Retirement… the word conjures different visions for every person. New adventure, traveling, and spending time with family are among the main reasons I hear from owners looking to depart from their business. While most people plan to retire in their mid-sixties and most ensure their financial needs will be met in their autumnal years, they often don’t plan to make sure their business is passed to a capable successor.
While the non-business owner might anxiously look forward to those golden years of freedom (or even look forward to starting a business), how do business owner’s feel about it? A study conducted by The Guardian Life Insurance of America found that 58% of small business owners would “find it hard to completely retire,” 37% “didn’t really want to retire,” and 24% “believed they would never plan to retire.” The study also discovered that while 62% of small business owners used financial advisors and felt prepared for retirement, the other 35% were going it alone in terms of planning for the future.
This reluctance to retire could in part be tied to the strong correlation between work and identity. Gallup found that 55% of U.S. workers get their sense of identity from their job. It’s not hard to imagine that the individual who has invested most of their life into building and running a company might derive their identity and self-worth from their greatest accomplishment.
While it’s obvious that many of the owners surveyed found it difficult to let go or even think about walking away from their business, the study exposes something more troubling: if owners aren’t planning for their exit, how are they preparing to pass along their business to the next gen of leadership? Will there be healthy soil for the emerging leader to grow?
A Cautionary Tale
Small business owners aren’t the only ones who struggle with planning for ownership transitions. Mogul Sumner Redstone often insisted he would never retire and would simply “live forever,” implying only death itself could pry majority ownership of Viacom and CBS from his grasp. Indeed, he continued working well into his nineties despite mounting health difficulties, until several lawsuits and a court ordered examination by a psychiatrist resulted in Redstone relinquishing control of his empire.
Although not inherently bad, Redstone’s desire to continue working and running his empire caused many problems surrounding the transition of ownership. He perpetuated a revolving door of CEOs and CFOs, not confident at the age of eighty-two as to who exactly was equipped to take over when he was gone. Although his Will outlined who would inherit control of his company and fortune, his personal life bled into his professional one and resulted in embittered lawsuits between his daughter and two longtime girlfriends. For Redstone, nearly a century wasn’t enough time to get his ducks in a row and prepare for his eventual departure.
Although the circumstances surrounding Sumner Redstone’s saga may seem unusual or extreme, the attitude he took toward retirement and the passing of his legacy is all too common. There are a few lessons to be gleaned from his rocky transition.
The Board Is Set, But Who Are The Pieces?
Redstone removed Tom Freston as president and CEO of Viacom, the man he handpicked to run the company after his departure. A lack of aggressiveness in the digital arena, lackluster performance and low network numbers were among the reasons Redstone cited for this removal. Was Freston a dud exposed by his new role in the company, or an able successor with a streak of bad luck? It’s difficult to say, but the answer perhaps should’ve been more clear to Redstone, who waffled in his decisions concerning CEOs and CFOs. His other obvious choice for heir apparent, daughter Shari Redstone, was long estranged by their clash over the future of the company and his apparent lack of belief in her ability.
Sumner’s insistence that he would never leave foisted an atmosphere where a peaceful transfer of ownership became an absurd objective, and no one could truly take hold of the reins and run the company with the ongoing interference of Sumner. Subsequently, his death became the catalyst of a battle royale for control of his fortune and controlling shares of his empire. Had he identified several key players and groomed them to successfully take over once he departed, Sumner might’ve avoided some of his transition woes and saved his family and business associates the stress of picking up the pieces after his passing.
Balance of Power
While overstaying your welcome can be detrimental to your business and the success of your potential successors, your involvement doesn’t have to cease for a transition to be a smooth one. In fact, lessened but continued input can be helpful in many cases, and most succession plans make allowance for it. The gradual transfer of equity, responsibility and ownership should be the goal when passing your business along to a successor or family member. With a properly implemented plan, that gradual transfer of ownership might have prevented the long, expensive lawsuits that resulted in Shari Redstone being able to push out several longtime board members and, for better or worse, wield the 80% voting rights that were once controlled by her father. A good plan protects the people involved with the transition and prevents a situation where they become pitted against each other.
Conclusion
Implementing a succession plan plays a key role in retirement. It allows you to determine the fashion in which you’ll leave your company and what your continued involvement will look like, while protecting the other players involved. It can help make retirement something you look forward to instead of a dreaded prospect fraught with worries and uncertainty.
In George Washington’s final address, he said, “Every day the increasing weight of years admonishes me more and more, that the shade of retirement is as necessary to me as it will be welcome.” Retirement can be a welcome phase of life even if you’re leaving behind a role you enjoy in your company. Developing a meaningful life outside of work is a hard balance to strike for most people, but a necessity for those who are transitioning into a period that will no longer be subject to the demands of making payroll every week. Whether that new phase entails sunning on a remote beach or starting a new venture is entirely up to you. Whatever you decide, enjoy your golden years—you’ve earned it.
