The Great Resignation made headlines in 2021, with scores of employees leaving their jobs amid the pandemic and societal upheaval. But while these issues have receded, another crisis looms in the distance: the upcoming executive labor shortage as baby boomers leave the workforce.
Baby boomers — generally defined as people born between 1946 and 1964 — play a prominent role in our economy. Many are now in the upper echelons of major corporations, including executive positions. However, the youngest baby boomers will turn 67 by the year 2030, the age at which they can begin collecting their full Social Security retirement checks.
This imminent exodus means that many corporations will have considerable gaps in their leadership team. Are they doing enough to prepare for it? In some cases, no. Here’s what you need to know about the upcoming retirement crisis.
The average CEO age is currently 58. However, many CEOs are outliers, still sitting at the helm of their organizations despite being in their late 60s, 70s, or even 80s. One extremely prominent older CEO is Warren Buffet. Despite being 92, Mr. Buffet remains the CEO of one of the world’s most highly-valued organizations: Berkshire Hathaway.
For the most part, organizations welcome the opportunity to keep older CEOs. After all, they have extensive experience that can be challenging to replace, especially if they’ve been the primary driver of the company’s success. A more senior CEO could have internal knowledge of business processes and customers that their peers lack.
If an older CEO is still able to fulfill their duties, there’s no reason to replace them, especially if they enjoy and do well in the job. Pushing them to retire could have adverse consequences for the organization, such as fluctuations in the company’s value and significant customer loss.
CEOs benefit from the arrangement, too. Staying on board for extended periods allows them to save more for retirement while remaining relevant in the workforce.
However, keeping an older CEO on board can negatively impact younger executives eager to take top billing. Delayed retirements mean that future leaders need to wait longer for their opportunity to come. And when it arrives, they may find they’re no longer the right person for the role.
Most major corporations — particularly those of the S&P 500 variety — have succession plans for their top leaders. These succession plans identify the next person in line for the top executive roles, including the CEO and CFO. They help ensure business continuity when the time comes for an executive to retire.
Traditionally, succession plans benefit companies, employees, and stockholders. Organizations enjoy less risk of corporate disruption, while talented employees who know they’re in the running for executive roles are less of a flight risk — since they have the assurance that they’ll take top billing within a few years. Similarly, stockholders stand to gain because they’re less likely to see significant fluctuations in their investments when an executive leaves.
However, many organizations have failed to prioritize and enact their succession plans over the past few years. This isn’t surprising; executives have simply had too many other exigent issues to deal with, like remote work, social unrest, and supply chain disruptions that impacted their product lines.
While no one can fault their decisions to delay retirement and succession, given the unprecedented circumstances, it does mean that many companies are woefully unprepared for future executive retirements — many of which will occur in the next five years.
Organizations would be wise to take heed of these issues, especially when it comes to their baby boomer leader’s future retirement. While executives may have remained in their roles to help navigate organizations through unexpected crises, they can’t do so forever.
Companies that don’t have existing succession plans should create one, particularly for leaders nearing retirement age. Of critical importance is identifying younger employees with the aptitude to perform well in leadership roles and align with the company’s business objectives.
However, the time to develop these plans was a long time ago, and it won’t be long until it’s time to take action. If you’re just now beginning, you must be ready to implement these plans within the coming years, and you must begin preparations now. Executives who intend to hand their roles over to younger professionals need to prepare their successors for the job. That takes time. Their successors will need training, but they’ll also require grooming.
The grooming process includes forming relationships with key stakeholders, customers, and other executives. It requires introductions and inclusion in critical meetings that involve the future direction of the organization. It’s important to note that executive grooming usually requires several years to bear fruit; it doesn’t happen overnight. It can’t be stressed enough — your organization can’t afford to put off this process any longer than absolutely necessary.
After all, not every company will find that the right talent exists within their ranks. If that’s the case, they should start the executive search now, before it comes time for their leaders to retire. The right person will need the expertise, talent, and cultural fit required to assimilate into the position. As a result, finding the right person for a CEO or similar administrative role can take months, even years.
As baby boomers retire in droves over the next 10 years, we’ll see an impact on the economy, businesses, and the retirees themselves.
Businesses can benefit from keeping their older employees on board past the traditional retirement age, especially if workers remain healthy and can contribute valuable guidance to younger colleagues. As more baby boomers retire, they’ll need to ensure a smooth transition by transferring their knowledge to their colleagues while they can.
Starting the succession process now — before baby boomers leave the workforce — is critical, especially in organizations where the leadership team consists largely of older employees. A massive shift in leadership can be highly detrimental to an organization if they aren’t prepared for it.
Whether your organization sources its future leaders from within or considers outside candidates, having suitable successors in place will reduce the risk of disruptions to business processes, stock valuations, and customer relationships.
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