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OVER THE NEXT 30 YEARS, MORE THAN 61 MILLION AMERICANS will retire, and the gap between the number of workers needed and the number of workers available will widen dramatically Consider the fact that between 1998 and 2008, workers age 45 or older will grow from 33% to 40% of the U.S. workforce, while those between the ages of 25 and 44 will plummet from 51% in 1998 to 44% in 2008.

The statistics are clear. If present trends continue, a serious shortage of college-educated talent will develop. Traditional methods of solving the problem-such as the tried-and-true American tendency to rely on trained immigrant labor to make up for any domestic labor shortages-may not work. Fallout of the war on terrorism means that it is now tougher for many people to get entry visas to the United States or working visas once they are in the U.S.

As different sectors of the economy confront shortfalls of experienced talent, the leaders in those organizations will most likely be compelled to take more aggressive steps to attract and retain talent. That is likely to mean a bidding war for people. Even if your industry is not directly affected by the aging of the labor force, your organization may begin to feel the effects of the problem as other organizations take highly competitive steps to attract the talent they need.

An effective solution to these problems lies in succession planning and management, a systematic, long-term approach to meeting the present and future talent an organization must have if it is to continue to achieve its mission and meet or exceed its business objectives. Succession planning and management is a strategy that can help an organization meet its continuing need for people at all levels and in all occupational groups.

It is important that leaders consider succession issues at the same time they make business decisions. Succession planning and management, taken together, indicate a desire to plan for the organization's talent needs and take action to meet those needs. It is a driver for an organization's commitment to develop its people and build its bench strength.

Should You Worry?

How do you know if your organization really needs a succession planning and management program? One way to answer that question is to monitor your organization for the appearance of common symptoms that may indicate that need. If you answer "yes" to a majority of the following questions, then the likelihood is great that your organization needs a succession planning and management program:

* Managers are complaining that they have nobody "ready" when vacancies open up.

* Expenses for external searches are increasing.

* Those who are unofficially regarded as possible successors are leaving by surprise-and are perhaps indiGating on exit interviews that they see no advancement opportunities within the organization.

* The company is losing a high percentage of its star performers (sometimes called "high potentials")-those who are both good performers in their current jobs and are thought to have advancement potential. (Some organizations are now tracking this special metric, which is called critical turnover, to distinguish it from the usual turnover statistic that is calculated by average number of voluntary quits over total headcount.)

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* The organization lacks sufficient numbers of women, minorities, or other protected labor groups at each level of responsibility to match the general demographics of the area in which the organization operates.

* Workers are complaining that promotion decisions seem to be made on the basis of nepotism, favoritism, capriciousness, or expediency.

Focusing on the Real Goal

Many managers seem to have a knee-jerk reaction to a job vacancy. They immediately think of only two solutions: fill the position from inside the organization, or fill it from outside the organization. The problem with regarding all vacancies as an opportunity to "fill from within or from without" is that there actually are more choices than that. The goal is to get the work accomplished and not to fill positions.

There are many ways to get work accomplished, and they do not all involve filling a position from inside or outside the organization. Hence, there are alternatives to succession planning and management.

Every time a vacancy occurs, managers should consider a range of options. (See the sidebar above.) These options are possible alternatives to succession planning and management, which may itself be regarded as a means by which to develop the internal talent of the organization for possible future advancement.

HOW DO YOU GET THE WORK DONE?

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Best Practices In Succession Planning and Management

Eleven best practices typify productive succession planning and management efforts. By adopting these practires, you can put "success" in your succession planning and management efforts.

BEST PRACTICE 1: Clarify the Purpose and the Desired Results of the Effort. Companies can develop succession planning and management programs that will help them accomplish a number of objectives. They can slash the cycle time it takes to fill key positions when needed, back up key performers, improve the representation of historically underrepresented groups in the organization's workforce, and develop superstars. But an effective succession program cannot be all things to all people. Executives must clarify why the program exists and what results they seek from it. The important point to understand here is that best practice in succession planning and management is typified by goal clarity. Executives know exactly why they want the program, align it carefully to business needs, and take a hands-on approach to formulating, implementing, and evaluating the program.

BEST PRACTICE 2: Determine What Performance Is Required Now. Leading-edge organizations have begun to rely on competency models instead of work-based human resources approaches typified by job descriptions. Competency modeling focuses on discovering the differences between the best performers in a job category (called exemplars) and average performers in the same job category. Competency models, which are linked to the people who do the work, are more enduring than job descriptions, which describe what work is done. The use of rigorous competency models is a best practice that typifies successful succession planning and management programs.

BEST PRACTICE 3: Measure Performance. While competency models describe the people who do the work, they do not measure how well individuals are performing within a given time frame.

Performance measurement systems do just that. Effective succession planning and management programs integrate competency models (which describe the people who do the work) with employees' measurable work results in a given time span. That amounts to more than employee performance appraisal. It includes performance management systems that provide individuals with continuing feedback from those they serve, such as customers, and help to pinpoint and eliminate the organizational barriers that impede their productivity.

BEST PRACTICE 4: Determine What Performance Is Needed in the Future. Few people doubt that the business world is changing rapidly. It is not enough to develop competency models that define current differences between the best and the average performers. It is also necessary to devise a future competency model that describes the characteristics of individuals who will be aligned with organizational strategies and objectives for the long term.

BEST PRACTICE 5: Assess Potential. By comparing individuals to future competency models, decision makers can assess their potential for coping with the organization's future business environment and future work requirements. Assessing potential through 360-degree feedback or through assessment centers in a regular, continuing, and systematic way typifies best practice in succession planning and management.

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BEST PRACTICE 6: Establish a Means to Narrow Gaps. Once decision makers know the gaps between an individual's current competencies and performance (as measured by Best Practices 2 and 3) and between an individual's potential (as measured by Best Practices 4 and 5), they can establish a means by which to narrow those gaps over time. That is often done through individual development plans (IDPs), which help to plan activities that will build individual competencies to meet present challenges and prepare for future ones.

Companies can implement these plans by establishing an inhouse leadership development program geared to meeting identified needs and preparing people for the future. It is important to emphasize that, since most employees learn on the job and in the context their work, an in-house leadership development program often includes on-- the-job work assignments, projects, and task force participation, as well as participation in off-the-job training and education events.

An important best practice here is the application of Action Learning. It involves the use of teams to achieve work results while, at the same time, building individual competencies in needed areas. Action Learning teams usually set out to solve a business problem. In so doing, members learn from each other and from the project experience, and those lessons help to build individual and organizational competence.

Another important best practice is the application of mentoring programs. Most successful people, research has found, have benefited from the counsel of a more experienced person. The mentor serves as a sounding board and offers a less experienced person advice on what to do, when to do it, and how to do it. Mentors are rarely immediate supervisors.

BEST PRACTICE 7: Follow Up. The Achilles heel of many otherwise fine succession planning and management programs is lack of follow-up. People work with their immediate supervisors to establish an individual development plan. Then a year goes by and nothing happens because both the individual and his or her immediate supervisor were busy.

To solve this problem, companies must establish a means to follow up and hold both individuals and their immediate supervisors accountable for implementing individual development plans. One way to do that is to establish a regular follow-up system-such as quarterly talent review meetings in which supervisors must explain to their own bosses how they have been developing their people in line with the IDPs.

RATE THE SUCCESS OF YOUR SUCCESSION PLANNING

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BEST PRACTICE 8: Document Competence. As decision makers find that speed is a strategic resource and that beating competitors to the punch provides competitive advantage, they need to be able to locate the talent they have. To do that, they need to have a clear understanding of what people know and can do in the organization. The old-style skill inventory, which usually only captured information about workers' education and general experience, is neither sufficiently detailed nor sufficiently companyspecific to provide the essential information.

Therefore, an emerging best practice in succession planning is to use the process itself to document the work-related, company-specific competence of key workers in the organization. When an organization that has immediate access to that information faces a crisis, it can field a team to attack the crisis on short notice. Look for the competency inventory to be a key driver for succession planning programs of the future.

BEST PRACTICE 9: Create and Sustain Rewards for Developing People. The old truism that "you get what you pay for" applies to succession planning and management. If executive bonus plans do not reward decision makers for "growing talent," then they will not do it. And if workers are not rewarded for development, they will not do it either.

Growing talent might be "the right thing to do," but, in this age of downsizing-when managers often do not know whether they will be permitted to replace departing workers, even if those workers have been tapped for more responsible assignments elsewhere in the organization-the incentive is actually focused on employee hoarding. To avoid these problems, best-practice firms establish incentives for developing people in line with organizational needs. How well people progress on their IDPs becomes a factor considered in awarding bonuses.

BEST PRACTICE 10: Evaluate Results. Before committing to a succession program, most CEOs will want to know how the company will benefit financially. It is not question that is easily answered. In fact, few best-practice firms actually determine the return on their investments in succession planning and management.

More common in best-practice firms is what might be called a "smell test." It works like this: When a key position becomes available, are there qualified internal applicants who may be considered for it? If the answer is "yes," then the succession planning and management program is deemed to be successful. But if the answer is "no," then the program is considered unsuccessful. It is a preponderance of "yes" answers that makes for a good program.

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BEST PRACTICE 11: Lead from the Front. In best practice firms, the CEO and other senior leaders take a hands-on approach to succession planning and management. They do not delegate it completely to the HR Department, but instead become personally involved in it. Their active participation shows that they "walk the walk" as well as "talk the talk." Additionally, their direct involvement sends an important message to others that they are being judged in their performance as "talent developers" for the organization's future success.

Crisis Management

While many senior managers seem to be preoccupied with the fallout from various corporate bankruptcies and accounting firm gaffes, others are working behind the scenes to steel themselves and their organizations against another looming crisis. That crisis is more subtle than bankruptcies or terrorism, but for some organizations, it may be much more serious. The demographic realities in the developed economies of the world are leading to a larger-than-usual number of people becoming eligible for retirement in the next few years. Even as some organizations downsize, others scramble madly to prepare for a larger exodus of experienced talent than they have witnessed in many years. The survivors will be those who work for success in succession planning.