When you’re preparing to retire, having a succession plan is crucial for a number of reasons. Here at advisorRETIRE™, we’ve already discussed many of the guidelines of setting up a succession plan, but knowing what not to do is just as important as knowing what to do. In this article, we’ll cover some of the top mistakes financial advisors make as they’re transitioning to retirement or preparing to transition out of a business.
Mistake #1: Playing Favorites
You likely already have somebody in mind to take over for you. This could be somebody who you’ve worked with for several years—or a rising star you’ve become acquainted with more recently. This is a person you believe will be perfect to take over for you once you leave. However, your personal feelings toward a particular employee don’t necessarily mean he/she will be the best person to fill your shoes once you leave.
It’s time to take a step back to evaluate this person’s leadership skills. Sure, you like to play golf with him/her on the weekends (and it’s possible this person’s coworkers, do, too), but do your other employees look up to your potential successor as a leader?
Putting the wrong person in an important leadership role can have significant fallout, leading to high turnover, lost inter-business connections, and other disruptions. Look at your top-performing employees, identify several who could fill this role, and make decisions based on logic more than popularity.
Mistake #2: Failing to Help Employees Improve
Leadership involves tough conversations. Having frank discussions about poor performance is not only a way to prevent the problem from happening again, but more importantly, it gives employees the tools to move forward with stronger skills to improve and make the organization stronger as a whole. Cutting an employee loose without these all-important conversations, or continuing to let problems go, are sure ways to allow mediocrity and frustration to metastasize within an organization.
When working toward succession, working with your top employees to improve team-building, training, and overall leadership will have a trickle-down effect within your organization. Your organization will grow stronger, empowering employees to take control in the roles they’ve been given. And that leads us to Mistake #3…
Mistake #3: Viewing Successors as Competitors
When you view your successors as competitors, you’re far less likely to provide them with the skills, training, and empowerment to move forward and upward. This type of attitude fosters mistrust, and the effect is two-fold. Your employees won’t feel trusted by you because you haven’t given them the tools to improve. You’ve effectively held them back, and in turn, held your organization back.
You have, for all practical purposes, told them that you’re the keeper of their success, and, without you, they won’t have the ways or means to become a stronger company. And in turn, this breeds mistrust among employees. Healthy competition is beneficial. However, once that competitive edge crosses a line, it’s hard to pull your organization back from that.
Mentor employees who have potential to lead your company one day. You want your company to succeed once you leave, so giving them the trust and personal ownership to move your legacy into the future is the best way to do that. advisorRETIRE™ specializes in this type of plan, so reach out to us today to learn more!
Mistake #4: Making Promotion Processes a Secret
Refer back to #1 for one example of how promotion processes can be secretive and backfire. When employees lack a clear direction for advancement, promotion, and higher financial compensation, they lack direction for forward and upward movement. You, as the leader, look as if you’re arbitrarily picking and choosing who is promoted, which creates mistrust and anger. It is your company and you can promote whomever you want, sure. However, in the worst cases, you risk losing valuable employees.
Show employees how to succeed in your organization by showing employees the various ways to reach milestones for success. Establish goals and provide employees with the tools to reach them. When an employee hasn’t reached a particular milestone, provide feedback so he/she understands why his/her colleague was chosen for a promotion instead. While disappointment will result, the process is clear and understood, and the employee will know how to succeed next time.
When it’s time to choose your all-important replacement, make the process clear from the start months in advance. Work with your organization as a whole to let everybody know what is happening and when, and how the selection of your successor(s) will work.
Mistake #5: Selecting the Wrong Successor
This can happen to even the best organizations, and under the best intentions. Making the mistakes above can lead to this. Nepotism is another factor. You could’ve gone through the processes by the book, done your research, and groomed the strongest candidate for the role, only to find he/she couldn’t stand up to the pressure. Your shoes are big ones to fill, so it’s time to step back and take look at things objectively.
Can this situation be salvaged? Perhaps. Leadership training, for example, can go a long way. You might decide to delay your retirement to mentor your successor further if you have any flexibility. You might decide to bring on a leadership team for support. In any case, at some point, you must make your exit. Chances are that once you leave your successor to spread his/her wings, success will follow. The best way to prevent the wrong person from stepping into your shoes is to have a clear plan and to start implementing it early.
Succession Planning with advisorRETIRE™
advisorRETIRE™ takes the guesswork and stress out of succession planning, by helping you navigate your exit strategy with ease. Our proven, successful plan will leave you, your employees, and customers grateful, making the transition smooth and painless.
We take the stress and worry out of retirement and selling a business, and our advisors are second to none when it comes to laying out your plan. We’ll work with you individually to ensure every detail is taken care of, with a plan tailored specifically to your needs. To learn more about our processes for succession planning, or to meet with one of our independent financial advisors, contact us now!