Baby boomer are about to retire, and when they do, will your management team still be there?
Most of us have heard about the impending crises in Social Security and Medicare as the massive numbers of baby-boomers retire en masse over the next few years. We have begun to argue and debate this problem, both in public forums and in private discussions. We haven’t yet got the message that this also affects the companies that we invest in.
Entire senior management teams may be retiring within five years of each other. Although some companies have succession plans in place, others — including many high-tech firms — have ignored the problem. They haven’t been grooming talent to take over ten years down the line, assuming that they will be able to get qualified staff from the market.
Bu when the baby-boomers leave there isn’t another large generation immediately behind them to take their place. The baby boom was followed by a baby-bust. These “baby-busters” did not have many opportunities because the entry level jobs were filled by baby-boomers, and as a result never got the requisite experience to run a company.
Any qualified baby-buster candidate will have multiple offers. You may not be able to find the candidates even if you could pay them.
If you own your own company, the situation may even be worse. Owners will start thinking about retiring and living off the returns from their years of investment in the company. The move from a founder-run company to one run by a paid manager is known to cause problems.
What will you do if you do not have a qualified candidate to take your place?
Take a look at your management team. How many of them will want to run the company for ten years after you depart, to continue building the company so that you will have a legacy? Or are they all about to retire?
This problem is a severe threat to American business performance because we won’t have leaders to fill the upper level spots. And that means that it’s a threat to investors because their companies will not be able to perform, driving down the whole market.
There are solutions. Immigration comes easily to mind. By continuing to attract the world’s best talent, American firms can take advantage of a larger pool. Unfortunately, after the 9-11 attacks the American government has severely curtailed the number of internationals attending American universities. This means that the candidates that you can find will be educated and trained, including most of their job experience, outside the US. They won’t understand the general culture, much less your internal one. Immigration is a good part of the solution, but not the only one.
One of the ways to fill your succession pool is to start finding overlooked candidates who can do higher-level work. Many companies have a large pool of underemployed candidates who can be converted into high-potential fast-trackers. It takes time, and it takes work. But it has the advantage of being cheaper.
Most executives don’t realize the gold mine that they sit above. I have consulted to several very large corporations and I always find underemployed people who could provide a great deal more benefit to the company if they were given a larger role. I make it a goal to help prepare these high-potentials to take on that role, including bringing them to the attention of management. Sometimes it works, and my clients gain a strong leader for the future. Other times the company refuses to look at someone differently than how they have in the past. The employee leaves for the competition who gain a strong leader.
Potential high-level workers often get trapped in the lower ranks, especially when a glut of boomers fills the next levels. Some are there because they have been told that only certain career paths are appropriate, that they have to wait their turn. Some are stuck below because of race, ethnicity, gender or faith. Others have had bad experiences in education or early jobs. Most got stuck because they took a job where they quickly out grew their boss. Managers are notoriously bad at determining over-performers, seeing only solid performance. The high-potential is never identified or purposefully kept low by a less-qualified manager who sees them as a threat.
With internal underemployed candidates, you will not have to complete complex visa requests or handle difficult immigration forms. Searching internally is considerably cheaper than recruiting outside your firm, which can run beyond $60,000 for even a junior executive.
You also get another strong benefit. Because these people have been underemployed, they often lack the arrogance that leads to a Worldcom or Enron style disaster. Hardship often creates a stronger moral compass. They are more likely to work as Level 5 leaders, a “servant leadership” where they put the company before their own interests.
You can take away all the underemployed from your competitors, removing a whole cadre of workers who have been providing the magic behind the competition. You won’t eliminate them as competitors, but you will take away some of their power. And because they are underemployed, your competitor will look at their leaving with a sigh of relief.
Mining your lower ranks (and that of your competitors) for talent takes time. You have to be ruthless about assessing people’s real performance and potential. You have to be ready to supply coaching to help these people overcome some of the behaviours they learned in order to survive in a job that was too small. These are readily improved over a very short amount of time, and you can grow them in the skills you belief that they will need.
In addition to coaching them, you will also need to bring them to a role one size smaller from where they should be. Recruiter Mark Van Clieaf of MVC International calls this “bungee-ing down”. You know that they aren’t ready yet for the whole role. By putting them into a temporary role one level down, they get to learn the ropes more quickly about higher level work. Ideally, they should be moved to more than one role over the training period. Within three to six months, the training will be complete and you can move them up into the full role. This process also shows the future subordinates that you have faith in this high-potential. It also lets him or her get to know and develop relationships with a large group of managers one level below where he will start.
Mining your lower ranks isn’t easy. It’s just easier over the long haul.
Don’t stop there, either: mine your competitors’ lower ranks for their underemployed high-potentials and take away a potential rich resource for them.
Acknowledgement: Separate conversations with management experts Nagananda Kumar and Mark Van Clieaf started some of this thinking.
Image Credit: Linda King finds working as a roof bolter’s helper at the Bullitt Mine in Big Stone Gap, Virginia, more challenging and better paying than her previous job in a garment factory, 1979, President’s Commission on the Coal Industry (USA). NARA via Wikimedia Commons.
Medieval gold mining, detail from The Book of Simple Medicines, ca. 1520-1530