Unlock insights to successful executive search and talent retention with industry insiders Deedee Meyers and Tom Sievewright in the latest episode of "In Your Best Interest." Discover how the high-stakes game of recruiting top players in financial services demands a blend of strategic foresight and competitive compensation. We delve into the urgency of initiating CEO searches with ample time, and the evolving nature of the CFO role to one that requires a strategic mindset. Our conversation uncovers the pitfalls of sluggish hiring processes and reinforces the necessity for organizations to pivot quickly to secure the right candidates, ensuring their visions for the future align perfectly with those stepping into leadership roles.
All statements are made exclusively on behalf of ALM First Executive Benefits LLC.
Unlock insights to successful executive search and talent retention with industry insiders Deedee Meyers and Tom Sievewright in the latest episode of "In Your Best Interest." Discover how the high-stakes game of recruiting top players in financial services demands a blend of strategic foresight and competitive compensation. We delve into the urgency of initiating CEO searches with ample time, and the evolving nature of the CFO role to one that requires a strategic mindset. Our conversation uncovers the pitfalls of sluggish hiring processes and reinforces the necessity for organizations to pivot quickly to secure the right candidates, ensuring their visions for the future align perfectly with those stepping into leadership roles.
All statements are made exclusively on behalf of ALM First Executive Benefits LLC.
Welcome everyone to, In your Best Interest, an A-Long First podcast, A show that will explore common depository challenges, give you an insider's view of the latest market trends and share stories and insights from industry leaders. I'm your host, Mike Ensweiler. I was just reading the January-February 2024 edition of Harvard Business Review magazine. The issue focuses on leadership in business, and one article in particular caught my attention. The quick summary stated the biggest headache that global businesses confront today, not to mention their most considerable cost, is figuring out how to secure talent. No matter how large your company or how strong your brand is, the odds are that your organization is experiencing a talent crisis, and the numbers tell the story. In a March 2021 survey of 30,000 people from 31 countries, it found that nearly 41% of workers were considering leaving their jobs. In April of that year alone, 4 million workers quit in the United States. Although the so-called great resignation has eased, the number of jobs is growing globally, and it really hit home, as I think about credit unions and banking.
Speaker 1:This is the season when we see a lot of updates to compensation surveys, year-over-year trends showing increases in competitiveness and salary increases, and utilization of executive benefit arrangements to try to retain key personnel. To put all of this in perspective and to get a firsthand look at what is going on in the financial services industry, I am joined today by experts in this area. My guests today are Dede Meyers and Tom Sivrate. Dede is the CEO of Dede J Meyers and Tom is the Director of Executive Benefits at Ailand First Executive Benefits. They work with and talk to CEOs, C-level executives and boards of directors of financial services firms daily. With the integration of Dede J and Ailand First, the two firms have a strong executive recruitment and compensation background, including executive benefit arrangements, and bring a perspective that I believe our listeners will be excited about. I'm speaking with them today to understand what the current environment looks like and give our audience some insights heading into the new year. Welcome to Dede and Tom of the show.
Speaker 3:Happy to be here. Thanks, Mike, Thanks Mike.
Speaker 1:I'll just dive right in. I'll throw this out to you, Dede.
Speaker 3:What are?
Speaker 1:the latest challenges in the executive search space.
Speaker 3:We're in a paradigm shift mode here right now, mike. We're seeing that organizations, as we all know, are more complex. We're growing, the markets are different than they've ever been before. The challenge is that on the CEO, front boards are starting their CEO searches to me far later than they need to. I think they need to be a strategic upfront, looking at what the competencies and characteristics they need down the road and building those internal candidates On the C-suite side, particularly for a chief experience officer, maybe chief growth officer and for sure, a chief financial officer.
Speaker 3:We need to attract the very qualified people. We need to start looking out of the market. Yes, still in financial institutions, we need to elevate our thinking about what competencies are needed. What that means is we need to pay attention to compensation. We're lower than what high quality candidates are asking for. What that means is the searches are taking a long time. We're not paying relocation to move people. We're asking people to work in a hybrid environment and they might be coming from state into, maybe a layer, san Francisco or Boston, new York, but we're not compensating for that, for that travel back and forth. I think we need to start looking at assigning bonuses. More Compensation is the issue. You know what we do in credit unions. We have this level of thinking or mindset that we need to elevate in terms of saying first let's get the best people, then let's look at compensation.
Speaker 1:You brought up a couple of different roles. As you're doing these searches, are there certain roles that are more in demand than others. Cfos Chief.
Speaker 3:Financial Officers. Here's the unique thing we need Chief Financial Officers who are strategic thinkers, can look ahead, help us plan where our risks might be in the future, where our strategic opportunities are Not the green-a-shot, eye-shade kind of CFO. We're done with those. So we know that, as it can talk, they have to be able to talk, be strategic, be critical thinkers, gain momentum on strategy and cross-functionally collaborate. It's a new breed. We're not seeing a lot of those.
Speaker 1:You brought up the fact that employers are not paying relocation fees as much, but that CFOs are in high demand. Is the market favoring more the employer or the employee at this time?
Speaker 3:In that case they might be favoring the member or they might be favoring well, yes, it would be the employer favoring their current mindset. So they're not favoring the potential employee. And by that I mean there should be no favor here or there. We should come together in alignment on what's needed for the future versus in that moment.
Speaker 1:That makes sense? Yep, definitely, so what? Is a compelling trend or problem you've seen with clients in recent months.
Speaker 3:They take a long time to process candidates, a long time to say this is a candidate I want to hire. And then what happens? Because those are good candidates, they're out looking at other roles. So this morning, I've been waiting three weeks for a client to get back on candidates and one of the candidates One of the finalists said hey, I have two other offers. I want this one, though, but I have two other offers, so I need to make a move. So we need to create a sense of urgency that there's good people out there and we need to change our timeline.
Speaker 1:Is that? Historically, have you seen that institutions are looking for the ideal candidate and willing to wait, versus what you're putting in front of them?
Speaker 3:They're looking, they want the ideal candidate, but also what's going on is they want to make sure that candidate's going to fit into their culture and what the challenge is. Yes, they all say let's get somebody that'll fit into the culture. But really, what happens in human dynamics as soon as you hire someone in, it's going to shift, and I'm not a believer that today's culture is going to take care of us tomorrow. So for me, we should be looking for people that help us add on and be accretive in our culture.
Speaker 1:Culture is so important.
Speaker 3:Oh, it's, yes.
Speaker 1:I agree. So how do you retain and attract talent in this?
Speaker 4:environment. I think it's a great point and a great question and going off of what Didi said is, once you have that ideal candidate, you want them to be with your institution. You want them to stay because one the cost of finding a new person, all that goes into that, is more expensive and it's difficult. So it's almost less expensive to retain and I think the institutions are more and more looking at supplemental executive retirement plans.
Speaker 4:You look at the data 88% of credit unions over a billion already have some sort of SERP in order to help retain and retain is just one piece of this, I think, attracting Almost always now in the actual contract to retain or, excuse me, recruit someone. You're putting these in the contract that they're going to have a SERP within 12 or 18 months and that's really the only way that you're able to recruit these new employees.
Speaker 1:And so, as you look at the current landscape, how impactful are those compar arrangements, like you said, not only in attracting these new employees, but also in retaining them? I mean, do you find that people in their current positions are sticking around and if so, what's driving them to stick around? Are these existing plans effective in retaining key employees?
Speaker 4:Yeah, we're certainly hearing that anecdotally as we go out and travel and visit with clients, but also Peter Meyers on the team. He did some research into the last decade of new CEOs and over the last decade of credit unions bigger than 250 million there was about 650 or so new CEOs that were placed and less than 10% of those actually were CEOs at another institution. So we might not be able to directly correlate that because they had a split dollar or some sort of SERP at their previous institution. They're not leaving because of that the 90% that actually weren't CEOs before. But I think we can certainly make that correlation that these plans are working. The current CEOs in the industry aren't moving to other CEO jobs because they're satisfied with where they are so, and that's really interesting.
Speaker 1:In what ways can these executive benefit plans align with the mission and values of credit unions and the strategic trajectory of the organization?
Speaker 3:Well, one way to look at it, mike, in terms of the strategic focus of the organization, is when we do a search, we really wanna understand where's the organization going, of course. Where does it come from? Where is it going? What did they dream and hope for for the future? Are they looking to do mergers and acquisitions, expand geographically, bring on news sex, whatever that is?
Speaker 3:So we're seeing some boards who say, no, we're fine where we are. You know, we're not going to really change, we're going to hold status quo. We don't believe in all that hype that we have to be stronger. They just have a status quo that I can see that they probably wouldn't be very competitive to attract the highest, the highest performing candidates. But those boards and there's some really sophisticated ones out there now they want the best for the member, they want CEOs are going to help drive change in a meaningful way, both strategically and organically. They're willing to pay up. They will make some good packages and offers for the candidates and what I'm noticing there is it's more about bringing the right person on than what the money is. So they're focused on the right person to do the right thing, versus Nicol and Dimon here and there. It just makes it so easier to attract the best.
Speaker 1:So I've attracted the best. I'm willing to pay up for these, these candidates. So how do credit unions determine performance metrics for executive compensation and what incentives are commonly offered?
Speaker 3:So what we do is look at for the first six months and new CEOs in there. We help the board establish what the metrics are. The first year.
Speaker 3:They're primary, more subjective, because the CEOs getting their feet on the ground and then then we go and then the next year would be clear metrics of success and there's some standards out there. But we're also hearing more around culture, strong leadership, modeling you know being in the community. So we're seeing more of a blend of specific financial metrics with a qualitative, subjective metrics as well as the board CEO relationship. That's weighing in a lot these days. They have to partner really well there.
Speaker 1:And I'm sure these are pretty bespoke based on the institution. Yeah executive and board composition.
Speaker 3:We see a lot around. You know, of course, the standards ROA or delinquency. You know our I don't see camel as much anymore, but that's really important too. But yeah, there's some standard ones out there sometimes loan to share, asset growth, membership growth, nps, net promoter score we see a lot of that as well. We're also seeing net promoter score for the employees. You know how well are we taking care of our employees. So those are some of the ones that we see out there quite a bit.
Speaker 1:You'll throw this one to you, Tom. What unique challenges and opportunities do credit unions face when designing these executive benefits packages?
Speaker 4:The most, the most unique piece of the credit union versus some of the other industries are these loan regime split dollars.
Speaker 4:A lot of other industries aren't able to actually put together loan regime split dollars. So the opportunity to actually give your executive these long range benefits is really a plus for credit unions. And I think some of the challenges we hear are the costs. We get asked what's the cost of actually putting in place a split dollar, and I think we hear a lot from some of our clients that they don't think there is a cost involved which, if designed correctly, they will get paid back that loan amount. But there is a cost, especially now with the liquidity environment we're in.
Speaker 4:These are long range plans that can be on your books for 40 years. So the liquidity and the opportunity costs not being able to have other investments. So that's where we get that opportunity costs and in this current environment is the AFR. When a credit union provides a loan to an executive, they're forced to charge a minimum interest rate, which is what the applicable federal rate is, and if you look at year over year data, the applicable federal rate has risen significantly, which has also caused the amount of the loan that needs to fund these plans to continue to rise. So it's becoming more and more difficult for institutions to actually put these plans in place. If they do put them in place, then it's a lot more expensive than it was at this point last year.
Speaker 1:You know, one of the things that we've seen, one of the trends, is that historically, you know, 10 plus years ago, credit unions, when they were putting these plans in place, there's a heavy emphasis on 457 plans and we've seen that that is really balanced out. There's been a migration to add time more of what you've been talking about. These loan resumes split dollars. So are you in terms of asset size? Are you noticing any trends as institutions be? Bigger as they emerge. What have you seen there?
Speaker 4:Yeah, mike, it's a good point and, in the grand scheme of things, split dollar plans are relatively new to the credit union space.
Speaker 4:You know they've been around just over 15 years and a recent study that just came out mentioned that just under 50% of credit unions have at least one split dollar plan and that number has continued to rise. And we're really seeing that as you get into that one billion and even more probably three billion and larger, we're seeing that more and more credit unions are going past the C-suite. You know, over one billion, 75% of institutions have at least two members of the C-suite that have a plan and then above three billion.
Speaker 4:That goes up to 90%. So we're seeing that more and more institutions are going past their typical CEO, cfo, coo, and we're even seeing sometimes into the VPs and DeeDee.
Speaker 3:You probably see that in terms of a succession plan. We have absolutely, because we're taking that mid-level talent, so important right now.
Speaker 1:So that makes especially what you said earlier, deedee, that makes a whole lot of sense with the challenge of really retaining your key employees. Going to that next level makes a lot of sense to me, especially in this environment. Do the one-size-fits-all plans still apply?
Speaker 4:Well, I'm not sure if they ever did apply in terms of choosing one or the other, and when I say one or the other, we're predominantly talking 457F or split dollar plans, and I think the way we look at it is we want to understand the goals of both the executive as well as the institution.
Speaker 4:The executive they might be a 40-year-old executive who doesn't plan to retire until they're 65. So you look at that, quite a long time horizon before they actually see that benefit. So if we're just going to put them into the same split dollar that a 50-year-old executive might think is a good benefit for them, those are two different scenarios. So we really want to look at it from what's important to retaining this executive, but also from an executive's perspective.
Speaker 4:What's going to keep me at this credit union? Is it seeing a benefit in 25 or 30 years, or is it maybe when my kids go to college? Am I going to see a benefit, Because there's? Just a lot of different varieties, and what's important to me might not be important to you, so I think it's just about understanding your goals and understanding what's going to keep both parties happy.
Speaker 1:Yeah, that makes a whole lot of sense, indeed, and open positions that you're trying to place. How or what are you coaching boards and committees and what to do to put together a strong package.
Speaker 3:Great question. We're coaching and advising to develop and use a compensation philosophy. Compensation philosophy is a written statement that enumerates and explains. Here's our process to set compensation values. Here's a frequency of refreshing the data. Here's how we want to reward our CEO and why. It also looks at the components of compensation, particularly cash and non-cash. So what we find is, once the commuter of the board has that compensation philosophy, then it's so much easier for you to make that decision. The emotion goes out of it. Then bringing in the data in terms of base salary and incentives, and I would also encourage boards and CEOs here to move away from using just one source for compensation. I would use six, seven, eight, nine, ten different sources, which we do. So we provide a lot of different sources of data. We see a difference in the data sets. So compensation philosophy and then look at where you get the data and it's just so much easier to make.
Speaker 1:So you've got a compensation philosophy, you're willing to pay up and potentially to get the right kind of Culture fit in performance. You know oriented individual in the door. So are there trends in linking these benefits to the financial performance and growth of the organization?
Speaker 3:Well, we're seeing, and then, Tom, you can weigh in here. We're seeing when the board is aligned on how they think about the role of the CEO and how they're going to provide oversight to the CEO. That's Meaningful. When the board, the CEO, are aligned, that's even more meaningful. Then the CEO could take all of that, roll it through the organization. So everybody's on the same page. So we're not always worried about how am I gonna get paid? I do this, what's gonna happen? Everybody can focus on where they're gonna go. And we're are seeing.
Speaker 4:We are seeing positive Results on financials, yeah use the word align, which I think is a great, great word, and I hear our merger and advisory team use the term board on board. Is the board on board?
Speaker 4:And I think it's really important that, like you said, you're aligned, because if an executive and we talked about in a previous answer but if the executive wants one thing and the board wants something else, it's it's never going to work out. So we need to figure out how can we bring everyone together so that executive feels valued and feels like they're. They want to end their career with your institution and the board. You know once, once, the same thing.
Speaker 3:Well, tom there. What one thing we advise CEOs is don't negotiate your own compensation. Bring in a third party, because they're gonna have a wider perspective what's going on in the market and be able to advocate for you, but they'll also advocate for the board and the whole organization. But it doesn't work out really well when the CEO advocates for their own.
Speaker 1:You know we are running up against the clocks. Are there any additional stories or anecdotes that you'd like to share and close this out with?
Speaker 3:Well, I say the exciting news is more awareness boards are elevating their thinking, their mindsets. They're open to talking to third parties, becoming educated, they're open to doing the right thing and getting the processes in place so they can focus on being strategic versus like all this stuff that they all constantly have to cross T's and dot eyes on. It's very exciting out there right now.
Speaker 4:Yeah, so I think you know we spent a lot of time throughout this podcast talking about some of the challenges, but I don't want there to seem like there's a dark cloud over over this industry. I think there's still a lot of opportunity and there's still a lot of a lot of ways to tailor solutions. We can mix and match different Solutions and products to still make this work. Make this work in terms of retaining your talent, recruiting your talent and Really providing that retirement income to your executives.
Speaker 1:In. The thing that I really like there too is With more of a bespoke Solution with kind of the vast array of products out there. We all know that there's certain people that are or heavy one way or the other, but but being able to mix and match these seems seems like it's in the best interest of the members. First and foremost. It's in the best interest of the institution, and at the end of the day. It's in the best interest of the executive.
Speaker 4:Yeah, I think we used to see it's a one-size-fits-all and that that's no more right. It's you can. You can start off in a 457f and we can switch it to a split dollar.
Speaker 1:We can make make it work based on the credit unions needs, and I think that's really important to understand, to layer these things on, especially, you know, deedee, I'm sure, when you bring in someone from the outside to lead an organization to some degree it's a leap of faith. You're hoping that the culture fit is going to be right, that they're going to perform how you think they're going to perform. And so you know, anecdotally, what I've heard from more CEOs is that they're getting plans in place when, to your point, tom, you start with one thing a 457. Before we make this lifetime commitment to this individual, we want to make sure that there are certain metrics being met, or that you know certain Objectives are being met, and then we'll kind of layer in the additional options that may be available.
Speaker 3:Absolutely. I heard that term a lot. Do you make it a leap of faith here? And we feel a lot of responsibility and make it sure the board to CEO get on the same page and so far it's working.
Speaker 1:Well, this has been really insightful and a ton of fun. Thank you both for joining me today. Thank, you.
Speaker 1:Thank you, dd and Tom, for joining us today and sharing your insight on retaining and attracting Talent in today's environment. At the end of each episode, I like to take a moment and that you know we have some additional resources available. We have a robust workshop, conference and webinar scheduled, so be sure to visit our website for more details on these, as well as our education hub and resource center for recorded webinars, articles and more. As always, stay safe, stay healthy and thank you for listening to in your best interest and a long first podcast.
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