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Succession Planning

Published January 2008

Mapping Talent Among Younger Workers

Brian Davis, Ph.D.

Identifying and developing high-potential leaders inside the organization is critical to business growth, and the demand for business growth is as strong as it has ever been. Organizations that can map the leadership talents specific to their business success against those exhibited by current high-potential employees can create a detailed road map for continuing success.

Many organizations find the critical constraint to achieving growth is not access to raw materials or capital, but access to labor. Specifically, organizations need a steady pool of internal and external leaders when dealing with succession issues. Unfortunately, many key HR leaders feel their organizations are not doing a good job of tracking, measuring and making the best decisions to identify and develop leadership qualities in existing employees or "internal talent."

When called upon to fill a critical leadership role, it's not uncommon for a company to find it lacks the needed skill sets among eligible individuals. This isn't always because the talent within the company is insufficient. Rather, the lack comes as a result of insufficient succession planning.

Proper succession planning involves strategic and long-term "talent mapping" — that is, integrating the skill sets and competencies needed to fill current and future leadership roles into high-potential employee development efforts and tracking individual results as these efforts go forward.

There is urgency to this development need. The market for business leaders has become a classic case of rising demand and falling supply. The demand for leaders is growing — the number of executive positions is projected to increase 10 percent to 20 percent over the next five years, and an unprecedented 70 percent of organizations surveyed report they are searching externally for leaders. Meanwhile, the supply of leaders is shrinking — the number of workers in the 35 to 44 age range is projected to decline by 8 percent over the next few years, and in the U.S., 50 percent of the senior management ranks of Fortune 500 organizations are eligible to retire over the next five to seven years.

Talent is a precious resource, not just because it is scarce but also because it is valuable. Studies show, compared to less effective leaders, more effective leaders deliver:

• 12 percent greater gross margins.
• 8 percent stronger net operating contributions.
• 5 percent greater sales.
• 12 percent more profit.
• Nearly 3 percent less staff turnover.

Assessing Potential

By definition, leadership potential is the capacity to develop into a leader. "Potential" consists of a broad array of traits, experiences and other characteristics necessary to create the capacity for this development. This means different people will come to the same level of potential from very different paths.

Similarly, different companies will have customized definitions of what leadership looks like. For example, a company that executes its business strategy on a global scale cannot hope to successfully transition this execution from a 30-year global veteran to an individual who has only worked domestically — no matter how high potential that individual may be. The traits and skills of the leader have to be specifically mapped to the strategies and goals of the organization.