What Happens when the Baby Boomers Retire?
The University of Florida, Kentucky Wildcat basketball, and Ohio State do not rebuild their sports programs, as they say, they reload. The same is true for your organization. If you are like most companies, your bench strength is under pressure. The U.S. work force is about to enter a massive retiring and you need to be ready.
An interesting article from the Minneapolis / St. Paul Business Journal dated April 2005 warned that a massive retiring would start in 2011. It was recommended that companies in 2005 begin planning as soon as possible. It claimed that nearly 77 million Baby Boomers would have to be replaced with only about 45 million Generation Xers. In the absence of Baby Boomers, the most senior sector of the labor force would have to be replaced by a force that is 42% smaller in number.
The economic nosedive of 2008 caused many would be retirees to postpone retirement. The massive retiring set to begin in 2011 was simply delayed. The numbers do not lie. Soon enough weak benches will threaten the success of businesses that did not practice succession planning.
The small business succession plan
Tom Deans, Ph.D. and a family business specialist, states that only 3% of family business make it to the third generation. One of the reasons is lack of succession planning. Heirs might not have the knowhow or motivation for the going concern.
If you are a small business and are privately owned you should consult with an attorney and financial planner to handle the legal aspects of a succession plan. This could encompass anything from buy-sell agreements to shareholder’s agreements.
With the legalities out of the way, the small business owner can focus on grooming the proper replacements.
Look within to find the right candidates
The future leadership could possibly already be a member of the organization. This person does not have to be extremely experienced, yet. Most important they should possess the potential to be a leader. This Succession Planning Tool can be used to easily assess who might be the right fit. The form can be printed and distributed to likely candidates and then reviewed to determine next steps.
Ways to prepare a candidate for their future role as upper management are lateral moves, special assignments, and training. The goal is to expose the candidate to as much of the business as possible. With a lateral move the candidate does not take on more responsibility, rather they shift the type work they are doing. For example, if the candidate is a sales representative with no direct reports, then a lateral move might be placing them in the credit department and with no direct reports. Think of this strategy as sort of a rotational program. Many management training programs are organized in this manner.
Special assignments are not as formal as a rotational program or lateral move, however they serve the same purpose of exposing the candidate to new things. It might also be that resources do not allow for a lateral move and that the candidate will need to resume their current function.
Seminars and formal training programs outside of the organization will compliment the learning already going on within the organization. Topics to consider could be everyday leadership techniques as well as industry specific courses designed for leaders within the industry. Certain accreditations for the specific industry, if not already obtained by the candidate, should be considered at this time as well.
Mentorship and knowledge transfer
The person preparing to retire has amassed a great deal of personal knowledge. This person should definitely be encouraged to mentor the replacement candidate. Job shadowing, interviews, and collection of certain documents are all techniques to accomplish knowledge transfer.
What to watch out for
Try and balance management training with technical training. Your goal is to groom a competent leader. They should be knowledgeable of the industry and how a business operates, but they should also be aware of how to manage people.
When thinking about a candidate, use the tool suggested above. Failure to give every possible candidate a thorough review could possibly lead to a narrow-minded decision. It is not always seniority or track record that qualifies a good manager. Just as important in leading an organization is working well with others, ethics, values, and the many other qualities that make a great leader.
The Number One Mistake companies make with succession planning is failing to implement in a timely fashion. In most cases the current management’s retirement will be planned. In this case early planning and implementation should result in a smooth transition with plenty of knowledge transfer. However, in the event that an unfortunate event occurs such as death or resignation, if succession planning has been ignored, the odds of a successful transition are questionable.