Succession Success: Let’s Talk Transition
Did you know that there were an estimated 78 million people born in the Baby Boomer generation? These individuals, if they retire at the age of 65, will all leave the workforce in the next decade. Even those who originally planned to stay employed past 65 may find themselves drawn to early retirement or face an unexpected health crisis that changes their situation. Is your company prepared? There are only an estimated 40 million people that belong to Generation X. Doing the math; this causes an instant shortage in the workforce because there aren’t enough people to fill the shoes of those stepping away.
So now what? The Millennials, with 80+ million in their generation, are eager for more responsibility, but are they truly ready to be in key leadership positions? This Baby Boomer exit impacts all levels of an organization and becomes especially messy when the current ownership team consists of all or mostly Baby Boomers.
Transition is often a difficult conversation, even when owners know it’s the right thing to do. It’s a fact that every single business must go through ownership transition at some point, but it can be tricky logistically, strategically, and emotionally. It’s also important to recognize that this type of transition isn’t just about executives. It would be best if you discussed NextGen transition in all areas of your business, including human resources, finance, and marketing.
Ownership transition is an area full of challenges; let’s take a closer look at some of the transition traps you should be on the lookout for.
Transition is a delicate topic, with many moving parts, and requires a strategic and thoughtful approach. It may be that those nearing retirement have a difficult time envisioning what it will be like on “the other side” and can lead to indecisiveness or paralysis by analysis, which ends up hurting the company. It’s best to have a team approach to help keep things on track and moving forward.
Another potential challenge could be that those who are positioned to take over the company may not feel confident in their ability to lead the organization. Or, they may have other personal demands such as a newly purchased home, younger children, etc. that prevent them from being able to buy into the company financially. These are issues that need to be uncovered sooner rather than later so that they can either be resolved or other options can be considered.
Aversion to Change
Change is tough, and so often, decisions that require big change find themselves at the bottom of the “to do” list. When it comes to succession, procrastination can have significant negative impacts on the business, so beginning the necessary conversations early is critical. A plan that is carefully and thoughtfully developed will have a big say in the future success of an organization. It also puts the minds of employees at ease to know that their future is being planned and quells rumors of what may or may not happen.
Sometimes, it’s only one person who doesn’t want to talk about change, and it’s the one person who needs to talk the most – the owner or department leader. If you are a leader who is ignoring the inevitable, meet with your team and start the conversation. Taking that first step may be hard, but you will be glad you did it.
Lack of Strategy
Succession should absolutely be strategic, otherwise why even bother? First things first, do you have the perfect successor in your employment currently? It’s certainly not a requirement, and frankly, sometimes the best decision is to hire from the outside, someone who brings fresh new ideas to the table. Don’t just hand positions out to the last person standing. Use this opportunity to be thoughtful about where you see the business going, or if it’s a specific department, where you need it to be in order to help the company grow. Should you need to look outside the organization, it’s best to have that person on board for sometimes years before they take over the reins. If, however, you do feel that you have the right person on staff already, do you know if they want to move into the new role? Never assume, start the conversation and talk openly about goals and responsibilities. Again, the emphasis is on being prepared and doing your homework in advance of any big decisions.
Watch our on-demand webinar, where we’ll discuss industry trends that will impact transition strategies, leveraging people to create high-performing teams, and the importance of embracing people skills to position your firm for future success.