While there are numerous components to a successful CEO succession plan, few are more important than selecting an interim CEO to run the credit union while staff search for a permanent leader.
That’s according to "CEO & Board Succession Planning," a new Credit Union Magazine white paper. In some cases, if the interim CEO has been properly trained, he or she could be named the new CEO permanently.
A variety of staff works together to formulate a succession plan. This can include the CEO, the board of directors, the human resources department, and senior executives. Senior executives may end up taking a lot of responsibility. Besides helping develop a succession plan, they may be called upon to act as interim CEO, the white paper says.
Succession plans should define the process for establishing interim management. Usually the board selects an executive from the credit union staff to work as interim CEO until a permanent CEO is chosen. If the CEO and his backup are both unavailable, they may chose a team of two to three people to take over temporarily.
If no internal candidate is available or willing, the white paper suggests the board should work with search firms and the state league to find one from outside the credit union. Another option boards might consider is hiring a recently retired CEO or senior executive to temporarily serve as CEO.
At a special board meeting immediately following the CEO’s departure, the board should establish the interim CEO or team. This action must be documented in a letter by the chairman and witnessed by another board officer. The board might consider these factors when selecting interim staff according to the white paper:
- The interim’s level of authority;
- The board’s official liaison during the interim period;
- Salary terms; and
- Anticipated length of the interim assignment.
The board must also make plans to find a new CEO. Board members should decide whether the executive committee or an appointed search committee will seek out the new CEO. They should outline a hiring process; and they should include whether the interim CEO can apply.
Once an interim CEO is selected, a board must establish the CEO’s role and any limitations on his or her abilities as CEO. Before the interim takes the position, the white paper lists the following steps the board should address:
- Decisions requiring the board’s approval. These might include a spending limit for the CEO, or specifications on project types that will require board or executive committee review;
- Term of interim employment—or how long the interim CEO will serve in the position, especially relative to when the new CEO will take over;
- Compensation. Boards should pay an appropriate rate for an interim, and should consider additional pay or a bonus when the interim is selected from staff, because increased responsibility will mean longer hours, disruption of relationships with colleagues, and project delays which could turn into even bigger workloads when the interim returns to his position;
- Ability to apply for the CEO position. Most credit unions let the interim apply but make it clear he or she competes equally with other candidates; and
- Sensitive issues. These are most important if the interim doesn’t apply for the permanent CEO position. One such instance might be if the interim CEO is required to conduct performance evaluations and determine pay raises. The board might delay such a decision, or handle it on its own.