If you are over 50 and the Founder / Chairperson / CEO of a mature business, there are two types of succession planning that you need to do:
- Your employees (the topic of this article)
- Your business (the topic of a future article)
Regarding employees, do you have a succession plan in place for yourself and other top executives nearing the retirement age? Baby boomers, those born between 1946 and 1964, are heading into retirement in droves (about 10,000 a day, in fact).
According to the Pew Research Center, the 10,000 Boomers who will turn 65 between 2011 and 2030 comprise 26 percent of the U.S. population. This demographic shift will reshape the American workforce.
This cohort represents individuals who have been in the job market for 30-40 years, and many have ascended through the ranks to top management. They hold positions of responsibility as CEOs, CFOs, and COOs.
Workers aged 55 and older were employed across many types of occupations in 2016, according to the Bureau of Labor Statistics. More than 42 percent of these workers were in management, professional, and related occupations, a somewhat higher proportion than that for all workers.
Because more than half of the workers who are soon to retire are in managerial positions, it is all the more essential that companies have succession plans in place to fill these vital executive roles. Business continuity is critical to a firm’s success and protecting institutional knowledge about a company, and its sales are crucial.
Succession Planning Preparation
Experts advise you to take the following steps as you prepare your succession planning:
- Start planning early – What if 10 of your senior executives retire in the next two years? How will your business handle that? Getting a plan in place now will save your executives from going into crisis-mode when a wave of retirements occurs.
- Talk to those approaching 65 about their plans -In fact, the Society for Human Resource Management (SHRM) advises companies to conduct “retirement coaching,” which ideally means more than providing a to-do list to employees announcing their retirement. Retirement coaching helps give both prospective retirees and future generations of the workforce a clearer view of their future with the organization.
- Promote from within – Start promoting those smart and ambitious mid-level executives into senior management, and give them the exposure across the company they need to make executive-level decisions. If you identify and promote individuals with high potential, you will not only send a message within your firm that you value good contributors, but that your workplace is one where advancement and progress are possible.
- Make sure vital information is shared – You don’t want an executive to retire to an island in the Caribbean and take with him vital sales contacts or other trade secrets he has developed within his career. Make sure that HR is working on a plan for knowledge transfer for individuals nearing retirement, and if you assign each of these executives a second-in-command, you can assure the transfer of information stays within your company.
- Creative leadership training – Use the wisdom of your retiring senior executives to train the up-and-coming leaders of tomorrow. Schedule retreats at an attractive venue in the mountains or by the sea, and let your executives approaching retirement age share the essence of their roles and responsibilities with the generation that will follow them. You can make this a pleasant, relaxing weekend retreat, and find that both the retiring seniors and the young leaders will appreciate exchanging knowledge in a setting outside of the office.
- Attract Millennials – Millennials, the generation born between the early 1980s and late 1990s, are defining the next generation of workers. A study about Millennial Careers from Right Management found that Millennials are motivated by stimulation, recognition, flexible work arrangements, and a defined culture. The more meaningfully your company addresses these needs and objectives, the more successful you will be in retaining tomorrow’s workforce.
Firms and Organizations Ready for Retirement Wave
As Courtney Rozen wrote recently on BloombergLaw.com:
“Eight years ago, partners at CPA firm Kruggel, Lawton & Co. LLC in South Bend, Ind., gathered around a table. All close in age, they faced a challenge: what would happen to their 90-person firm after they retired?
They weighed two options: lure a large firm to buy them or train replacements. They picked the second, and have since doubled their personnel, added three partners and delegated leadership tasks to younger CPAs, said Barry Hall, the firm’s managing partner.
At CPA firms like Kruggel Lawton, baby boomer-aged partners are preparing to clock out for good. Eighty-four percent of multi-owner firms surveyed in 2016 by the American Institute of CPAs said they believe succession will be a big issue for them in the next decade.”
Kruggel Lawton’s partners both expanded their firm and increased their replacements simultaneously to avoid a leadership gap when they retire, Pozen wrote. They also instituted a new policy that requires partners to give two years’ notice for retirement, which offers younger leaders a definite timeline for advancement.
“You can write the best succession plan in the world, but if you don’t grow your practice and develop leaders, it’s going to fail,” Hall said to Bloomberg News.
Within state and local governments, efforts are underway as public-sector employees reach retirement age.
Neil E. Reichenberg wrote a paper about “The Ripple Effect of Baby Boomer Retirements.” He cited The City of El Paso, Texas which created a succession planning whitepaper. It also surveyed employees to find out their planned retirements dates. The city also institutes workforce planning to capture the data for each city department.
Reichenberg noted, “This initiative has assisted the city in getting directors to think strategically when replacing crucial talent. It has also made them aware that they need to train internal staff and have an overlap of employment to transfer knowledge.” The city also provided 45 hours of training at a local college that focused on leadership, organizational behavior and communications for the employees who were poised to advance to managerial positions.
The coming retirement of the baby boomers in your company is a reality; you can’t avoid it. However, your firm can take steps today to plan for this reality and to identify and train future leaders while respecting the information that their predecessors acquired and are now willing to share. Much of your business’s success has been due to careful planning, throughout the company.
Succession planning is no different. If you communicate well with your employees about the upcoming plans, and reward those who share knowledge with younger managers, your company will not only be ready for the future, but you will go a long way towards motivating loyal, valuable, and hard-working executives throughout your firm.
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