Succession Planning

After Lone Star Bank’s current CEO Harry Ritter agreed to accept an attractive severance package and serve out the rest of his year and then to be replaced, he offered some advice to the organization. Ritter suggested Lone Star hire the bank’s senior vice president of operations, Bob Bowers because he knows the inner workings of the bank better than anyone else on the board. Although the CEO may have been sincere with his suggestion, this is not always the case.   An organization should not leave it up to the CEO to identify a successor because they are typically not trained or experienced in staffing, and they may also have selfish motives in appointing a successor. At the same time, CEOs many also avoid recommending a CEO in hopes of keeping their job.   I think that Lone Star should take advantage of succession planning software and try to hire internally. I feel hiring an employee internally will benefit Lone Star because they are not planning for long term, and they need someone who knows the company and its investing well. Hiring externally is good for some positions, but considering it is a CEO position and they need an employee who will be knowledgeable about investments for the company, they should first look at internal hiring.  

It is essential for Lone Star to have a succession plan for the CEO position. Succession planning at financial firms, including banks, has always been important but with the credit crisis putting a great amount of focus on the importance of strong management, it is now something not even the most strongest executives can ignore. An example I found to explain it significance concerned Bank of America Merrill Lynch, which took 11 weeks to find a replacement for outgoing chief executive Ken Lewis even with the announcement of his resignation. Because of this, senior managers at the firm admit the failure to quickly find a replacement for Lewis caused difficulties, as important decisions about the running of key divisions such as...