I spoke at a banking association’s workshop for emerging leaders and the event planner asked me a great question, “Where are the emerging leaders in banking?” We discussed the fact that associations work hard to offer quality educational programs for emerging leaders. But attendance is typically lower than they expect. We wondered why this phenomenon is a problem across the nation.

I believe there are several reasons why the emerging leaders don’t participate in these special leadership development programs as much as they should. Below are some of the reasons I observe from our clients under $5 billion in assets:

Emerging leaders are working.

Emerging leaders are running the organization behind the scenes and don’t have time to get away. They occupy entry level, supervisory, and some middle management jobs. They are starting their families and juggling work, family, and community commitments.

There is no money in the budget.

Often there is no money in the budget to attend leadership development focused programs. They are an afterthought. While budgets for certain training to take place, they focus on the technical aspect of the employees’ jobs. The focus on the leadership development of emerging leaders comes second.

Perception that emerging leaders are not loyal.

Financial institutions have been burnt before. They develop a specific emerging leader and just when the employee is ready to take the new job, he or she leaves. The organization is left with no one to occupy the position of an employee who just retired. There is no successor, and they find themselves starting all over again.

Legacy employees don’t leave.

Reasons such as the economic environment, living longer, cost of health insurance, and others, means legacy employees continue to occupy their jobs. I call “legacy employees” those who have been in the same job or same organization for over 20 years and are past the full retirement age.

It starts at the top.

I recently spoke with a CEO who mentioned their institution’s board of directors is comprised of three directors over 60, one over 70, and three over 80 years old! If the Directors are not willing to leave their spots and allow a younger generation to take over, the rest of the institution will follow suit. Why do they not leave? In addition to the reasons stated above that apply to employees, the legacy directors may not fully trust the next generation to take over. When addressing banks, in many instances, these are family-owned and the founders cannot let go because they don’t have successors—or at least successors they trust to take the organization into the future.

The lack of leadership development for the emerging leaders presents a critical risk to community banks and credit unions today and something must be done to change this trend. Below are some ideas you can implement immediately to train the leaders of tomorrow:

Do implement a succession planning process.

The first step is to identify future leaders and successors of key positions in your institution.

Budget for leadership development.

Ensure you budget both for technical training as well as leadership development for the emerging leaders you identify through your succession planning process. In addition, budget for continued leadership development for your senior leadership.

Encourage emerging leaders.

The performance review process is the appropriate time to ask each employee if they aspire to positions of leadership in the future. They don’t necessarily have to desire a senior leadership role. Some of them may be happy to be a supervisor, team lead, or manager of a department. Others may aspire to a “C” level position (i.e., Chief Financial Officer, Chief Credit Officer, etc.).

Mentor future leaders.

Part of a strong Talent Management Program is to establish a formal or informal mentoring program both as you onboard new employees and then as you identify successors. Mentoring employees is part of leadership development.

Hold emerging leaders accountable.

It’s a two-way street. The current senior leadership who mentors and provides opportunities to the emerging leaders must hold them accountable too. The accountability comes in several ways. For example, ask them to share with others what they learned at workshops, seminars, and leadership development programs.

Send them to training.

If you are a senior leader, please send your emerging leaders to leadership development seminars, workshops, and conferences offered by your state associations or other professional institutes. Also, as they grow into their leadership journey, provide executive coaching opportunities so they continue to grow as a leader and learn to deal with special situations.

If you are an emerging leader, go!

If you have been selected to be a successor to a key leadership role or aspire to lead throughout your journey, you must take the time to attend these leadership development opportunities when they present themselves. It is on you to prove and demonstrate to the legacy leaders and board of directors that you can and will take the organization to the next level. Part of demonstrating your desire to lead is to work hard and be loyal to the institution. This is hard to do when the trendy thing to do is to leave a company for the next best opportunity after only a few years of employment. You need to allow your employer time to develop you and to also prove to you that they want you in the organization for the long haul.

So, to answer the question, where are the emerging leaders? If you are reading this article and are currently in leadership, I hope it inspires you to send your emerging leaders to leadership training. If you are an emerging leader, I hope this blog inspires you to go and attend every opportunity you get!

Struggling with succession planning? As always, we’re here to help.

Strategic Planning in uncertain times is the most difficult way to start a New Year. What are you going to do to prepare for 2023? “Fight, fight, fight. No Matter What!” That was the response from a NASCAR Truck driver after ending the race in second place. Community Banks and Credit Unions can embrace that same attitude as they prepare budgets and strategic plans during one of the most uncertain times of this generation.

The current uncertainty touches several risk categories such as Interest Rate Risk (IRR), capital, liquidity, human capital, credit, and technology. Because all risk categories are interrelated, the impact on one risk category affects others simultaneously. Many community banks and credit unions are in the process of finalizing their budgets and strategic plans for 2023. Below are some strategies to help your leadership team through this difficult season in banking:

Take care of your people first.

You can have all the capital in the world and without your employees, you’re not going anywhere. Therefore, make retention of your top talent a priority in your strategic planning. It is true that many employees leave because of higher salaries elsewhere. But people leave mostly because of a toxic culture or work environment. To address turnover due to higher salaries, ensure your bank’s compensation and benefits are competitive and introduce new and creative benefits. Communicate to your staff that you surveyed other institutions of similar size in your area, so they know you did your homework. To address the culture problem, conduct periodic surveys, interviews, and truly listen to what your employees tell you.

Cybersecurity is still a top risk.

The investment in technology to safeguard your customers’ sensitive data should not be considered a burdensome expense. It is rather an investment to allow you to retain your existing customers and potentially attract larger businesses that need more sophisticated services such as Treasury Management.

In addition to the investment in hardware and software technology, you need to invest in the right talent to run the technology. This includes the consideration to outsource the expertise to third-party IT managed services. Additionally, ensure you have a strong Vendor Management Program which is crucial to a successful Cybersecurity Program.

Watch Your Balance Sheet and Income Statement closely.

As an ex-CFO, I typically found budgeting for expenses easier than estimating income—especially during uncertain interest rate environments. This year bankers have the additional challenge of low liquidity with their bond portfolio tied up due to unrealized losses. As you know, borrowing to fund your loan demand increases your cost of funds and decreases your Net Interest Margin. Therefore, you need to focus on increasing other sources of income and Treasury Management should be at the top of your list. If you can make your Treasury Management services a competitive advantage, you will attract larger businesses who in turn will bring additional core deposits and additional/new non-interest fee income!

Continue the strategic conversations in your Asset/Liability Committee (ALCO) meetings. Watch your financials closely and stay in constant communication with the Board of Directors. Regulators expect Directors and senior leadership to have a full understanding of your Balance Sheet and the effect of Interest Rate Risk on your Income Statement and bottom line.

Fight, fight, fight. No matter what!

Community banks and credit unions—especially under $1 billion asset size—must continue to fight no matter what. The fight is in several areas: The fight to attract and retain talent as mentioned above continues. The fight to compete against larger financial institutions and Fintechs also continues to be a challenge. And the fight against increased regulation must continue as well. Lastly, you can never rest on the fight against cybercrime.

So as the NASCAR truck race driver said, “Fight, fight, fight. No matter what!” Ending a race on second place is not bad. But everyone wants to win the race and be first. These days, staying in the race and not giving up is what truly matters. You cannot win every race, but you can enjoy small wins by retaining your best talent, ensuring your customers’ data is secure, and knowing your institution is safe and sound during these uncertain times.

Strategic Planning in uncertain times presents many challenges. I hope these strategies help you finalize your budgets and your strategic plan for 2023. We’re here if you need help!