Succession Planning – It’s Not Just for CEOs

March 14th, 2008

The 79 million Baby Boomers in the U.S. continue to charge full-speed toward retirement age.  The oldest of the Boomers will turn 65 in 2011, and from that point on, it is likely that more workers will be leaving the workforce than will be entering it.  Companies need to face the reality that there will soon be a significant gap in the workforce, assess how it will impact their organization, and implement a company-wide succession planning project.  According to a recent report released by the Aberdeen Group, succession planning is underutilized by most small and mid-sized businesses.  Only 35% of small and mid-sized businesses have a succession plan in place.

Although succession planning is most frequently used for presidents, CEOs, or other senior management personnel, it can be a useful tool for virtually all levels of an organization, regardless of the organization’s size.  Many businesses have positions that require specialized knowledge, skills and/or abilities.  If the employee that filled such a position retired or left the company, the company needs to ensure that there is someone immediately available with the same specific skill set to take over.  This is especially crucial for small to mid-sized businesses, where there is little-to-no employee redundancy, and everyone’s job is vital to conducting ongoing business activities.

A company’s first step in succession planning should be to conduct a risk evaluation.  This can be accomplished by examining every position in the company and assessing (1) possible retirement plans of the individual working in the position, (2) importance of the position in relation to the overall functioning of the company, and (3) current status of possible replacements for the individual working in the position.

Once the risk evaluation is complete, the company should develop a strategy for minimizing the potential impact of retirements by various HR tools, including succession planning and updating recruitment and training policies.  Some potential avenues to explore include:

  • Create consulting agreements with senior managers that would provide access to their knowledge and experience after retirement
  • Create policies and procedures allowing for part-time return to work after retirement
  • Update existing training policies and procedures to allow for accelerated training opportunities for key positions

Keep in mind that employment and employee benefits issues could arise as a result of the succession planning.  For example, re-hiring retirees can have an impact on benefits eligibility.  Consulting with your benefits attorney during the risk evaluation and strategy development can identify and correct employment and benefit issues before the employer implements policies and procedures that can create problems in these other areas.

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