Recognizing that this summer’s ‘Peak 65’ will be making Succession Planning ever more important, the leadership team at RETS made a concerted effort in Q4 of 2023 to ask commercial real estate clients the short, simple question – “Tell me about succession planning at your firm.” Unsurprisingly, the answers fell into several common categories:
1. We’re Well-Prepared: Our leadership team has fully embraced SP over the last few years and we’re in pretty good shape!
2. Executive-Level Planning Only: We have SP in place at an executive level.
3. Awareness but no Action or Plan: It’s something we have thought about and need to do something about.
4. Major Concerns: It keeps me up at night, we do not have a plan.
In one of our more astute conversations, a COO for a privately-owned investment and asset management firm with $10B under management shared that he views succession planning more as protection and redundancy. Protection in the event an employee was “hit by a pie truck” and redundancy to backfill a role when a team member moves up at the firm or departs. Protection and redundancy are about leadership development and business continuity. Essentially, it is an insurance policy for continued business growth and the future prosperity of the firm. Is succession planning an integral part of your firm’s growth strategy? If not, consider the following…
Why Succession Plans Are Vital:
1. Everyone has an End Date – planned or unplanned
2. Unexpected Illness/Medical Situation – preventing a CRE employee from performing their duties
3. Unexpected Resignation
4. Declining or Poor Performance
5. Termination – for cause or not for cause
Benefits of Succession Planning:
1. Long Term Viability of a firm
2. Confidence from capital partners, investors and shareholders
3. Stability/Security which aids in attracting/retaining talent
4. Seamless Business Continuity
5. Risk Reduction when the unexpected happens
Common Mistakes in Succession Planning:
1. Ignoring Personal Limitations: Disregarding age or health risks, assuming perpetual capability despite advancing age.
2. Internal Bias in Selection: Choosing familiar or convenient successors over more qualified external candidates. Do not just appoint someone you know, select the best possible candidate.
3. Underestimating the Impact: Failing to understand how the sudden loss of a key employee can severely affect business continuity.
4. Reliance on Verbal Plans: Neglecting the need for a well-documented succession strategy. A well-written plan is necessary!
5. Disregarding Unforeseen Events: Believing that unexpected circumstances cannot be planned for.
6. Overly Competitive Environments/Darwinism: Creating cutthroat races for key positions that can backfire.
7. Decision-Making Based on Fear or Loyalty: Choosing successors out of fear of losing an employee or due to loyalty without considering merit.
8. Failure to Delegate Authority: Implementing a plan but not empowering successors, hinders the transition process.
Conclusion
For commercial real estate firms, succession planning is not an option, but an absolute necessity. Hundreds of thousands of CRE professionals will exit the industry via Peak 65 in the second half of 2024 and beyond, and millions of staffers will be impacted. The failure to plan for the inevitable at all levels of your firm is both inexcusable and avoidable. Succession planning serves as the principle means to guarantee the sustained business operations, consistency, and ongoing survival of a commercial real estate firm. A proper succession strategy will lead to significantly increased chances of creating a positive outcome for CRE firms both now and in the future. Be prepared.
By Kent Elliott and Berkeley Davis Principals, RETS Associates.
The RETS Team brings a deep, strategic understanding of the real estate industry to your recruitment needs. Click here for more insights & tips.
