When key employees retire, how easy is it to find qualified replacements? Well, without planning, it can be quite difficult. The market place is changing, baby boomers are retiring at staggering rates, and how your business fills their spot will be a key factor in determining its future success.

Key trends and statistics

We compiled statistics from studies by Harvard Business Review, Hireology and Forbes. Some of them might surprise you!

1. 10,000 baby boomers are retiring every day
2. 56% of workers plan to work part time in retirement (at least for a while)- This means that you will have to keep providing employer benefits to them, which could have a huge impact on your company’s finances.
3. Approx. 40% of new CEOs fail to meet performance expectations in the first 18 months.
4. 40% of companies do not have a formal succession plan for their CEO
5. 94% of employers report that having a succession plan positively impacts their employee’s engagement levels.

Key takeaways

Succession is a lengthy process that shouldn’t be left to chance. All businesses should plan for retirement and other situations where key employees are suddenly not able to fill their roles. This will ensure there is no loss of productivity and your business continues to operate smoothly and effectively.

Planning takes years not months and a good place to start is integrating executive development programs with CEO succession planning so that the best internal candidates are identified early. If someone indicates that they’re planning to retire, commence training and begin the transition process. If you are not planning to fill the role from within, ensure that the position description is updated and check with the retiree to make sure the description encapsulates all that they do. It’s best to involve the retiring employee in the recruitment process – no one knows the job better than they do!

Can you fill a position and pay the new person less than their predecessor?

Some companies use a position replacement as an opportunity to save money. The catch here, though, is that it might end up actually costing the company more in the long run.

Case study

For example. A CFO who makes $250k a year retires. The company looks to hire a new CFO for $150k in order to reduce their overhead costs and trim expenses. Sounds like an easy way to save on payroll expenses right? Although it’s an appealing cost saving strategy, here’s two outcomes I find many companies fail to take into consideration:

1. Hiring a candidate for $150k may reduce costs but that comes with a price. Many times a “cheaper” candidate does not have the skill set or has less experience than a more seasoned replacement.
2. Many times companies spend months searching for a lower cost replacement only to find that they are not getting quality candidates. They end up spending the difference in salary on hiring costs and other fees related to a lengthy search process.

Current Market Trends

The labor market is tight and there is a shortage of qualified people to fill high-level positions. While the idea of saving money is appealing, in the end, it costs many companies even more time and money to fill these positions themselves with less costly candidates. A succession plan can eliminate a significant amount of added time and stress.

The main idea here is that planning is key. You don’t want to be caught off guard when a key employee decides to exit. Need help with your succession plan or filling a critical role? Contact KLR Executive Search Group, LLC.