“When are you thinking of retiring?” I am used to this question by now. It usually comes up an hour into a meeting with a client prospect for our investment company, often after a shuffling of papers and downward glances. “And what is your plan for succession at the company?”
At first, I used to be surprised. Did I look that old? I’d reply that I had no near-term plans to retire and that we had a very strong team of younger executives, including the current president, whom I had designated as my eventual CEO replacement. Then I cycled through a range of reactions: annoyance with the inquiry; concern that women are still not considered as “committed” as men, even when we’re CEO; and wanting to better understand why people felt compelled to ask me about retirement.
It turns out that I am not the only one who’s wondered about this. I informally surveyed 280 business leaders, all over 55 years old, the majority of whom work for small to mid-sized firms in the U.S. I found that 30% had been asked about retirement, primarily by clients or prospects. Both men and women were queried about retirement, generally starting by age 60, across all industry groups. Many said they believed the question was seeking reassurance.
The fact is that CEOs tend to be the face of their organizations, especially at small to mid-sized companies, where they may work with the most important clients, and when they are the founder. Prospects may have been drawn to the company specifically because they heard about the CEO. So it is entirely reasonable that customers planning their future with you would want to know about any upcoming retirement plans.
CEOs have to anticipate this concern and be proactive in addressing it. The growth of your business may depend on how well you can ensure clients that the company will be fine under your successor’s leadership. The further away you are from retirement, the longer you can handle that client’s needs; but the closer you are to departure, the more you need to convince them that your colleagues are as good, if not better, than you. (And if you’re nowhere near retirement, you should simply state that you love your job, have numerous initiatives underway, and look forward to fulfilling them in collaboration with colleagues and clients.)
Failing to communicate succession plans clearly with clients, workforce, and shareholders can result in internal chaos, loss of current and future business, and decline in stock value. As CEO, it’s your duty to be mindful about client concerns and carefully consider your tenure, transfer of responsibility, retirement timing, and appropriate communication. Failing to do this may put your firm and your ultimate successor at risk.
Here’s an action plan that may help:
If you are the CEO of a small to mid-sized company, you need to begin thinking about your own transition many years before retirement. That includes deciding when you will retire and at what pace you will divest your current responsibilities.
From there, you can decide whom to move tasks to, whether you have the right people in place, and, if not, how to attract and train the next generation of leaders. Only at that point can you begin to implement these reassignments.
With this plan in place, you’ll have a more thorough response to any questions about when you will retire and who will succeed you. When it comes to timeline, you can always offer a range (4-6 years from now, for example) or explain that you intend to be fully active for many more years than that.
What clients want to hear next is reassurance about the team you have in place to take on more of your responsibilities. Reinforce how much confidence you have in your people. Within a year of your retirement, introduce your core team to prospects and clients, and highlight their achievements with the firm. Many CEOs prefer gradual transitions, and this requires thoughtfully explaining which roles you will retain for the longest period of time. That way, your team fully understands and can articulate these plans to others. Since more than one person may be in contention for the CEO role, try to clarify that choice as soon as possible, to avoid internal stress and bitterness.
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Client prospects care when you’re going to retire. That’s a nod to your reputation. But it requires a careful and honest description of both how long you can provide your expertise and how well you have assembled, led, and nurtured a management team with even better skills than you could offer. You don’t have to wait for the question to come up before speaking to this.
Karen Firestone is the President and CEO of Aureus Asset Management, an asset management firm which serves as the primary financial advisor to families, individuals, and nonprofit institutions. She co founded Aureus after 22 years as a fund manager and research analyst at Fidelity Investments. She’s the author of Even the Odds: Sensible Risk-Taking in Business, Investing, and Life (Bibliomotion, April 2016).
Article first appeared in the Harvard Business Review
