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Trend Watch: Averting an executive void

Boomers' looming retirement will leave a corporate chasm

Property of SeaFood Business magazine
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 functions.

"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 Palisades, Calif.

"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 Singapore."

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 mind.

"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 is complete."

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 companies."

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 Columbia

 

 

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