By now, it should come as no surprise that baby boomers are retiring in record numbers. According to AARP, the number of retiring baby boomers is somewhere in the range of 8,000 per day. Considering that the average age of a community bank’s CEO was 58 years old back in 2013 (according to Morgan Stanley), and the average retirement age in America is 62 years old (according to the US Census Bureau), this leaves a small window of about two years for community banks to get the next generation of executives lined up to make for a smooth transition.
Easier said than done.
When the Recession hit eight years ago, a lot of seasoned bankers were displaced. Some eventually found another bank, but a large number left banking altogether, which has left a significant void of talent in the marketplace. There are many younger bankers that are just now transitioning into management, and many more intermediate-level bankers starting to get a feel for how to successfully manage, but are still by no means expert. The pool of qualified candidates that can confidently and successfully walk into that banking executive role, then, is understandably small and often hidden, as a majority of the top seasoned bankers are loyal and have been flying under most recruiting managers’ radar for quite some time.
While small, the talent pool is a bit deeper in major urban banking hubs. For smaller cities and rural-based banks, however, finding a qualified candidate is exacerbated by an extremely shallow pool of prospective candidates. This problem has caused many banking executives to delay, often indefinitely, the idea of retirement. Or is this really the problem?
A couple of weeks ago, I had the pleasure of meeting a Chief Credit Officer who had helped found his rural community bank in the Midwest. He was very confident about his retirement in two years. He had no idea, however, who was going to take his place. He had already spoken with everyone in his town that was qualified and could not find a suitable replacement. Although he was willing to look at other candidates from outside of his market, he was willing to be extremely picky about the exact background a person had to have in order to warrant a telephone conversation. Eventually, he decided the timing wasn’t quite right for the bank and the budget.
Although he continued to think the problem was a lack of qualified candidates, what emerged was what seemed to be a picture that is probably very familiar with a lot of banks and, for that matter, corporations throughout the U.S. Because he had invested more than a decade in building his bank from scratch, he seemed convinced that he was the only person that could manage it successfully. As a result, he was looking for an exact replica of himself.
While understandable, his emotional tie to his bank might be so strong that he may never retire. Or, he may retire in two years having never found a successor, in which case the bank will be in a mad scramble to replace him with a suitable candidate, this time without nearly enough runway to spend thoroughly vetting each candidate.
So, what is the right strategy? While there can never be a silver bullet, one-size-fits-all approach, there are steps and measures that can be taken to ensure that your bank can find the right successor.
It starts with understanding that the right candidate often comes along when you least expect it. As the adage goes, the easiest way to find something is to stop looking for it. However, you must be prepared to act when a prospect does show up out of the blue. This means not only being willing to spend the time fully vetting this person, but it also means setting aside a budget devoted to investing in the right person when they do come along.
Understandably, this opportunistic approach to hiring is something that can only happen if all of the executives in the bank are on the same page. If one or more member of the team is not ready for a succession-planning hire, either financially or emotionally, it doesn’t matter how perfect a candidate might be for the role.
Once everyone can buy into this strategy, it makes the overall succession planning process much more palatable and successful. When there’s a preparation and willingness to invest at any given time in the right opportunity, it just takes a well-qualified candidate to come along. With all the logistics and heavy lifting out of the way early, the bank can focus all of their time and attention on fully vetting the right candidate, which is truly a winning strategy.