« September 2007 Table of Contents
Trend Watch: Averting an executive void
Boomers' looming retirement will leave a corporate chasm
By Lauren Kramer
September 01, 2007
As the first baby boomers reach retirement age this year,
some are wondering who will replace them. In a survey of
companies by RHR International in Wood Dale, Ill., 50 percent
of company executives surveyed said they expected to lose more
than half their senior managers in the next three years.
Fifteen percent said they were likely to lose 75 percent or
more. Those results were echoed in another survey by Ernst
& Young LLP, with headquarters in New York, where six out
of 10 respondents said the expected retirements over the next
half decade would cause a major brain drain in some business
"Nobody knows what percentage of boomers will choose to
retire and precisely when, but certainly lots of them will
retire in the next few years, particularly because they grew up
in a generation when there were pension plans in place," says
Dr. Eric Herzog, president of Quest Consulting & Training,
an organizational consulting and development firm in Pacific
"I'm predicting there will be a leadership void and a
technical void that will cut across the broad spectrum of
industries and government positions - and the seafood industry
will feel it too," he says. "From my experience, it is kind of
an aging industry with a lot of long-timers in its ranks."
Succession training has not been high on the priority lists
of many companies, says Herzog, and as these executive voids
start to appear, many industries are approaching recruiting as
a global challenge.
"We know, for instance, that in industries like engineering,
aerospace and defense, they're already recruiting globally
because they can't find the technical talent they need in the
United States," he explains. "With increased globalization,
staffing has become a global activity, which means someone is
as likely to get offered a position in Canada as they are in
As it becomes increasingly difficult to find new recruits,
the key is to look within your company, he advises. "Identify
the mission-critical positions in your company and ask
yourself, 'If I don't have these capably filled, will it affect
business?' If the answer is yes, consider when those people
become retirement eligible, and if it is five years off or
less, you know you have that period to be thinking about their
succession," Herzog says.
In the seafood industry, not everyone has retirement top of
"We aren't too concerned about retirement at this stage,"
says Bill Taylor, president of Taylor Shellfish in Shelton,
Wash. "This is a family-owned business with four generations in
the industry, and my father, who is 86, still comes to work
pretty much every day. Our children will be trained if they
have any interest in being involved in the business, but we
owners will probably never retire," he quips. "We're involved
in a business in which we're very interested."
Some, like Blount Seafood, have anticipated their succession
strategies and completed them well ahead of deadline. "We've
always pushed the envelope and moved our succession planning a
decade earlier than most families," says Todd Blount, president
of the Fall River, Mass., company. "When I was in my early 30s,
our succession plan was in place and now that I'm 40, that plan
Blount Seafood's growth has meant the company has hired a
new generation of employees. "Though we've had lots of people
retire in our plant, we have either replaced them with
temporary workers or equipment," says Blount. "Now, we have a
nice balance of older and younger employees, and our retirement
issues will likely come up 20 years from now."
For company owners, creating an exit strategy is a
complicated, time-sensitive issue that is frequently
underestimated, according to Richard Jackim, executive director
of the Exit Planning Institute in Palatine, Ill.
"Studies predict that as the baby boomer generation
approaches retirement, 50 percent of all privately held
businesses will change hands over the next 15 years," he says.
"The same studies indicate that 75 percent of business owners
have no idea how they will ultimately exit their
Attempt to exit your company without a strategy and the
result can be the weight of regret. "A high number of business
owners report that they regret selling their companies after
the closing, primarily because they didn't accomplish all their
objectives in the closing - and the reason they failed to do
that is because most business owners sell their companies
without much planning," says Jackim.
The Exit Planning Institute tries to encourage professional
advisors such as bankers, attorneys, accountants, management
consultants and business coaches to consider an exit strategy.
It tries to empower these advisors to talk to business owners
about exit planning, or the creation of a formal document that
answers all the personal, business, financial, legal and tax
questions involved in selling a privately held business.
"Our studies have shown that most business owners don't view
exiting their business as a step towards playing more golf.
They want to engage in the next chapter of their lives," says
Jackim. Ideally, business owners should start considering their
exit strategy three-to-five years ahead of their intended exit,
giving themselves ample time to understand their business
value, he adds.
"In 90 percent of cases, there is a real expectation gap
about the value of their business," Jackim says. "Part of the
exit planning is to do what can be done to maximize the value
of the business before the exit and to improve the net proceeds
that the owner keeps after the transaction. The more time you
give this process, the broader your options are."
The sale of a business is a process, but one that is
commonly misconstrued as an event, Jackim says. "Businesses
don't sell in a liquid market - it's not like real estate.
Sometimes they take a year or more to sell, and oftentimes, the
new buyer will expect the previous owner to stick around and
act as a consultant during the transition process, which can
take up to 12 months. You have to add that to the exit
timeframe," he explains.
"We recommend you start to talk to your advisors,
accountants, lawyers and bankers about the desire to exit. Put
together a team of advisors who are aware of your goals, and
can begin to provide advice. Talk to as many people you can,
and don't be intimidated by the exit-planning process."
Contributing Editor Lauren Kramer lives in British