When you retire, you want to leave the company in the best, most capable hands possible, so having a succession plan will help ensure an easy and successful transition upon your departure. The key is in taking careful consideration hiring the next generation of leaders, years before retirement is even a consideration, in order to retain staff and avoid any unpleasant surprises that might throw your retirement plans and the company’s future off track.
The Importance of Timing and Planning
The majority of us dream of retirement and began to make mental plans of retired life on a beach or a golf course without a care in the world from the very beginning of our work lives. In reality, those at the executive level need to seriously start setting plans into motion years earlier than they plan to leave the company. Things out of our control do happen, but just beginning to set the process in motion puts the retiree and the company in a much safer, easier place for eventual transition.
“If you don’t have a succession plan in place in case of a sudden departure or change, it really puts the company at risk,” said David James, CPA, CCIFP, former CFO of FNF, Inc. in Tempe, AZ. “It’s important to always have someone in the wings and available, which is the fair thing to do for the company. Some companies don’t have the luxury to have the structure that allows for that and that makes it more difficult.”
The average succession plan begins about five years out from retirement, which means talking to upper management and team members about the inevitable last day that for some people can be uncomfortable. There needs to be a culture of open, honest communication in place, or else the soon-to-be retiree may not speak up in time to set in motion a solid succession plan. Beginning and continuing this conversation is the correct strategy to keeping everyone on the same page and moving in the right, successful direction.
“Ideally, retirements of all key management positions should be included in your three to five-year Strategic Plan with an annual update,” said Vickie Spotts, CPA, CCIFP, former CFO of Zartman Construction, Inc. “Practically, personal plans change. Therefore, strategizing a process to follow in the case of a key retirement in advance and having a second person informed of key functions is imperative.”
This open communication also extends to staff and employees in lower-level positions interested in moving up in the company. It’s important to also share with them, assure them there is a plan, and set expectations.
“Without this open communication, you can easily lose half your staff if they hear you’re leaving and they think ‘oh well, the whole place is going to fall apart, so I’m going to leave before it does,’” said Linda Nila, CCIFP, former CFO of The Boldt Company. “You cannot under-communicate. You need to let people know there’s a plan and how you’re handling it. Let there be no surprises.”