Forty percent of senior living CEOs could be retiring within the next five years, making succession planning an urgent matter, suggests a recent survey sponsored by LeadingAge.
The issue may be even more urgent because 30% of CEOs may be retiring in three years or less, according to CliftonLarsonAllen, which conducted the 2017 LeadingAge-CEMO Leadership Compensation Survey on behalf of LeadingAge and through the Chief Executives of Multi-Site Organizations. (The 30% figure is part of the five-year calculations.)
When it comes to chief financial officers, CLA found, 11% could be retiring within three years, or 20% within five years. And for chief operating officers, 12% could be retiring within three years, or 18% within five years.
“Where we help with either succession planning or strategic planning, which we do a lot of, at both state association level and in boardrooms, the issue of succession is in the top three strategic issues,” Mario Mckenzie, a Charlotte, NC-based partner of CLA, told McKnight’s Senior Living. “Multi-sites definitely have an advantage in being able to rotate positions as well as develop pathways for leaders, creating more likely internal succession opportunities. Single sites, conversely, have a more limited source of talent. It is still being developed, but the opportunities for enrichment or job changes are a little more constrained.”
Mckenzie offered the following succession-planning recommendations for organizations:
- Be deliberate about succession. “It takes a lot longer to figure out what it means for you, and then how to implement and do in a way that honors candidates without committing to the candidates,” he said. “Boards will seek out the best candidate when the succession comes, but having an internal program to help develop people probably ensures a longer list of quality applicants.”
- Develop a plan when you don’t need it. “If the plan is, ‘We will hire a search firm and someone can temporarily fill the spot,’ then there is a great risk that very good conversation, strategically, of what an organization should be doing and looking for may get lost, because a search strategy as the strategy is more of a disaster backup.”
- Use the succession discussion opportunity to broaden the conversation. “Ask, ‘What are we doing to retain our talent?’ ‘Is our talent fairly rewarded?’ and ‘Do you or don’t you build incentive plans?’ ” as well as other questions, he said. “One of the big purposes of the CEMO report is to provide actionable data to organizations. [It] greatly helps, when a search happens, to have this type of information already defined.”
The LeadingAge-CEMO report offers compensation data for 17 executive positions based on information from 108 organizations and 1,302 executives. Data are presented by geographic region, total organizational revenue, assets and full-time equivalent employees. To order a copy, visit CLA’s website.