Succession Planning: A critical strategy for credit unions

By Amanda Erickson and Robert Zondag, Wipfli

Succession planning is a vital strategy for helping ensure the long-term success and stability of credit unions. Every organization faces the challenges of an aging workforce, employee retention, competitive labor markets and the need for continuous leadership, and it becomes essential to develop a proactive approach to talent management.

Understanding Succession Planning

Succession planning is not merely about finding replacements for departing staff; it is about developing and retaining talent within the organization. Unlike replacement planning, which is reactive and focuses on filling immediate vacancies, succession planning is proactive and aims to cultivate a pipeline of future leaders. This approach positions credit unions to be prepared for transitions and maintain continuity in leadership and operations.

The Importance of Succession Planning in Credit Unions

With a significant number of baby boomers retiring each day (approximately 10,000), credit unions are at risk of losing valuable institutional knowledge and leadership experience. Succession planning helps mitigate this risk by identifying and developing potential leaders from within the organization. This process not only preserves critical knowledge but also fosters a culture of growth and development among staff.

In addition, the final rule on succession planning (12 C.F.R. Parts 701 and 741), effective December 10, 2024, mandates that credit union boards establish a written succession plan that addresses specified positions and contains certain information. The board is also required to regularly review the succession plan, and newly appointed board members must have a working familiarity with the plan within six months of appointment.

Key Components of Succession Planning

• Clarifying Future Needs: Credit unions must identify the skills, knowledge and attributes required for success in key roles. By understanding the specific needs of each role, credit unions can tailor their succession planning efforts to help ensure they are developing the right skills and competencies in their future leaders.
• Assessing Talent: Engaging in discussions about talent from multiple perspectives helps to understand the depth of the talent pool. Tools like the nine-box matrix can be used to evaluate the performance and potential of employees, guiding investment in their development. The matrix allows organizations to categorize staff based on their current performance and future potential, helping to identify those who are ready for advancement and those who may need additional development.
• Identifying Successor Readiness: Knowing the readiness of potential successors is crucial. Readiness charts can help track employees' strengths and development needs, helping ensure the right employees are prepared for key roles. These charts visually represent where employees stand in terms of their readiness for a promotion, making it easier to identify growth areas and address them through targeted professional development efforts.
• Understanding Career Interests: Credit unions should engage with staff to understand their career goals and interests. This enables development efforts to align with a staff member’s aspirations, increasing the likelihood of retention and leading to higher job satisfaction. Revisit career interests on an annual basis. The employment journey changes frequently as the stages of life shift. Therefore, what might have been a “no” or a “not now” in the past can easily become an “I’m ready to go” response.
• Developing Talent: Continuous development through stretch assignments, special projects, coaching and mentoring is essential. This ongoing process helps to address potential gaps and prepares staff for future responsibilities. Stretch assignments and special projects provide opportunities to develop new skills and gain experience in different areas, while coaching and mentoring offer personalized guidance and support. Should an unanticipated vacancy occur, development activities also help identify high-potential staff members who may be best positioned to take on increased levels of responsibility with moves into leadership.
• Performing Ongoing Review: Regular reviews of the succession planning program keep it relevant and effective. Promising practices suggest reviewing the succession plan every 9 to 15 months and adapting plans as needed based on changes in the credit union’s strategic priorities and staffing needs. Having said that, whenever there is a significant shift in strategy or loss of critical staff members, it is imperative to review the succession plan regardless of the passage of time. These reviews help ensure alignment with goals and adaptability to any changes in the external environment.

Focusing on Generational Diversity

Consider the following demographic shifts unfolding between 2025 and 2035. Understanding the generational composition of staff will assist in creating a unique and tailored succession plan.

Organizations must consider the generational diversity within their workforce. With millennials and Gen Z now making up 61% of the workforce, it is important to invest in proactive, intentional development efforts to prepare employees for assuming greater levels of roles and responsibilities. Recognize that succession planning isn’t just about leadership positions – it encompasses all key roles. However, it is equally important to continue the development of Gen Xers, the youngest of whom have another 20 years before reaching the traditional retirement age of 65. Development should be as inclusive as possible, not exclusive.

Employee Retention Strategies

Retention doesn’t just happen; it requires proactive, intentional action to support the organization’s most important asset – its people. Credit unions should consider strategies such as competitive compensation and benefits, flexible working environments, professional development opportunities, career path opportunities, mentorship programs, building a sense of empowerment and autonomy, fostering connectedness and enjoyment among staff, and of course, succession opportunities.

Research by the Work Institute suggests that upwards of 75% of turnover could be prevented by addressing the reasons that cause employees to resign. To compete and distinguish themselves as high-quality institutions invested in and supportive of their staff, organizations should consider these strategies.

Leveling up leaders is crucial. Provide foundational education and mentoring for supervisors, including ongoing training, group coaching sessions and culture leaders who can help supervisors work through various developmental areas. Supervisors need foundational education and mentoring, which doesn’t mean one-and-done workshops. Think ongoing training, group coaching sessions and culture leaders who are on demand to help supervisors work through various developmental areas.

Assessing the current environment is essential for achieving a desired future state. Conduct compensation studies, organizational structure reviews, personal development plan assessments, engagement and culture surveys, stay interviews, exit interviews and focus group discussions to identify areas for improvement. Assessing your environment and leaning into data, facts and anecdotal information provide an abundance of information on which to act.

In addition, focus on creating a positive staff experience. The staff experience represents an employee’s perceptions, observations and interactions with the organization from pre-employment through the end of the employment life cycle. Culture is at the heart of the staff experience, and every experience matters. By fostering a supportive and engaging culture, credit unions can enhance staff satisfaction and retention.

In instances where a successor is not identified or a talent gap exists in leadership roles, Wipfli provides fractional services to fill the void. We support clients in the areas of finance and accounting (CFO and Controller), technology (CIO, CTO, CISO), Human Resources (CHRO, HR Director), Operations (COO) as well as project management.

Succession planning is not a luxury but a necessity for credit unions. It requires a commitment of time, energy and resources from everyone. By investing in the development of their staff, organizations can develop a continuous supply of talent, maintain their culture and achieve long-term success.

Connect with  Wipfli to learn more.