Early Retirements in Your Company due to COVID? Here are some Succession Planning TipsMay 27, 2021
Are you losing a leader? The pandemic has spiked early retirements. Start your succession plan now!
It’s no secret that the pandemic is fueling an increase in executives taking early retirement across all industries. More vacancies and a shrinking talent pool combine for increased demand (read: competition) for highly desired top talent in the workforce. How can employers find suitable successors? We explore below.
Candidate driven market
This out-of-balance supply versus demand phenomenon is sometimes referred to as a “candidate driven market” and is forcing employers to assess their anticipated needs even further ahead - or face the ramifications. The good news is that an organization can implement an action plan to be prepared when retirement notices are tendered.
Case In Point:
Consider this example. A mid-market, New England based organization is struggling to find a suitable successor for a C-level position due to an imminent retirement.
While the incumbent gave extended advance notice, several factors are limiting the candidate pool. These include:
- For starters, the industry sector is lean of similar size organizations with a similar focus and model.
- The potential talent pool is further reduced because the employer desires to hire an executive with established local connections.
- Additionally, the organization has a relatively unique model and desires candidates who have specific, relatable experience.
- Lastly, and perhaps most importantly, this employer’s planned salary range is on the low end of the market – certainly not competitive by any means.
These factors may not be as critical in an “employer driven market” when the demand for talent is reversed such as during times of high unemployment or an industry-specific rebalancing. But given the present circumstances, this employer is left grasping for straws.
What is an employer to do? Sit back and wait for a high-ranking executive to announce retirement and then try to pick up the pieces? Heck no. Employers can get out in front of it. They get informed and make a plan. Being prepared will help to minimize the impact.
Here are some points and actions to consider:
Assess, Assess, Assess:
- Assess your vulnerability. Take a candid look at your leadership team and contemplate those who might be in a position to retire early. Once identified, pull together a short list of possible internal candidates you would consider promoting. The benefits of an internal succession can be plentiful. Do you have a bench you can rely on?
- Assess external executives in your industry niche who could make a “splash hire”. Industry contacts? Former employees in good standing? Consultants? Can you turn lemons into lemonade?
- Assess the parameters you are dealing with. Does your geographic area have a deep talent base? Technology in the Bay area, finance in New York, Education in Boston are industry centers where talent is more plentiful than other pockets of the country. If your niche is lacking locally, weigh the pros and cons of relocation versus becoming flexible on skills, degrees and experience. Can you allow for an off-site employee or perhaps on the job training? Some situations dictate that the two executives pass at the door. Other situations are best served with a transition time for the new hire to acclimate while the retiring executive is still with the organization.
- Assess what you can offer. For most people, it isn’t only about the money. Culture, career pathing, flexible work options, market reputation and other intangibles are often of greater concern. That said, compensation is most assuredly a critical factor and you should take the position that your competition may also be a great place to work. Do you have a compelling compensation and benefits package? Long term incentive plan? Equity? How can you fill the basket?
When you’ve finished assessing these variables, continue your homework by learning about current market trends at play. Consider having an external firm conduct a salary survey for the role you may need to replace. Scan trade publications for announcements of leadership changes, M&A activity and other events that might identify potential executives to keep in mind. Identify an executive search firm that specializes in your industry. They’ll bring an objective view and deep experience. Have initial, confidential conversations (use a NDA if necessary) to find the right service provider. With a preliminary relationship in place, your search can be launched quickly when needed.
While each situation is unique, securing a highly experienced executive takes time. Vetting candidates, negotiating an offer and transition time between employers adds up to months in most cases. More time will be needed if relocation is necessary and/or you want to have your incumbent interface with the new person. Although you can’t predict exactly when you will receive notice from a senior executive, you can take steps to be prepared. As a last resort, if your retiring executive leaves before you onboard a permanent replacement, you can rely on any number of interim and fractional executive service providers to bridge the gap. While not necessarily ideal, a temporary solution is likely much better that a void.
Need help assessing your individual situation? We can help. Reach out to KLR Executive Search Group.