If you head up a commercial real estate firm, you probably have everything in place from a personnel perspective. You have enough staff on board to support goals. There’s enough space for everyone to work effectively. And there’s enough knowledge on board to provide differentiation strategies and competitive advantages.
What might be missing from your organization is a succession plan. In other words, once you or other leaders retire, you could be “left with vacant roles and a loss of institutional knowledge,” said Kent Elliott, principal with executive search and recruiting firm RETS Associates. Companies scramble to fill positions. The hiring process is rushed, without selecting and cultivating the best talent. “The result is rarely optimal,” Elliott said.
Elliott, with Michael Oddo, owner and CEO of facilities services company Metro Services Group, told ConnectCRE that a sound strategy can eliminate confusion and be proactive with one, two or more leaders who decide it’s time to leave. “Without it, the brain trust, assets, and goodwill vanish,” Oddo explained.
As for the firms without a specific plan, “they’re toast,” Oddo said.
A Plan Foundation
Whether the goal is to hire from the outside or promote from within, Elliott said that leadership duties and expectations must be carefully examined before the search commences. “At RETs, we’ve seen a trend of ‘scope creep,’ where over time, the responsibilities of senior executives expand well beyond a single role,” he said.
As a result, job descriptions can be a mash-up of two or more positions, making successor recruiting difficult. Elliott suggested that before setting up an internal or external job search, it’s essential that the jobs and required tasks align with the company’s goals.
Additionally, companies should realize that succession goes beyond just a concern for the C-suite; it impacts everyone throughout the organization. This means that succession activities should involve employees’ well-being, as well as that of their spouses or partners. “A serious issue in either case can accelerate retirement decisions,” Elliott said. “Succession planning must address the human side of leadership transactions, as well as the business side.”
A Seamless Exit
Speaking of recruitment and retention, establishing an Employee Stock Ownership Plan (ESOP) lets eligible employees receive the company’s shares as a benefit.
Elliott explained that an ESOP does a couple of things. First, it rewards retiring owners with “a capitalization event that rewards the enterprise value they’ve built over their careers.” Second, when structured correctly, an ESOP helps employees of the enterprise with equity, wealth and long-term security.
As part of a succession plan, an ESOP can help preserve a business’s culture and continuity, while providing an effective exit plan for an owner or leader. “Managers and staff win because they now own the company; the better they steer, the more they earn, and the more stable their futures become,” Oddo said. Meanwhile, owners can earn a larger take-home over time and “can also stay involved in strategy and help groom the next generation,” Oddo added.
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