Core Competencies Hindering CEO Succession

Credit unions face a massive leadership transition as 40% of CEOs retire by 2030, yet only 54% of boards have succession plans in place, creating both challenges and opportunities for reimagining executive leadership.

• Wave of retirements includes not just CEOs but also C-suite leaders and board members creating multi-level leadership turnover
• Internal CEO candidates often lose to external ones because they haven't proactively developed strategic leadership skills
• Responsibility for succession planning falls on boards, current CEOs, and candidates—but ultimately aspiring CEOs must take ownership of their development
• Today's boards seek transformative leaders with clear vision rather than just operational excellence
• Successful candidates demonstrate emotional intelligence, cross-enterprise experience, and strategic thinking
• Assessments help quantify leadership potential while supporting successful onboarding
• Boards should establish clear expectations with current CEOs about transition timelines
• Aspiring CEO candidates should seek mentors, request rigorous feedback, and continuously learn
• The best boards prepare themselves to work effectively with a new generation of credit union leaders

If you're a board member, start by examining your succession planning quarterly. If you're an aspiring CEO, don't wait for others to develop you—seek teachers, mentors, and challenging experiences to build your leadership capabilities.

Chapters

• 0:00 Credit Union CEO Retirement Wave
• 3:33 Multi-Level Leadership Turnover Crisis
• 5:42 Internal vs External CEO Candidates
• 9:05 Succession Planning Accountability
• 12:45 Critical Leadership Competencies
• 17:23 Advice for Aspiring CEOs
• 20:01 Board Preparation for CEO Selection
• 23:15 Final Thoughts on Succession Planning

Transcript

0:00

Welcome, everyone, to the 29th edition of the Your Best Interest in a Home First Podcast. A show that explores common depository challenges gives you an insider's view of the latest market trends and shares stories and insights from industry leaders. I'm your host, Mike Nsweiler. A collaborative succession represents one of the most critical yet challenging transitions for credit unions, with CEO turnover expected to accelerate dramatically over the next five years. In this episode, we will explore the realities of succession planning, examining how institutions can effectively prepare their internal talent pipeline while aligning leadership competencies with future organizational needs. These insights come at a time when many credit unions are facing the retirement of baby boomer executives and the need for transformative leadership in an increasingly complex financial landscape. Today, I'm joined by D.D. Myers, a renowned leadership consultant who specializes in credit unions, CEO searches, executive development, assessments, and more. She'll serve candid perspectives on board responsibilities, candidate preparation strategies, and practical approaches to developing internal talent. We'll explore both the difficulties and rewards of building a strategic succession plan that prepares your organization for its next chapter of leadership. Hi, D.D. Thanks again for joining me on the show. Could be here, Mike. Thank you for having me. So there's been a lot of buzz in the industry that over the course of the next five years, plus or minus, there's going to be a lot of retirements going on in terms of credit unions CEOs. Can we just talk to us a little bit about what you're hearing, what you're understanding in terms of that turnover coming up? Sure. Yeah. So we all know that all the baby boomers will turn 65 years old by the age 2030. And they're terming out, their retirement plans are coming to have age. So a lot of turnover there that you see here about mergers and acquisitions. And then Mike, there's some CEOs who are actually starting to leave early. They think it's time for them to go. So they might go at age 58 or 60. And what I'm noticing there is the reason why they decide to go early is they recognize that the organization is ready for a big change, transform of change. And they go, I think somebody else should come in and leave that instead of them starting it. They're making room for the next leader to come in and do that. So that's where we're seeing a CEO turnover. Last year, we were super busy with CEO searches. We worked on about 25 different projects, which is about twice what we normally do. So we staffed up and teamed up for that. But what we also notice for every CEO that leaves within a couple years, you're going to lose about two C suite members as well. So you've got change at both of those levels. And to complicate it further, we're seeing 30 to 40% of board members actually saying they're going to withdraw or retire off the board within three to four years. So those three levels of leadership turning over their mic. Wow. And so when you get contacted to do a search for an institution, what are you seeing in terms of internal, maybe versus external CEO selections? Yeah, so that's good. So we're seeing some of our projects or boards are declaring they're going to just go internal. And nicely here done, Mike, is that they've done the work. They put together over two, three, four years, a CEO readiness now program and developed methodically and intentionally the CEO candidates. So those are great. I think about five of our 25 last year were that some very wonderful case examples there. Some of the others will say, yes, we have internal candidates. We definitely want to go external and look. They feel that they want to do their fiduciary responsibility and look at the best candidates and then have candidates internally and externally to choose from. What we see in those, unfortunately, though, is that the external candidates might seem to be more CEO ready now than the internal and many of those examples. And the reason is is when there's an external candidate, they've actually done a lot of work. They've done cohort learning, they've done some CEO planning, their resume is ready. They've taken on extra responsibilities and authorities in the organization. They've done one-on-one coaching and that's different than, unfortunately, some of the internal candidates who say, oh, our CEO is retiring. I'll apply. That's the next level of leadership for me, but they haven't done the work. So I think we can talk about that more. Sure. So, you know, so 20 of the 25 you worked on with external. So then what do you see as needed in order to increase the success rate of internal candidates being promoted? Let's expand on your last thought there. Yeah, absolutely. So what we're advocating for is that it is definitely a board's responsibility to make sure there's a good CEO, a viable CEO succession plan. So the way we look at it is to be CEO ready, you have to be ready within six months. If you're targeted for CEO development, that goes in the range of six to 36 months. And then learning or ready future, Mike is, you know, 36 months, maybe to five years. What we're not seeing is the board stipulating to the CEO, go forward CEO and get our candidates ready. So when we do see board saying CEO, develop our candidates or bring candidates forward, the missing link there is the board never has the conversation about what they might need in that role in the future. So what we're saying, let's go futuristic here. Let's look out three years and five years and see what, what kind of competencies do we need to lead our organization in this world that we can even anticipate now and what might those look like? And we're advocating that it's not a linear list of competencies that we pick three to the five most important competencies and characteristics that can be interwoven. So the new CEO can pivot when needed. So the board does this work, so we use our CEO start performer for that. Then it gets turned over to the CEO to help develop the internal candidates. And then we can talk about internal development and what resources are available externally there. Yeah. So I mean, who's ultimately responsible for the development of these internal candidates? Good question. The board will say CEO get them ready. The CEO will say, hey, internal potential successors, this is what we can do. So what gets mixed up is like, really, is that accountability question? I believe the board needs to advocate for it and expect it. The CEO backs it up, but Mike at the end of the day, it's up to the internal candidate to be accountable for their own development. They can make requests, they can make offers, they can seek that learning. They have to step up to it. What gets mixed up sometimes is when the board and the CEO say to maybe chief financial officer or chief learning officer, we're going to get ready. We're going to look at CEO succession. Here's what we're going to do and we're going to give you a development plan. Sometimes the internal hears that as a promise to be the CEO and what really what it is, it's a promise to give the resources to be able to go forward and do it, but it's up to that internal leadership potential candidate or leader there to actually take advantage of it and move forward. So three, three wrongs of accountability at the end of the day, it's that candidate has to align their skills with what the board and the CEO is doing. So if you were to do a poll right now, what do you think of board with Sarah? What are you hearing from boards to a question like this? Where is your board in preparation for a CEO succession? You know, would it be a they've a documented plan and identified internal candidates or maybe be they've discussed it, but don't have a formal plan. See they expect to rely on an external search when needed, D, they'll do an internal and external search or either unsure. Yeah, mostly be we've discussed it, but we don't have a formal plan, you know, large percentage don't have a formal plan of the percentages of people that say they have a plan. I would say it's not formal and Mike, it's not strategic. It could be a replacement plan. Here's our CEO, let's replace, but it's not a strategic succession plan aligning the competencies to the future needs of the organization. I would say they discuss it, but it's not formal discuss it might be, oh, yeah, we mentioned it in a board meeting four months ago, we've not done anything about it. No, I saw a statistic recently, I don't know if the statistic is recent, but if something I saw recently, at least from America's credit unions that said that only about 54% of credit union boards have a succession plan in place. And so, you know, the clients that you work with, it sounds like that's pretty typical. And even if we talked about it, they may or may not think that that's a plan. So, you know, what are the types of things that you're trying to educate boards on? You know, maybe it's leadership traits or here's how you build a plan or, you know, what's kind of top of mind in that area? Yeah, so we're helping them actually put a process together or codifier memorialize a process. Call it a plan is in there as well, Mike, and it's if something happens, and it's the emergency situation, here's our interim. And if our CEO gives us two years notice or three years notice, this is what we're going to do. And putting a budget together, sometimes we've encouraged, even though you're not looking for two or three years, go get some proposals from maybe two or three different search firms so you know what the search firm will do for you. You know, the scope of their, what their authority is or their accountability or their support or guidance for you, but really is looking at what are the leadership practices needed in the future. So some of the things that we're seeing is number one, a lot of our boards are asking for what's called transformative leadership. They want a CEO to come in and who has transformative experience versus just step every day a different thing we're going to do or transitional leadership we call it or transactional leadership. We're hearing a lot around we want somebody has a vision and strategic thinking. So we're seeing a lot of internal and external candidates omitted from the process because in an interview, Mike, they don't even bring up the word vision, they don't even bring up the word strategy. And that's a game changer. They're out if they can't do that. We're also seeing different from the great recession when we really looked for financial expertise because we needed that to keep us healthy from a financial perspective. We're seeing that the boards want what we call cross enterprise experience somebody that's not just functionally led in part of the organization like finance or marketing or digital. Somebody who's impacted the organization on a cross enterprise piece. There's more there if you want to go into, but those are top that we're hearing right now. Okay. And so as a person who's used your search from, I think certainly when people compare those quotes, you said to get the three kind of proposals, fee is obviously something that jumps out at folks. But I think one of the things that I've been extremely pleased with is your use of assessments to better understand potential candidates and their competencies and maybe they're fit inside of the organization. So maybe talk a little bit about your thoughts about using those types of assessments on the front end and how that is maybe a best practice that people should be doing. Yeah, sure. One of the reasons we started doing the assessments about 20 years ago, Mike is we're trained in leadership. We're all leadership certified leadership coaches here who run our keep searches. And we thought, okay, we get it. But how can we help our clients or our boards really understand the characteristics, leadership characteristics of the candidate? So we wouldn't look for some assessments that would give us more of a quantitative perspective there and also back up our qualitative assessment. And also the other thing there is when we do an assessment, somebody gets placed, it helps with the onboarding. So you definitely don't want to hire off an assessment, but it will help better understand the candidate and provide some validity there. We want to look at how does that person respond to the demands of the environment? Are they most comfortable sitting in the office every day or are they the kind of person that will get up and look about, look at the internal environment, external environment, see where the competitive forces are, see how we line up for that, know their level of drive. We also want to look at the interpersonal skills. How do they build trust, how do they exude trust, relationships are so important. We're also seeing because of the pace in the environment, CEOs have many competing commitments. And so how do they respond to the pace in the environment? And then this piece around, how do they respond to regulators and compliance needs, all those kind of things. So we look at, can they stay, keep the organization safe from a regulatory perspective, but also be innovative. So those are some of the things we look at. But at the end of the day, the one I really rely on is the emotional intelligence, Mike. I think we need a threshold of emotional intelligence in the CEO role. And so we've collected all this data from all of our candidates. It's hot off the press just like two days ago. And we're looking at, here's what the most successful CEOs have in different areas of emotional intelligence. So we'll have that ready for reviewing here in the next couple of weeks. But there's a threshold there that we look at in emotional intelligence. That's exciting. So what words of advice do you have to individuals who believe they may want to be a CEO someday? Well, one of the things is, start early. Start, think about being a CEO the day that your CEO gives notice or announces their retirement. Look ahead. I think it's this piece about professional clarity, self clarity on who we are and what we bring to the table and how it lines with the needs of the organization, how it lines with how the board sees us. So one of the opportunities or challenges that internal candidates have is the board sees them for maybe they're 15 minutes of fame, every quarter giving a report. They don't really see them in many cases and other venues. So there's opportunities there to get to know the board and show your stuff there. But I think that whole piece around self clarity, what do we bring to the table? I also say seek teachers, seek mentors, don't wait for your current CEO or your board to say, go forth and develop yourself. I think one of the most powerful traits a leader can bring is to say, I need a teacher, I need a coach, I need a mentor and go and ask someone, would you teach this to me? Would you be my coach in this regard? The other piece is, you know, we have a super neat, a big need in organizations to give rigorous feedback, we're so polite and so diplomatic that I think we could muscle up on giving feedback and asking for feedback. So we actually teach our candidates how to go and ask for rigorous feedback and get. And so therefore they get a better idea of how people see them and just don't settle that continuous learning. I just got off the phone with somebody who wants to be CEO candidate. And what I heard was, I don't have time to be a continuous learner. I'm too busy managing the daily task of the organization. I go, there's a gap here. You know, through gaps. So that's a big story to talk about right there. I mean, it's like your vision idea, right? I mean, that person is obviously myopic and operationally focused versus if you're going to lead an organization, especially in these challenging and uncertain times, I mean, you really have to have a vision and be able to persevere through whatever it takes to fulfill that vision. Yeah, the piece about vision I hear a lot of, especially from internal candidates, is I have a vision, but I don't feel it can be heard so I don't say it. I just go along and I go, how can you turn that switch on when you're a CEO now? Is that a switch you can turn on overnight? So a lot of work to be done there, a lot of opportunity, which is exciting for us. So speaking of switch, let's switch the conversation over the board earlier said that it's the board responsibility to decide the competencies and characteristics of a future CEO. What's important that they need to ensure they get it right? Well, that the board gets it right? Correct. Yeah, I think they need a partner to help guide that process, Mike. So some boards just, yeah, that's a big question. I think that's one of the things that we do really well at DDJ is it's helped to appropriately challenge boards on what we see they need because we've worked with hundreds of organizations like this. We can actually see what could go right, go wrong, and I think that's our responsibility as a consultant is to help guide the board on what they need. So what we do is, you know, sometimes they come to us with a list. Here's our list. Well, let's back it up. Let's take a strategic perspective here and get aligned on how we want to be in a narrative for our future CEO. So somebody comes up to you, a member comes up to and says, what do you expect from your next CEO or what's your vision of success for your CEO? It's not a good idea to give them a list of, oh, they should have a degree in this. They should have five years experience in lending and three years in member experience. That doesn't matter what matters is what the end result is and how that person is going to lead through their presence and their expertise, their emotional intelligence, all of that. So getting the board aligned on that, that's a big piece of work. And it's not something that's easily done over Zoom. So the board might has to make the commitment to come together to do that work and get aligned. Then we can get the list of competencies, but I think that's the, that gets it right. And I want to say that helps us have a really high sticky rate over the last 30, 35 years and great success in placements of CEOs. Okay. So we've got some alignment now with the board in terms of competencies and characteristics for the future CEO. I've hired a great search firm like DDJ to do the search. Now we've got the candidates. What, what can the boarded directors do to prepare for interviewing these CEO candidates? Yeah, that's a really good question. So, you know, we do this work with board development involving the performance of a board is called there's six board types. So I'll just talk about a couple here. One is an imperial type and imperial board type is the type of board that just super relied on the CEO to run everything, decide where the organization is going, decide who's going to be on the board, decide the strategic objectives, decide the agenda and the board is a good rubber stamper. You know, so what, what their challenge is an interviewing is actually being able to be in a rigorous dialogue with the candidate. So Mike will do some more coaching and being in the room and help them along with that. And then at the other end, there's that higher performing board that has had a wonderful leader, they've had a partnership between the board and the CEO, that's a higher level dialogue. They're in that strategic and futuristic thinking conversation and they get very innovative and high level there and then our job is to make sure there's some reality checks going on. Can that CEO candidate who's speaking from a futuristic and innovative perspective, can they actually get things done? Will they really listen to people? So that's a different polarity that we manage in the interview room. And then there's others, but those are the two that we see the most and it kind of makes it a lot of fun. So you know, we're coming to the close here and I just have a couple more questions for you. So just playing that out a little bit, you know, if I'm one of the 46% of the credit unions without a succession plan or maybe I'm one with one, but it maybe as in his robust as it could or should be, what advice do you have for these boards? So they're able to make, you know, this important kind of succession plan and CEO decision. Yeah, a couple of things if we're two or more years out, definitely once a quarter, take a look at your CEO succession plan and look at the competency set and also important their mic is what are we doing as a board? So we're ready for that high performing CEO, what are we learning? What are we developing and constantly look at your internal candidates and see how you see them developing also for boards that are continuous learners and they go to conferences, ask other boards, what did you do that was successful? And I always love to look at candidates or potential candidates at conferences, which is one reason why I go is I get to meet people that I might have the opportunity to work within in the future, but you know, the board has to start asking those tough questions of themselves and of their CEO and their potential internal candidates. Just be educated. Like go to the Ailen First Institute, go to the Ailen First Forum, increase that learning and increase that capital in the board room and just don't stop. Just don't rely on the next CEO to bring everything to the table. Be challenging. Well, as we wrap things up here, Dede, you know, any final thoughts in general for CEO candidates or succession planning or board hiring or in general, what do you want to leave us with? Yeah. Well, one thing for potential CEO candidates is, you know, like I said, start early. We have this wonderful program. It's called the See Yourself and I can look around the country and I can see CEOs who are doing a great job that maybe five years ago, they were thinking about being a CEO. Like they went through the See Yourself program, which is a one-on-one intensive where you really pull back the layers, go to what motivates and drives that person's leadership and help cultivate them to be CEO ready. I would say that even for internal candidates going through that is a powerful thing. From the board perspective, I would say if you don't know when your CEO is going to leave, you haven't asked that question and maybe you're afraid to ask it because you think the CEO might think, you know, you're trying to run them off. Just say, could you give us two years notice and get it, make a deal there, give us one year notice, give us two year notice, and then if you want to extend it, you can. But put a pen in it, Mike, and drive for alignment there. Those are two things that I would suggest. Awesome. Well, it's always a learning experience for me talking with you, DeeDee, and I always enjoy it. Thank you so much for joining us today. My pleasure. Thanks, Mike. Sixth CEO's succession planning is crucial for credit unions as DeeDee's insights revealed. The key takeaways that I got from this conversation are, one, most boards like formal plans aligning future leadership and organizational needs and less than 54% have them. Number two, internal candidates face unique challenges in shifting to a CEO mindset. And third, effective development demands shared accountability. Students, CEOs, and candidates all play a role in growth and readiness. As we wrap up, let's reflect on the evolving financial aid landscape that DeeDee highlighted. Crediting unions must adapt to these changes and that starts with intentional leadership preparation. Thank you for joining us on in your best interest. We hope this discussion provides valuable perspective as you evaluate your own leadership pipeline and succession planning strategies. We have a robust workshop, conference, and webinar schedule, 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. 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