Succession planning has always been an essential part of ensuring the long-term stability of any organization. However, particularly within the community bank sector, succession planning is becoming increasingly more complicated due to a variety of converging factors. As senior leadership starts to ride off into the sunset towards retirement, the next generation of leaders often isn’t ready—or at times even interested—in stepping up to the plate. With a shrinking talent pool combined with shifting values among the younger generation, many community banks are facing a daunting challenge: who will be their next fearless leader?
Internal Development: “Old Faithful”
For many community banks, internal development has long been the preferred method for promoting leadership. Historically, the goal was to develop employees who could move up through the ranks while simultaneously developing an intimate knowledge of culture and strategy who could eventually step into senior roles. However, more recently when I’m in meetings to discuss leadership search opportunities (President, C-Level, or similar), when I ask the question “who internally have you identified / already considered for the role?” it’s often met with sheepish silence.
It’s becoming increasingly obvious – in recent years, many banks have noticed that their internal talent pool is becoming shallower. With fewer employees pursuing long-term careers at these institutions and many making frequent career moves (in addition to many larger banks eliminating commercial banking training programs), the availability of qualified internal candidates has decreased with every passing year. This is also due in large part to the fact that there just hasn’t been a “replacement level” injection of fresh talent into the commercial banking space over the last couple of decades, meaning there’s simply less candidates to choose from.
Family Succession Planning: Generational Disruption
For many community banks, family succession has traditionally been the go-to method for ensuring leadership continuity and historically has been a reliable succession plan. Passing the torch to the next generation of the family has been a time-honored tradition – maybe their name is even on the building! However, the next generation of banking leaders within multi-generational family-owned banks often isn’t as interested in taking over the family business. Whether it’s due to the pressures of the job, a lack of interest in the industry of banking, or a desire to pursue a different career path entirely, many family members are stepping away – or even positioning the Bank for a sale/exit. This shift is adding to the challenges banks face in finding the right successors who are both capable and willing to take on senior roles, as it may not just be “all in the family” anymore.
Growing Disconnect: The Next Generation and Leadership
Even beyond the family dynamic, the broader next generation of banking professionals isn’t always eager to climb the corporate ladder – which is true across many other industries as well, as my colleagues in other verticals here at Versique have ran into similar issues. Younger workers, especially Millennials and Gen Z, are increasingly seeking roles that offer work-life balance, opportunities for personal growth, and a sense of purpose. Leadership roles, which can often come with long hours, significant stress, and heavy responsibility, aren’t as attractive to many in the younger talent pool and “taking the next step” into leadership isn’t always what’s most important.
So… what’s next?
While we can’t simply create more bankers (trust me, I wish we could!), community banks need to really do a deep dive and look internally at their training, development, coaching, and mentoring systems to see how they can get the most out of the people they already have. Alternatively, they can seek to bring in someone from the outside who can bring along a fresh perspective, ideas, and other tricks to bring along and motivate the next generation. Both routes can be successful in succession planning, but both need to be executed well.
As with anything else, having the right person in the right place at the right time is paramount to a bank (or any other company’s) success – but having a strong bench of up-and-coming leaders will ensure that success continues well into the future. Ultimately, there’s no “easy button” to push; succession planning requires a long-term, strategic approach. It’s not just about filling vacancies or slapping on fancy new titles; it’s about proactively building a pipeline of talent that is willing and ready to step into leadership roles when the time comes.
If your bank is starting to think seriously about succession planning, or realizing it’s already behind, I’d be happy to talk through what’s next.
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