Succession Planning For Public Finance: How To Navigate The Local Government Retirement Wave

Local governments face a looming retirement wave in public finance, making succession planning essential.  This article explores the challenges in succession planning, the risks of not having a plan, and strategies for implementation, including leveraging modern technology to ensure smooth knowledge transfer and attract top talent.

Local governments are at a crossroads. The 2024 State and Local Workforce survey by MissionSquare Research Institute paints a mixed picture of the public sector landscape. While the good news is that public sector employment has rebounded to pre-pandemic levels and compensation packages are competitive, a glaring challenge looms on the horizon. According to the survey, 54% of respondents believe the largest wave of retirements is yet to come.

This means succession planning is no longer just a nice-to-have—it’s a critical necessity. By developing strategies to identify, nurture, and prepare future leaders, local governments can ensure a smooth transition of knowledge and skills to the next generation of public servants.

Let’s take a look at the challenges of succession planning in local government, specifically for public finance roles, as well as some practical strategies for implementation. We’ll also explore how leveraging modern technology can set the stage for successful succession planning.

While the need for succession planning is clear, local governments may face significant obstacles in the planning and implementation process. At the same time, the lack of a solid succession plan can have both lasting and immediate consequences.

Let’s take a look at both.

Challenges In The Succession Planning Process

Lack of Urgency & Preparedness

Despite the looming retirement wave, many local governments haven’t prioritized succession planning. The MissionSquare survey reveals that only 37% of respondents consider workforce succession planning “very important” to their organization. The same survey indicates that only 12% of organizations currently have a succession planning process in place, and another 20% are in the process of developing one.

Balancing Competing Priorities

Local governments often juggle multiple competing priorities. Among those, the MissionSquare survey found that “competitive compensation packages” and “employee morale” are at the top of the list of priorities for many organizations, with succession planning coming in much lower on the list. With limited resources, it can be challenging to dedicate time and effort to long-term succession planning while addressing the immediate need to keep current employees satisfied.

Limited Resources for Development

Effective succession planning requires investing in their development through training, mentoring, and hands-on experience. The challenge is that most governments are already stretched thin and may struggle to allocate resources for these initiatives. On top of that, some organizations may not realize how long it’s going to take for successors to get up to speed—until they’re in a time crunch.

The “Bureaucratic Kinship” Trap 

When there’s no clear process in place, succession often happens informally. This can lead to what the ICMA calls “bureaucratic kinship”  where managers pick successors who remind them of themselves. It’s not always intentional, but it can limit fresh ideas and diversity in leadership. Without a structured approach, we risk creating a cycle of “same old, same old” instead of bringing in new perspectives.

While these challenges can make succession planning daunting, the consequences of not having a plan in place can be even more significant.

Consequences Of Not Having A Succession Plan

Lost Institutional Knowledge

As experienced employees retire, there’s a risk of losing valuable institutional knowledge. Capturing and transferring this expertise to the next generation of leaders requires careful documentation, planning, and training processes. This challenge can be complicated by workplace cultures where knowledge sharing isn’t actively encouraged, so when long-term employees retire without proper knowledge transfer, critical information can be lost to the organization.

Risk of Operational Disruptions

Without a solid succession plan, local governments risk significant disruptions in service delivery when key leaders leave or retire. Much like having a disaster preparedness plan, a succession strategy is a type of risk management plan that helps ensure continuity of operations and uninterrupted services to citizens, even during leadership transitions.

High Costs of External Recruitment

Relying on external recruiting for leadership positions instead of developing successors can be expensive and time-consuming. It often involves costly searches, lengthy onboarding processes, and potential productivity losses as new hires get up to speed with the organization’s unique processes and culture.

Impact on Employee Morale and Retention

The lack of a succession plan or focus on employee development can negatively affect employee morale. When employees don’t see a future for themselves within the organization, it can lead to decreased job satisfaction and higher turnover rates.

Challenges in Organizational Responsiveness

The lack of an agile talent development strategy can make it harder for a local government to respond to changing community needs, technological advancements, or policy shifts—all significant factors in who to hire and how to develop their skills.

Accomplishing Succession Planning For Public Finance Employees

Now that we’ve explored why it’s so important to have a succession plan in place, let’s look at how local governments can create a strong plan, specifically for public finance roles.

#1 Identify Critical Positions

Start by pinpointing the roles that are essential to keeping the finance department running smoothly. Think budget director, finance manager, or specialized analysts. Consider:

• Which positions rely on a single person?
• What tasks are crucial for day-to-day operations?
• Which roles require specialized knowledge that’s hard to replace?

#2 Assess Current Practices

Take a hard look at the way things are already being done. Evaluate processes objectively to help spot any gaps in how future leaders are being developed. Look at processes like:

• Training programs
• Performance management systems
• Mentoring efforts
• Knowledge transfer practices

#3 Develop a Targeted Approach

Now it’s time to create a formal succession plan tailored to the finance roles identified. A good plan should cover:

Recruitment:

• Highlight the rewarding aspects of public service
• Offer competitive pay and benefits
• Reach out to universities with strong public administration or finance programs

Development:

• Provide opportunities for employees to boost both technical and leadership skills
• Consider formal training programs, mentoring, and cross-training in different finance areas
• Encourage participation in professional organizations like the Government Finance Officers Association (GFOA)

Knowledge Transfer:

• Capture the wisdom of experienced staff before they leave
• Document key processes
• Set up mentorship programs
• Create platforms for sharing knowledge across the department

Embracing Technology In Succession Planning

Like so many other aspects of modern governance, technology can make the succession planning process easier and more efficient. We recommend a two-fold strategy for embracing technology in succession planning:

Leveraging Succession Planning Software

Modern succession planning software provides a structured approach to identifying, developing, and preparing high-potential employees for future leadership roles. Some of the benefits of using succession planning software include:

• Centralized data storage, which stores information on employees’ skills, experience, performance, and career aspirations in a centralized location for quick and easy access.
• Streamlined communication and collaboration, which facilitate communication between employees, managers, and HR professionals, and ensure that succession plans are aligned with organizational goals.
• Automated tracking and reporting, which track employee progress against development plans, generate tailored reports on talent pools, succession gaps, and development needs, and offer valuable insights to inform decisions.
• Talent development features, which create tailored development plans based on individual needs and career aspirations, identify skill gaps, recommend training and development opportunities, and help employees visualize their career progression.
• Risk mitigation, which assists with developing contingency plans to address potential leadership disruptions, identifies potential succession gaps,  suggests proactive steps to fill them, and improves employee retention by supporting talent development and career progression.
• Time-saving and cost-reducing efficiencies, which automate many of the tasks involved in succession planning to free up time for strategic initiatives, reduce the costs associated with turnover and external recruitment, and provide the data and insights needed to make informed decisions.
  

Building a Legacy with Modern Budgeting Software

While succession planning software can help manage the process, implementing modern budgeting solutions like ClearGov can make the day-to-day job transition smoother for successors by:

• Streamlining processes to replace manual spreadsheets and email chains with a cloud-based system that automates budget creation, request collection, and communication.
• Institutionalizing knowledge to capture hard-won expertise in a system that’s easy for newcomers to understand and use.
• Managing a revolving budget team through creating easy-to-follow workflows that can be passed on to new team members, regardless of their experience level.
• Attracting top talent through implementing state-of-the-art budgeting solutions, which is found to be more attractive to skilled finance professionals.

We’ve had two different interns since we started [ClearGov] and I was able to get them onboarded and run through help with the administration process. It was fairly intuitive, even for someone who didn’t come in with a lot of budget experience.

Nick Hawkins, Finance Manager for the City of North Kansas City, MO

The coming wave of retirements in local government finance presents both challenges and opportunities. By implementing a succession plan and leveraging modern technology, finance departments can ensure continuity of operations, preserve institutional knowledge, and attract top talent.

The key is to act now—before retirement or turnover hits. By focusing on succession planning and adopting tools like ClearGov’s budgeting solutions, local governments can build a lasting legacy that sets future finance leaders up for success.