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The Only Constant is Change – Succession Planning Part III

By August 1, 2024August 7th, 2024Insights, RETS Blog

Changing Leadership

As the commercial real estate markets navigate through the remainder of a turbulent 2024, it is important to acknowledge that at some point this summer, America arrives at ‘Peak 65’, defined as the time when the maximum number of professionals reach the traditional retirement age of 65. To better help the CRE industry understand the magnitude of how this milestone affects us, RETS released two articles earlier (Part I, Part II) this year to shed light on the challenge and the heightened need for a thoughtful succession planning strategy for 2024 and beyond. These articles generated many conversations with CRE industry leaders on what they are experiencing firsthand and how they are approaching this fast-changing issue. With Baby Boomer retirements continuing their heighted pace over the next several years, we offer further advice to CRE employers.

Not All Jobs are Equal

Understand that the professional qualifications of the retiring CRE executive may not be the ideal match for future company needs. As the CRE industry’s leading executive search firm, RETS has completed numerous searches and hosted many discussions on succession planning and has found that employers are often better served by focusing on future requirements rather than simply replicating the retiree’s previous role. Building internal consensus on the vision for the position and the specific experience sought in a replacement candidate is crucial, rather than getting caught up in the retiree’s accumulated duties and accomplishments.

Divide to Conquer

Similarly, the role being replaced often needs to be redefined or split into multiple positions to meet future market demands and address your organization’s greatest needs. In so doing, it’s not uncommon for retirees to stay onboard in a reduced capacity to handle a subset of duties to smooth the transition.  The RETS team recently experienced this on a search in which the retiring President of a CRE investment firm was re-engaged by our client on a part time basis to continue to handle a component of a complex mixed-use development which he had spearheaded the previous years.

Open to Change

This redefining of roles around current trends and the future needs of the company has become an integral part of the succession planning process. It’s common to see these reinventions include some duties reassigned within the firm, rather than placing all existing duties of the retiree onto the replacement. Just because the retiree handled certain functions doesn’t mean the replacement should take on the same responsibilities.

Succession Planning Tips:

  1. Start Early and Be Proactive

  •    Whether it is a COO, an asset manager, or an analyst, begin succession planning well in advance to ensure a smooth transition
  •    Identify key positions and potential future vacancies early on

  1. Identify and Develop Talent

  • Conduct internal talent assessments to identify high-potential employees
  • Invest in training and development programs to prepare these individuals for future leadership roles

  1. Create a CRE Knowledge Base and Transfer Plan

  • Encourage leadership and retiring employees to mentor younger staff.  This transfer of intellectual capital related to real estate deals is invaluable.
  • Document critical knowledge and processes to ensure continuity

  1. Engage Employees in the Process

  • Communicate openly about succession planning initiatives in order to build consensus with key stakeholders
  • Involve employees in career planning discussions and solicit their input on their career aspirations
  • Keep in mind, however, an existing employee isn’t necessarily the best candidate for the role.  RETS recently completed a search for a VP of Industrial Asset Management to replace an existing employee who had been promoted to the position but did not rise to the occasion.

  1. Consider Flexible Retirement Options

  • Offer phased retirement plans or part-time roles to retain experienced workers longer
  • Provide opportunities for retirees to stay involved as consultants or mentors

  1. Leverage External Hiring When Necessary

  • While internal development is crucial, be open to bringing in external talent to fill gaps or special needs.  Don’t just hire who you know, hire the best CRE talent.
  • Ensure external hires align with your organization’s culture and long-term goals.  Take the time out of the office to meet over a meal or a walk and discuss a specific real estate investment.

By embracing the changing needs of the industry and implementing some of these strategies into  their succession plan, CRE organizations can better navigate the challenges posed by the retirement of the nation’s largest segment of the workforce and ensure leadership continuity well into the future. On to Gen X…

 

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.