While the demand for effective managers continues to grow, the retirement of baby boomers is producing a sharp decline in the ranks of available personnel. In addition, executives are expected to be more sophisticated in order to lead new global and technological initiatives. For these reasons, careful planning for the eventual replacement of managers at all levels in organizations has gained strategic importance.
This is true for small firms as well as large ones. It’s not just succession at the top; it’s getting the right person in place for every job. Some of tomorrow’s key jobs do not even exist now. If a firm plans to double in size, they will need more talented managers.
Baby boomer retirement is a reality as evidenced by:
These retirements are not the whole story:
These statistics indicate that younger talent is more open to changing jobs, but choosing to hire from the outside may not be your best bet.
In addition, we have to look at the education of the workers coming in. For the past decade, rates of participation in higher education have been flat. We once claimed proudly that every generation of Americans was better educated than those that came before. This is no longer true. Probably for the first time since World War II, we made no progress at all in expanding college opportunity.
Between 1980 and 2000, the U.S. workforce expanded by almost 50%. Baby boomers and the increase of women in the workforce accounted for most of that dramatic growth. This produced so many new workers that it didn’t matter that our education system had moved only a fraction of them through post-high school training.
Current projections forecast labor-force growth of only 16% over the next two decades. A report released in May 2005 by the Committee for Economic Development put it plainly: “The prime-age, 25-54 year-old workforce that increased by 35.1 million workers between 1980 and 2000, will add only 3 million workers through 2020.”
The static educational level of the workforce, coupled with the retirement of baby boomers, means there won’t be enough managers to meet demand over the next 20 years.
What will companies do? That’s not too hard to predict: bid up wages, raid competitors for employees, encourage older workers to stay on the job and outsource whatever work they can. A highly efficient approach to meeting the upcoming professional squeeze is to identify and develop internal talent.
People already on your team know the business and have an observable performance track record. But some on your team are more capable and ready to step up as leaders than others.
An effective succession management system grooms high performers for rapid upward mobility and provides developmental opportunities for moderate performers. Having an effective succession management program in place not only begins to shore up your management team but helps to retain and attract the best professionals to your organization.