Start Planning Early for Leaders to Retire

Start Planning Early for Leaders to Retire

When a CEO or other company leader decides to retire, it sets off a chain reaction within an organization that can have long-lasting effects. How a company handles the transition and finding a new person to fill the open role—whether an internal or external candidate—will shape the future of that company for years to come.

The biggest question an organization has to tackle when it comes to succession planning is how much overlap are they ready to pay for and manage? Succession planning is not a situation where the retiree leaves on December 31 and the new hire begins January 1 with no training beforehand. The new hire should be allowed to gain new skills and experiences as they ramp up into the new role. In essence, companies will be paying two people for the same role for at least a short period of time.

If a replacement hire is selected internally, that employee cannot do both their former job and their new role at the same time. However, the incoming hire should be allowed to begin making decisions that the retiring employee has previously been making. Organization leadership needs to allow and plan for the task slippage by the incoming hire.

Another aspect to succession planning is the retiring employee’s outlook—are they ready to step away and let go of decision making before their final workday? Companies should plan for a six month lead time prior to retirement, with the retiree making fewer and fewer decisions as the retirement date nears.

Setting up this shift internally is critical to maintaining a thriving company culture. The organization needs to become more aligned with the decisions of the incoming hire and employees need to become more comfortable going to the new hire with their questions. The process is easier when the retiree directs employees to the new hire for questions during this transition period.

Many companies fail with succession planning when they think the process can be achieved in just a year. The actual process is a two to three year undertaking. When an internal candidate is selected to move up, it sets up a chain reaction where there are multiple roles that are being replaced—not just the retiree. It is also important for organizations to plan for training in the lower-level roles so the new employees filling those roles are not set up to fail.

Another question many companies need to ask is if they have the talent pool within the company to accommodate this chain reaction? If not, then hiring decisions should be made with the chain reaction in mind. Choosing an internal candidate is desirable, because they already know the team and company, but the team may not trust them in a higher role because they work with them all the time. A year to ramp up into a higher role helps the internal employee to build trust and hit benchmarks, proving to their colleagues that they can make decisions.

Direct reports who are getting a new manager need to be given the timeline for this shift in responsibilities and know who to go to for questions about different areas. It is also helpful for everyone to be made aware of an outline of what responsibilities the new hire will have in their new role. Complete transparency leaves little room for gossip and rumors, which can poison the company culture.

Keeping customers aware of the transition plan and timeline is also critical for service-based organizations. If customers are not comfortable with the changes being made, it allows them time to speak up and the company to adjust. Those employees that have a negative relationship with an internal employee moving up can be transitioned out of that department or the company, as they still have an impact on the net result of the transition.

It is very difficult to have those hard conversations with someone who has been a beloved CEO for 10-15 years. Everyone knows the CEO is 62 years old, but they are ignoring it, thinking his retirement is “somewhere in the future”. However, companies need to start planning for the right person to take the CEO’s place, whether they are internal or external, and start developing a process.

Setting that stage early means that a change at the highest level will have less impact on the business and minimize a negative cultural impact. If handled properly, a transition in leadership can be used as an opportunity to leverage cultural health and growth, and the company will be better off for it.