Business owners want their companies to be around for the long haul. It's why family-owned businesses are popular today, as once company creators retire, handing the reins over to their adult children or relatives can be the path of least resistance.
These transitions are increasingly common nowadays, as baby boomers by the dozens are entering the retirement phase of their lives. In fact, an estimated 10,000 Americans are retiring every day, The Washington Post recently confirmed.
However, instead of boomers turning to relatives to pick up where they left off, many look to the people that have loyally worked for them: employees. Employee-ownership models are increasingly the norm in the small-business world because they often allow for a seamless transition when company figureheads decide to step down and family aren't available.
Project Equity, an Oakland-based nonprofit, is an organization that's helping business owners turn their current workers into prospective figureheads.
"A common misconception we hear from business owners is they don't think their business could run that way or that they don't think their employees could run the business like they do," Project Equity co-founder Alison Lingane told the San Francisco Chronicle. "But it's not always as big a shift as people think. It's a shared form of entrepreneurship. Not every single person needs to be able to do the things we think of as roles for an entrepreneur or an owner."
"Smart hiring is crucial to employee-owner business models."
8 in 10 business owners regret certain hiring decisions
But in order to ensure employees are management material, business owners need to devote lots of time and attention to the hiring process. Workers who are employed by companies – be them large or small – have a huge say in whether a business dies or thrives and managers know what it's like to employ someone who turns out not to be a good fit. More than 80 percent of small-business owners said they've made at least one bad hire before, according to a survey done by Robert Half, a recruitment services firm. Additionally, 60 percent said they knew they made a mistake within a month of making the offer, yet on average, they weren't let go until nine weeks later.
To separate the wheat from the chaff, employers are "raising the bar" so that they can find those who are highly qualified. An estimated 40 percent of employers today are hiring workers with bachelor's degrees that were once available to high school graduates, a survey done by CareerBuilder found.
"Employers are looking for workers with a solid knowledge base and skill set that can make an impact on the business right away," said Rosemary Haefner, chief human resources officer at CareerBuilder.
"A minority of corporations know who will succeed the current CEO."
Succession planning important, but rarely done
Once business owners have the right workers who can potentially take over when the time comes, succession planning is a key step along the way. But this kind of preparation isn't implemented as often as it ought to be. Even major corporations aren't making it a priority. Based on a Stanford University survey done in 2010 of global corporation representatives, less than 40 percent of respondents had no plans on who would replace the current CEO once he or she decided to step down or had to resign.
Succession planning isn't just a good idea; it's a fundamental component to ensuring a company's survival. Furthermore, ensuring the process is done right can take years, not months. Thus, it's in your clients' best interest to get going as soon as possible For more information how your business-owner clients can prepare workers or family members to take over when the need arises, speak with a Global Financial Services Manager.