Talent War Best Fought With Succession Plans--Part 1

In the boardroom bunkers and the cubicle-filled trenches, the early skirmishes of the next war are being fought. For the moment, the action is guerilla warfare--brief raids in which the companies under attack, or in danger of disappearing in the current economic downturn are often unaware that they have been hit. Ultimately the war will be global and for businesses, the stakes will be not just success but survival.

According to a year-long study conducted by McKinsey, involving 77 companies and almost 6,000 managers and executives, the most important corporate resource in the next 20 years will be talent--smart, sophisticated business people who are technologically literate, globally astute and operationally agile. And even as the demand for talent goes up, the supply will go down, even in the current economic times. The study also concluded the following:

* corporate officers reported company growth was limited now because they did not have the right talent;

* within the next few years, most companies will lose 30-40% of its managerial staff to retirement;

* failure rates and turnovers among CEOs and executives have reached all time highs;

* 2/3 of employees have low confidence levels for their companies' top executives;

* only 1% of companies rate their succession management plans as being excellent.

A lot of this problem has to do with demographics. For example, 34% of the U.S. federal civilian workforce is over 50. Between 1996 and 2006, the number of Americans between the ages of 55 and 64 has increased by 54%. Most organizations stand to lose up to 50% of their executives to retirement in the next 5 to 7 years.. The huge bulge of retiring Baby Boom executives combined with a much smaller population of 35-to-45 year olds means the supply of management talent is declining at least 15% per year.

And there are other factors: the number of women entering the workplace has leveled off, immigration levels are static, and white-collar productivity is in decline. As well, many younger or newer managers and executives are not eager to take on more responsibility and as a result of downsizing and mergers, many young professionals have had no mentors because management layers have been thinned.

At the same time, loyalty to he company has taken on a different meaning for younger generations. They are loyal to a company only if it provides the kind of corporate culture and meaningful work that aligns with their values.

Many companies do not yet realize they are in a talent war. They may experience lower attrition rates at he senior management level, but the real attrition is occurring with employees aged 25 to 35 who are prime candidates for future leadership. For other companies the talent war is seen only as a recruitment problem, with some going to the extreme of providing signing bonuses.

In the new economy, competition is global, capital moves to where opportunities exist, ideas are quickly developed and cheaply, and people are willing to change jobs often. In that kind of environment, all that matters is talent.

In "Built to Last: Success habits of Visionary Companies," authors Jim Collins and Jerry Porrs identified 18 organizations that have had led their industries for at least 50 years. They found one of the key reasons such visionary organizations enjoy long-term success is because of a strong focus on succession planning These companies develop, promote and carefully select managerial talent from inside the company to a much greater degree than comparison companies, ensuring that leadership excellence and continuity takes place.

The war for talent is raging in the corporate world, and the losers of this war either fail to recognize they are victims of it, or they do not a strategic succession management plan that is being aggressively executed. The bottom line is strong leadership today does not guarantee strong leadership in the future. Leading organizations don't just survive, they thrive.