10,000 baby boomers reach age 65 every day. Is your business prepared for a wave of retirement among your most experienced workers?
We’ve reached the point in time where one generation is starting to move out of the workforce. On average, 10,000 baby boomers (1946-1964) reach age 65 every day as another 10,000 members of the generation turn 75. This passing of the torch is significantly changing the demographic makeup of the workforce. Already, Millennials (1981-1996) are the largest group in the workforce followed closely by Gen Xers (1965-1980).
While the “Great Resignation” has been dominating headlines lately, the “Great Retirement” is here, too. Not only did COVID-19 cause employees to re-evaluate priorities, but Boomers in the workplace did as well. More than 30 million baby boomers have already left the job market. One recent study showed that 3/4 of people say they want an early retirement as well.
Why you need to prepare for baby boomer retirements
Unlike previous generations, there’s been a sea change in the business world over the past two decades. Companies have eliminated many middle management jobs to save costs. However, this has reduced the experience level of the next generation of leadership. Companies without succession planning may be left with having to fill a senior-level position without any available qualified candidates. Even if they can find someone with the prerequisite experience, they’ll likely be highly sought after candidates that will command higher salaries.
This may also increase opportunities for Millennials and Gen Xers that have gained the experience and are ready to ascend to more significant leadership roles. For some companies, this will mean losing their top performers if they don’t have a retention strategy in place.
There’s another fundamental concern for younger workers with this wave of boomer retirements: Between college debt, inflation concerns, and the continuing rise in the cost of housing, many Millennials and Gen Xers are still depending on their aging parents for financial support. With retirement, however, boomers may no longer be able to supplement their children’s income because they’ll be living solely off their assets. This may force some younger workers to make tough decisions about their jobs, wages, and living arrangements.
How to prepare
Businesses need to prepare for this coming shift as it will have a significant impact on the future of nearly every organization, no matter how big or small. Depending on your goals, here are some of the ways you can prepare to be ready.
1. Capture processes and procedures
When experienced people leave an organization, they often take institutional knowledge with them. Businesses should attempt to capture this knowledge before it leaves. Preparing for retirements means documenting processes and procedures so that high-quality work can continue even after top performers leave your company.
This is especially important in small and medium-sized businesses where owners or top employees may be the only people that have in-depth knowledge of key customers, suppliers, or procedures. It’s also a good time to review your customer relationship management (CRM) and inventory management processes to make sure the data is current.
Organizations need to document systems, protocols, and processes to ensure a smooth transition. You should also identify subject matter experts (SMEs) within your organization and make time for related knowledge transfer.
Preparing for retirements means documenting processes and procedures so that high-quality work can continue even after top performers leave your company.
2. Succession planning
Organizations of all sizes need an aggressive succession plan to protect their future. Leaders should take stock of who is working for them and identify any leadership gaps. If there are potential future leaders among the current workforce, then it’s a smart move to invest in training and retaining them so they are ready when the opportunity arises.
If the people you need aren’t on your current payroll, it’s time to start sourcing potential candidates even if the opening isn’t imminent. Finding high-performing talent can be time consuming, especially if you’ll be trusting them with senior roles in your organization. Good leaders are rare and it takes time to find them. The process can take even longer when there are more open jobs than applicants.
3. Selling or buying a business
The generational transition may lead to a significant number of businesses changing hands. If you’re planning to sell your company, you need to do the work to prepare to command a good sale price. At the same time, there may be opportunities to expand your business and acquire other entities currently owned by boomers.
If you’re thinking about selling, you’ll want to get an outside perspective to understand how a potential buyer would evaluate your business. You may want to talk to your accountant or engage a broker to examine your financials and share insight into what your business is worth.
You will also want to take steps to make your business as attractive as possible to potential buyers. This includes making sure your financials and business plans are up to date. It’s also important to identify key assets and understand the competitive landscape. Some sellers may need to establish a line of credit to handle any transition period as it often takes several months to close a deal even after agreeing to terms.
If you’re not thinking about retirement, this may be a good time to expand your business as well. With baby boomers exiting the workforce and looking to cash out on the companies they’ve built, there may be opportunities that didn’t exist even a few short years ago.
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4. Consider ESOPs
For small business owners looking to retire or employees looking to ensure their future, one option is an employee buyout. Such transitions generally help assure owners that the business they’ve built will continue to flourish. For employees, it reduces the stress of working for a new owner who may want to make fundamental philosophy or personnel changes.
Employee stock ownership plans (ESOPs) also have tax advantages that benefit both owners and employees.
Regardless of how you plan to move forward, you must communicate your goals to your team members. Clear and transparent communication is crucial to building loyalty within your organization. It’s also the right thing to do. When employees know what to expect, they can make better decisions about their lives. If there’s going to be a big change ahead, your employees need to prepare, too.
Plan now for a smoother transition
Generational handoffs have happened throughout history and they will happen again in the future. There’s no excuse for being caught off guard. A little planning can go a long way in making the transition smoother and keeping your business performing at optimal levels.