succession planning efforts, to better protect themselves in the future.

<To read the article in its published format, click here  PACB April 2020 – Kaplan (1)>

Alan J. Kaplan is Founder & CEO of Kaplan Partners, a retained executive search and talent advisory firm headquartered in suburban Philadelphia. Kaplan Partners is the country’s only talent advisory firm member of both the ABA and ICBA, as well as a longstanding partner of Bank Director. You can reach Alan at 610-642-5644 or alan@KaplanPartners.com.

Board Governance For The New Year

<To view the article in its published format, click here Governance For The New Year>

Business conditions, financial markets and competitive landscapes are always changing. But perhaps there is no arena of business undergoing a more significant transformation at the moment than corporate governance.

Whether driven by activists investors, regulators, institutional shareholders, governance gadflies or best practices, corporate governance is in the crosshairs for many organizations today. And in the banking sector — where some in Washington have placed a bullseye on the industry’s back — an enhanced focus on governance is the order of the day.

Bank boards today would be well served to pay close attention to three important aspects of governance: board composition, size and director age and tenure. When left to their own devices, too often inertia will set in, causing boards to ignore needed enhancements to corporate governance and boardroom performance. Even in the private company and mutual space, there is room for improvement and incorporation of best practices if a bank wants to continue to remain strong and independent.

<To read the article in its published format, click here Board Governance For The New Year>

Alan J. Kaplan is Founder & CEO of Kaplan Partners, a retained executive search and talent advisory firm headquartered in suburban Philadelphia. Kaplan Partners is the country’s only talent advisory firm member of both the ABA and ICBA, as well as a longstanding partner of Bank Director. You can reach Alan at 610-642-5644 or alan@KaplanPartners.com.

Compensation Committee Rebrand

<To view the article in its published format, click here Why the Compensation Committee Needs a Rebrand >

Publicly traded businesses have long been mandated to have a compensation committee which reviews and sets the pay and benefits for corporate executives, and most non-public financial institutions have followed suit.

Most “comp committees,” as they are affectionately called, spend the vast majority of their time focused on the institution’s pay practices — including establishing competitive salary levels and crafting appropriate short- and long-term incentives that drive performance. While this core function of the comp committee remains relevant, it is time to change the focus of the committee.

The compensation committee label suggests that the focus of committee and board should be on paying executives properly. However, any good human resources leader would point out that compensation is only one piece of the puzzle when it comes to attracting, developing, motivating and retaining top talent. In today’s highly competitive banking talent environment, the board and compensation committees should broaden their focus to reflect this dynamic.

<To read the Article in its published format, click here:  Why the Compensation Committee Needs a Rebrand>

Alan J. Kaplan is Founder & CEO of Kaplan Partners, a retained executive search and talent advisory firm headquartered in suburban Philadelphia. Kaplan Partners is the country’s only talent advisory firm member of both the ABA and ICBA, as well as a longstanding partner of Bank Director. You can reach Alan at 610-642-5644 or alan@KaplanPartners.com.

 

Strategies for Winning the War for Talent

Talent Shortage Strategies

<To view the Article in its published format, click here:  Winning the War for Talent-MMG>

A decreasing unemployment rate, an aging baby boomer workforce, and the rise of technology and the gig economy have all been cited as reasons for the current talent shortage. But as the war for talent gets even more challenging, there are strategies that companies and private equity firms can employ to ensure they are recruiting, retaining and developing the right talent for their organization. These strategies were the topic of ACG Philadelphia’s January breakfast briefing, “Winning the War for Talent,” which was moderated by Alissa Moody, a partner at executive search firm JM Search.

Featured speakers included Michael Haugen, partner, ghSmart; Alan J. Kaplan, founder and CEO, Kaplan Partners; and Tish Squillaro, founder and CEO, CANDOR Consulting.

Groom and Develop Your Own Talent
While the talent shortage has caused many companies to work even harder to bring in the best new hires, less attention has been paid to grooming current employees for future leadership roles. Kaplan said that among his clients, he sees “a lot more talk than action when it comes to talent development internally.” Squillaro noted that internal talent development and external talent searches do not fall under an “either/or” construct—by developing internal talent in parallel with your external searches, you are able to better see your talent gaps and fill them effectively.

<To read the Article in its published format, click here:  Winning the War for Talent-MMG>

Alan J. Kaplan is Founder & CEO of Kaplan Partners, a retained executive search and talent advisory firm headquartered in suburban Philadelphia. Kaplan Partners is the country’s only talent advisory firm member of both the ABA and ICBA, as well as a longstanding partner of Bank Director. You can reach Alan at 610-642-5644 or alan@KaplanPartners.com.