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Management Succession Plans

By Blair Rugh 3 May 2017

The Federal Deposit Insurance Corporation and all of the other financial institution regulatory agencies require that as a part of its business plan each insured institution must have a Management Succession Plan. We all like to think that we are bullet proof, but unfortunately we are not. There are lots of reasons that the folks that are with us today may not be with us tomorrow. Who knows who will win the lottery and retire to a tropical island? An important part of an acceptable succession plan is the institution's leadership training program. Much of a person's ability to take on more responsibility is based on his or her training.

Training can be a problem in a community institution; everyone is working full time doing their normal duties and the time available to mentor those beneath them is limited. Too frequently a person gets channeled into one department of the institution and their knowledge of banking is limited to that one function. Lenders understand lending but little else. Tellers and CSRs understand opening deposit accounts and taking deposits. Effective managers in an institution should have an understanding of all of the functions of the institution. Obviously a lender, for example, is going to have a more in depth knowledge of lending, but he or she should have an understanding of the other functions of the institution if he or she is going to move up the food chain.

Here is a suggestion, make your compliance department your training program. There is no other function in the institution, other than internal audit, that gets to look at every function of the institution. I have often had a community bank president or a credit union president say something to me like, "We just hired a bright young person out of college. He or she has great potential. Where should we start them?" My advice is the compliance department. First, in today's world, a knowledge of compliance is almost critical to being a successful banker. Second, working in the compliance department enables that person to acquire a knowledge of lending, deposit operations, advertising and marketing and management. Also, they can get an understanding of your automation, how it works, and what it can do. After four or five years in compliance, a person should have a pretty good understanding of the business of banking.

Make it known within your institution that a position in the compliance department is something to be sought after; that it is a stepping stone to greater things. In some institutions being assigned to the compliance department is thought of as akin to a life sentence in a gulag in Siberia. Make sure that your other personnel realize that it is a great career opportunity.

Take this as an opportunity to review your management succession plan. It is one of those things that is too often written and then forgotten. Circumstances change and what you wrote several years ago is probably in need of some tweaking. 

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