3 Approaches to Succession Planning

3 Approaches to Succession Planning

Credit unions are facing an intense, competitive environment. Selecting a strong leader is paramount to the credit union’s success. The skills required of a Chief Executive Officer (CEO) have changed as banking moves to the digital age. Boards of directors must project the skill set required for a CEO to be successful in the hyper-evolution of banking. Tomorrow’s CEO must be savvy in technology, analytics, regulations and changing consumer behavior.

On top of these skills, directors must acknowledge that Americans, still recovering from the Great Recession, feel particularly skeptical about financial institutions. That skepticism can make an impending change in your credit union’s leadership even more intimidating.

Ultimately, the board has three distinct options for succession planning. Each option carries distinct advantages and challenges.

1. Choose an Internal Candidate as CEO

A board may have several viable in-house candidates who have shown measurable success in leadership roles and have been a part of a succession plan meant to groom them for just such an occasion.

The board of directors will be familiar with the leadership and skill set of the internal candidates, a distinct benefit to this approach. These candidates are also likely to bring incremental change to the organizational culture. Additionally, the board will already have a good sense of their working relationship with these leaders.

A candidate should demonstrate the ability to look beyond current modes of operation and create a new vision that allows the credit union to remain competitive in a crowded marketplace.

2. Recruit a New CEO Externally

A professional recruiting firm can help find the perfect new hire. An outside agency contributes valuable resources and contacts, expanding the scope of the search to identify a CEO who can handle the complex challenges of leading a credit union. Not only should ideal candidates be at the forefront of current and emerging banking technologies, they should have a solid grasp of the complex regulatory systems that govern financial institutions.

One option to consider: hiring a CEO of another, smaller or similarly sized credit union and simultaneously merging with that CEO’s credit union. Both credit unions benefit. A consultant can be essential in negotiating this type of agreement, which can involve conflicts of interest. An outside perspective ensures transparency and helps avoid any potential pitfalls that could undermine the merger.

3. Merge into a Larger Credit Union

As a final option for succession planning, a credit union can opt to merge into a larger credit union. This strategy provides obvious and immediate benefits to employees and members. By pooling efforts and combining years of skills and experience, this approach means that resources can be effectively deployed in order to meet new goals and create a smooth transition. History has shown that this approach to succession planning can be more effective than hiring an experienced CEO.

The recent announcement of the United Federal CU ($2B)  merger with Lake Michigan CU ($4B), the largest credit union merger to date, is a good example of the benefits of merging into a larger credit union as part of succession planning.  United Federal CU CEO Gary Easterling had announced his upcoming retirement.  This led to the conversations between  the two credit unions and ultimately a decision to merge.  The boards concluded this would this would set the credit unions on a growth trajectory that is nearly unimaginable.  Together they will offer huge benefits to the members and communities they serve.


Often credit unions will hire a recruiting firm to evaluate both internal and external candidates. This allows the board of directors to evaluate the pros and cons of each candidate.  An external consultant is also used for exploring potential merger candidates.

Finding the right candidate to lead your credit union can be challenging, especially in a constantly evolving, competitive market. Investing time and effort into identifying the right CEO, whether you recruit internally, externally or through merger, is essential to ensuring a smooth transition for both clients and employees. The recruiting process is not an area to cut corners or look for quick fixes. The future of the credit union depends on choosing the right leader who can achieve success.