By Debra CopeBoards know how vital CEO succession planning is, but sometimes a stark reminder arrives to drive the point home. That happened recently when Ronald J. Seiffert, the chairman, president and CEO of Northwest Bancshares Inc. and Northwest Bank, died suddenly of natural causes at the age of 65.
The experience shows that while a profound loss can hit like an earthquake, a bank that’s ready to pull its succession plan off the shelf and put it into action is in the best position to handle the shockwaves.
Experiences like Northwest’s are not unprecedented—and sudden death is not the only incident that can rock an organization’s world and trigger the succession plan.
“The No. 1 responsibility of a board is determining who leads the organization,” says Alan Kaplan, founder and CEO of Kaplan Partners. A vacancy can occur in the normal course of retirement planning, but it can also come about because the board feels a need to make a change, a CEO unexpectedly resigns, or a tragedy occurs, he notes. “Every organization, regardless of whether it’s public, private or family-controlled, has to have an emergency backup plan.” Succession planning often percolates up from the nominating/governance committee, although the full board invariably gets involved.
“The key is to have a plan that you will put into motion should any of these things occur,” Kaplan says. And the good news is that most banks do have a plan. “The last data I saw showed that 74 percent have both emergency and long-term succession plans, while 21 percent have only an emergency plan. That leaves 5 percent that have no plan of any kind.” In the worst case, banks without a clear plan leave themselves vulnerable, with potentially no alternative but to consider a merger.
Still, having a plan and implementing it are two different things. And that, Kaplan says, is why “it’s so important to review, revisit, and refresh your plan every year. Because things change. People grow. The board needs to be sure that the person who was picked five years ago to be an interim CEO is still the best choice today.”
What if you have to pull the plan off the shelf? The first step will likely be to convene a board meeting as quickly as possible. Northwest pulled both its boards together within 24 hours to execute on the specifics of the succession plan.
Kaplan advises getting a new backup plan in place quickly. Nobody wants to contemplate the possibility of lightning striking twice, but it can happen. This actually occurred at McDonald’s back in 2004 and 2005, with two CEO tragedies within a year.
It’s also important not to rush unless time is of the essence. It can be valuable, Kaplan says, to take some time to evaluate internal candidates. Conducting a robust executive assessment exercise can help crystallize what talents the bank has in-house relative to what external candidates might have to offer.
Another step is to clarify the board’s thinking about the interim CEO. Is he or she a transitional figure, or could the interim be a viable candidate for the permanent role?
The loss of a successful CEO can be a hard act to follow, Kaplan says. “They’re doing more than executing a plan. They’re bring everyone along in pursuit of a vision. Ron created a lot of followership at Northwest. I had the privilege of knowing him very well and working with him.”
A bank like Northwest, with a strong, deep team, is in a good position to identify the right successor because it had all the pieces of a good succession plan in place, Kaplan says. “That’s going to allow the board some time to decompress and make the right decisions.”