Earlier in my career, before I worked in executive recruiting, a credit union CEO excitedly shared some news: He would retire the next year, and had taken an intentional approach to succession planning, hiring a new EVP from outside the credit union and naming her as his successor. I couldn’t hide my surprise: I thought the best possible successor was on his own leadership team already.

Six months later, the new EVP was gone. While the CEO was still in his seat, she had pushed for sweeping changes that contradicted the culture, the strategic plan, and the board's stated direction.

With only months left before his retirement, the credit union turned to the internal leader it had previously passed over. She stepped up and has now led as CEO for more than seven years. Strong performance, an engaged team, and continued growth prove what my instincts told me: She was the right successor all along.

That experience shaped how I think about succession, so much so that (as an executive recruiter) I once gave a talk titled “Why Credit Unions Should Put Executive Recruiters Out of Business.” Research supports my belief in internal succession. In "The High Cost of Poor Succession Planning" (Harvard Business Review, May–June 2021), Claudio Fernández-Aráoz, Gregory Nagel, and Carrie Green highlight a study by Rakesh Khurana and Nitin Nohria that tracked CEO successions at 200 organizations over 15 years.

On average, insiders didn't significantly change their company's performance while outsiders produced extreme results, adding value at companies that were struggling badly, but destroying substantial value where companies were doing well. The authors concluded that outside hires make sense if a major turnaround or culture shift is needed, but that only 39% of outside CEO hires at public U.S. companies would have outperformed a comparable insider.

While the research was conducted at public companies, that caveat matters for our industry. Most credit unions aren't looking for disruption. They want a leader who will carry the mission forward while adapting to what's next. In these situations, an internal successor has a distinct advantage, and credit unions are well positioned to prepare for that succession.

Why the Best Candidate May Be Overlooked

There are two common reasons qualified internal candidates are overlooked.

First: It can be difficult to see someone who grew up in our own organization as strong enough to lead it. We know their history (including the early mistakes) while an outside candidate may appear to carry knowledge we don't. The perception gap widens in the interview. Internal candidates often get shy about highlighting their accomplishments, reluctant to take credit from the current CEO and hesitant to discuss changes they would make. External candidates, meanwhile, arrive with something to prove, and they interview that way. They leave a board feeling like they’ve found a hero who single-handedly saved their last credit union, while their internal candidate failed to tell a bold story.

The second reason internal candidates may be overlooked sounds like a compliment but is just as costly: The board knows the executive is valuable in the role they already hold. They believe they can keep this talent in place while adding new talent on top. That logic turns excellence in a current role into a reason not to promote someone, protecting one seat at the expense of the most important one. Boards have responsibility for only one employee—the president/CEO—who should be trusted to backfill their own role and build the executive team.

The CEO Must Open the Door

In the best succession plans, the CEO starts the conversation early, sometimes before the executive even sees themselves in the top role. When the CEO initiates the conversation, it gives executives permission to name their aspirations, to hear honestly where they need to grow, and not to worry they might be perceived as pushing their CEO out the door.

The CEO's next job is to bring the board into the conversation. Boards must see the possibility and progress of the internal candidate: The preparation, the skills being built, and the growth over time. This addresses the familiarity problem directly, giving the board a front-row seat to a leader deliberately preparing to lead the credit union.

These conversations also open doors to development programs, broader exposure, and bigger questions about what the credit union will need next.

Retirement Shouldn't Be A Surprise

When boards and CEOs don't talk candidly about retirement, assumptions fill the silence. Sometimes a board assumes its CEO will retire at 65 when the CEO intends to work until 70. The board is ready to move on sooner than the CEO would like, creating a missed opportunity to guide a respected leader toward a graceful exit.

While the board acting too soon does happen, more often it is the opposite. The board may not believe the CEO will really retire, and no plan takes shape. When the date arrives, the board is caught off guard, feels rushed, and internal candidates who might have been ready with a few years of intentional development are unprepared or overlooked.

The fix is simpler than most leaders think: By beginning the conversation about retirement and succession in the CEO's first year, these conversations become a natural part of governance. The CEO's annual performance review should include a discussion of long-term plans and succession planning should be one of the metrics the CEO is evaluated on.
When boards are prepared to start formal transition planning 18 to 24 months before the CEO’s retirement, they more often reach a confident decision about internal candidates.

Preparing Tomorrow’s CEO

In working with boards to define the ideal profile of the next CEO, one thing is clear: What might have been most critical ten years ago has changed. Technical and functional area expertise still matters, but as credit unions navigate fast-paced change and technology integration and adoption, the people side of leadership is even more important.

Tomorrow's CEO needs the curiosity to keep learning, the emotional intelligence to guide others through constant change, and a deep commitment to the mission, keeping the member at the center. Often, it is easier to cultivate and measure these qualities in an internal candidate who has proven their commitment to the mission, culture, and people, and who will navigate change alongside the team rather than impose it from outside.

Start the Conversation Now

None of this means an external search is never the right answer. When a board truly needs a turnaround or when no internal leader has been developed, looking outside makes sense. That should be a deliberate choice, though, not a default forced by a ticking clock. When a credit union has strong internal candidates, a board can formally assess them first, then launch an external search only if the board isn’t satisfied.

Don't wait for a retirement announcement. Start the conversation right now and you may find your next CEO is already in the building.

Jill Nowacki is Co-Founder and President/CEO of Zealyst, a consulting firm dedicated to igniting passion, purpose, and performance in credit union leaders and their teams. With more than two decades of experience in the credit union industry, Jill has built a reputation for helping organizations uncover the zeal that drives extraordinary outcomes — from executive search and leadership development to culture transformation and organizational performance. Jill's career spans leadership roles at credit unions and state and national trade associations, including serving as President/CEO of the Credit Union League of Connecticut. That breadth of experience — across operations, human capital, community development, and advocacy — gives her a uniquely grounded perspective on what it takes for credit unions to grow and thrive. Central to that work is executive search. Jill has placed hundreds of executives in credit unions across the country, developing a deep fluency in what makes leaders succeed — and what organizations need to keep them. That insight shapes everything she does, from consulting engagements to the stage. Her work is grounded in a deeply held belief: when people feel genuine passion and purpose for what they do, both they and their organizations perform at their absolute best. As a speaker, Jill brings that same energy to every room — challenging credit union leaders to see not just what is, but what's possible. Jill holds a Master's in Public Administration from the University of Montana and a Bachelor's in Communication and Public Relations from Carroll College. She is a certified International Credit Union Development Educator, a Certified Association Executive (CAE), and a Certified Diversity Executive (CDE).

Connect with Jill at jill@zealyst.com, zealyst.com or 203.213.7829