Modernizing business transition planning for the digital age

As technology continues to disrupt business in the wealth management industry, a new leadership question has surfaced: What does all this change mean for business transition planning?

Though many traditional wealth management firms have embraced the need for change in their functional leadership, few have established business transition plans that put technology and transformation at the center of the process. And for many executives, a major concern is having talent now in leadership positions to sufficiently address their leadership transition needs.

For firms to survive, they must transform their transition plan by adjusting it for today’s workforce and modernizing their succession planning.

Adjusting for today’s workforce

The digital economy has placed unprecedented pressure on many financial services organizations. The workforce and its expectations are drastically different and will continue to change.

In 10 years, the average CEO will be someone who grew up with smartphones and social media playing a critical role in their daily lives. These leaders will be the ones who make legacy business models obsolete.

The traditional approach of “replacement planning” for open roles or “moving up the hierarchy” won’t meet business growth priorities, satisfy employee engagement and development needs or create a sustainable next generation of leadership.

As you evaluate how to incorporate workforce changes into your transition planning strategy, ask yourself the following:

1. Have you identified and started addressing your talent and skills shortage?

Gaps in leadership capabilities spell trouble for future growth. And the leadership gap is growing wider and wider as existing leaders are not equipped to lead a diverse workforce, and the incoming millennial workforce does not yet have the skills and capabilities necessary to lead at these levels.

It’s essential to include both the identification of future skills and capabilities needed, as well as development in your succession planning approach, to narrow this gap.

Including development in your plan is an opportunity to grow and leverage learning programs to actively grow your talent. Otherwise, your firm may struggle to proactively meet future growth demands.

2. Are you leveraging all five generations of talent?

For the first time in history, the workforce is comprised of five generations working side by side.

A new generation of executives is moving up through the corporate ranks. Millennials already make up the largest group in the workforce, with more and more entering executive positions. In addition, people are living and working longer. We have never in history employed as many aging workers as we do now. Careers just don’t look the way they did before.

It isn’t uncommon to see a millennial employee managing someone close to retirement. And while many organizations focus on millennials, successfully leveraging talent is more about the dynamics of these five generations, who have different levels of digital capability.

There are meaningful differences in how these generations view technology, processes and digital transformation. This creates an opportunity for things like cross-generational mentoring and greater diversity and collaboration. It also calls for increased transparency about career growth and future roles.

3. Are you considering the evolved employee value proposition?

Today’s high performers have a better understanding of their own value and are heavily recruited, especially those with specialized skills. Next-generation leaders expect more mobility across an organization, as well as transparency about their potential and career growth.

Managing differences in employee contribution is critical to maximizing firm performance.

Firms are shifting to continuous performance management. They’re also acknowledging the need to manage individual differences in performance found across different employees working in the same group.

Additionally, employees are more comfortable now moving on from organizations rather than having a “lifer” approach to their careers. In 2022, the median employee tenure was 4.3 years for men and 3.8 years for women.

Succession and career development play a pivotal role in the new employee value proposition. A robust and transparent succession plan can help you retain employees, plan for future growth and narrow capability gaps.

4. Are you leveraging data to build your leadership bench strength?

Organizations that leverage quantifiable metrics and benchmarking in their workforce outperform those that don’t.

Gone are the days of large binders full of Excel spreadsheets that are outdated as soon as they are printed. Modern succession planning should be leveraging technology, real-time data analytics and data insights to build a bench that can help organizations grow and sustain their success.

Firm owners need to know who their people are and what skills and capabilities exist or are lacking. They also need to make key business decisions that are based on real-time, factual data versus the age-old “gut feeling” approach. Organizations need to build a sustainable model that incorporates data into the methodology of building a leadership pipeline.

Don’t let your organization avoid using data to drive decisions. This includes looking at data around flight risk, employee aspirations, mobility and agility.

5. Is your succession strategy linked to strategic objectives and financial performance commitments?

Firms that are most effective at building a sustainable leadership pipeline modernize their succession planning by embedding it with their business strategy.

Simple replacement planning will no longer work.

There is a significant difference between a succession approach that is more about exit planning versus one that is driven by strategic objectives, predictive analytics and a focus on investing in future leadership talent.

Firms need to proactively structure their pipeline of talent with growth targets, financial commitments, upcoming market expansion plans and other key objectives.

How Wipfli can help

Leadership gaps can hinder your growth, put your strategic priorities at risk and expose your organization to new talent management challenges.

Wipfli’s business transition group can help you put the binder away and shift your thinking toward a modern succession model. We help you make succession decisions that are supported by insightful technology and tied to your business results so that you can build effective leadership readiness.

To learn more about our objective and targeted guidance for your transition goals, contact us today.