I recently listened to a podcast on leadership and succession planning and heard two interesting statistics. The first was that there are 76 million Baby Boomers and only 46 million Gen Xers—that’s a 30 million-person gap between one group in the workforce and the next. While it’s doubtful every Boomer will walk off the job the day of his or her 65th birthday, the potential impact of even a partial exodus is significant. Projections are that more than a third of Boomers will retire within a year of reaching the age of 65, and the current reality is that 45 percent of people aged 65 are already fully retired.
So what’s the result of all of this? According to a recent RHR International study, more than half of all companies expect to lose over half of their senior managers in the next three years. If you haven’t done an “age survey” of your management team recently, I encourage you to do so to determine your vulnerability to potential retirements. Do you have people ready or being developed to step into those roles?
The combined effect of Boomer retirement and historically low U.S. birthrates is going to produce a much smaller and less experienced workforce in the not-so-distant future. Younger employees no longer join companies with the expectation of spending the rest of their working lives with one business. Fewer workers with less “connection” to a company means there will be fierce competition for available employees to replace retirees.
The next interesting statistic I heard was that research shows 66 percent of externally hired senior managers fail within 18 months. Many companies feel that if the right candidates can’t be found internally, the company can always go outside. Unfortunately, that doesn’t seem to be the case; 49 percent of employers report they are having difficulty filling skilled jobs.
Taking these two facts together, the conclusion is: if you aren’t developing (and hanging onto) your leaders internally, your organization could be at risk. Most companies are very aware of the need for succession planning, but only 35 percent are actually doing it. In fact, a recent American Management Association survey found that 83 percent of company leaders believe it is important to promote from within, but only 10.3 percent of those leaders feel they have a “robust” pipeline. So where are your future leaders going to come from? The good news is there are several steps you can take to start building your bench.
First, assess your vulnerability. What percentage of your key managers is nearing retirement age? Do they have specialized areas of knowledge that need to be transferred to others in the organization? While you may miss good ‘ol Charlie in production when he’s gone, you may be in bigger trouble when Mary from IT leaves.
Next, assess your in-house reserves. Take a good, hard look at your organization and truthfully evaluate the capabilities of employees to take on increased responsibilities and future challenges. It’s not how well they do the job they’re in—it’s what they’re capable of doing in the future. Performance management systems can be a good source of data for this evaluation, but only if you’ve been doing honest, robust valuations of people’s talents and skills. If everyone gets a great review because you’re “nice” and don’t want to upset anyone, then you’ll have to start learning how to differentiate the performers with potential from your other employees.
Third, put together a talent development strategy that targets the key skills and behaviors you will need in your future leaders. This needs to be a planned and directed activity. If a baseball coach has someone hitting .150 and wants him to hit .300, he doesn’t just tell him to do so and walk away. He tells him how to change his stance and hold on the bat, and gets him working with the batting coach. In the same way, you must focus on providing people with the resources and opportunities they need to build the skills crucial for your team’s success.
Fourth, make people development a primary objective for every single manager—especially executives—and require time and attention be paid to finding and building talent within your organization. The old saying is “you manage what you measure,” so measure talent development.
Building your bench strength can be hard work, but having talent growing and developing in your company is critical to your future success. iBi
Marvis Meyers is vice president of training and organization development for AAIM Employers’ Association.