The need for succession planning is becoming apparent as baby boomers exit the workforce
For only so long can companies rely on recruitment alone to provide the best workers, say local workforce development leaders.
Succession planning, the practice of deliberately developing and promoting talent from within a company to replace key players in the business, is the buzz phrase du jour in human resources.
It is so for a reason.
According to the U.S. Bureau of Labor Statistics, more than one out of four workers will reach retirement age by 2010, creating a shortage of nearly 10 million workers. This projected shortage isn’t going to be cheap.
This "baby boom echo" is likely to cost businesses in terms of recruitment, training and lost knowledge as baby boomers exit the work pool. With fewer workers, companies will have to compete harder to recruit workers.
"In some cases, it is going to be a serious threat to a company’s ability to compete," said Todd Oldham, interim dean of Workforce Development and Continuing Education at Clark College.
Workers will have many more choices even when the region experiences recession because the retirement numbers are huge in every occupation – managerial positions in particular, said Lisa Nisenfeld, executive director of the Southwest Washington Workforce Development Council.
Companies are beginning to look at how to identify emerging leaders and prepare them for upward mobility, he said.
It takes designing a plan and ultimately providing opportunities for selected workers to learn and grow in a new capacity. It also takes plans for worker retention and skills assessment and funding for continuing education and training.
It comes from within
The concept of promoting from within may seem obvious, but Oldham and Nisenfeld said succession planning isn’t all that common.
"Many companies are still relying on their ability to recruit," Oldham said. "That’s where they’re going to potentially fail in the future – there are not going to be enough qualified people. It can’t be solved with outsourcing and technology, the problem is the talent pool. They won’t be able to just deal with it, there will not be enough to go around."
Plus, most small businesses are too busy struggling to make it every day rather than thinking of establishing in-house training programs for upward mobility, Nisenfeld said. The SWWDC has spent a fair amount of time and energy trying to give businesses a sense of urgency about the impending crisis, but baby boomers entered the workforce at a time at a time of great expansion and may not be able to imagine the scope of the problem.
"Our mental model has been of a workforce where there are always more people than jobs," Nisenfeld said. "We have a deeply seeded idea that the workforce is never-ending. And even though we know intellectually it can’t continue, we have a hard time believing it."
The situation is true throughout the United States, unlike in China, India, Europe and Canada, which have funneled untold amounts into their educational systems.
"We haven’t focused on workforce development – we think it’s all going to happen by magic," she said. "Parents’ desire that their children should find fulfillment in their work has trumped trying to plan for a stable economy."
Businesses won’t have the luxury of dealing with the issue five years from now, Oldham said.
Speaking to succession planning in terms of preparing to transfer assets to one’s heirs, Jeff Kraai, president of Vancouver-based Exit Strategies, which specializes in confidential business sales and retirement transitions, said this:
"It amazes me that a business owner can spend 20 to 40 years of life acquiring assets, then spend more time planning a vacation than planning for retirement. It happens all the time – people don’t like to plan; they don’t like to believe they’re mortal."
Who is doing it
Vancouver-based Columbia Credit Union has a formal plan in place for leadership development.
Many of the company’s leaders began as tellers, and when new hires are made, they are told from the beginning that it is possible, if so desired, to work upward.
To do so, CCU provides educational assistance, both in the form of in-house training or tuition assistance, mentoring and shadowing opportunities.
On the retention side, there is a staff-wide incentive program and a comprehensive benefits plan. Besides saving money by not having to constantly recruit and train new hires, the company retains the culture that its workers possess, said Colleen Boccia, senior vice president of marketing and strategic planning.
"We’ve found that if we treat our employees well and offer opportunities for them to grow, it saves the company money and gains their allegiance," said HR manager Jan Goodman. "There is nothing better to serve our members than to have people who are proud to be where they are."
Boccia said moving within the organization is a two-way exchange of employees expressing interest to their managers as well as managers identifying potential future leaders. But, she stressed, without the continuing-education and skill-assessment pieces in place, succession planning isn’t going get a company very far.
Public transit provider C-Tran began taking a hard look at the need for a succession plan once several workers in specialized positions began retiring, said Arlene Doern, director of administrative services. Five years ago, the organization launched a mentorship program but had to abandon it due to funding instability.
Now that funding has steadied, C-Tran has hired Brenda Hamilton, a training and benefits specialist in the HR department. Part of her job is to keep an eye on succession planning.
The average C-Tran worker is 50 years old, and Doern said the institutional memory that’s lost with exiting the work pool could be noticeable.
Hamilton, who has worked in HR for more than a decade, said succession planning for some is a retention tool.
"It is a way to show that I, as a company, am invested in their success – giving them a chance to grow and spread their wings because I want them to stay," she said. "It’s easier and more beneficial to have someone stay and grow than always looking outside."
And implementing a succession plan is everyone’s responsibility, Hamilton added.
If employees desire promotion, they should approach supervisors and express that. It is a manager’s responsibility to pay attention to employee performance and recognize who could move within an organization and it’s up to HR managers to make sure both aspects are happening for the entire organization.
Nisenfeld said it has to come from the top because the best efforts of HR managers won’t have much effect without financing.
Resources are available
Succession plans may differ vastly from company to company depending on size and structure.
The first step is identifying key positions – the ones a company would really be hurting without – within an organization and what vacancies can be expected in the coming years, said Art Ricchiuti, a SCORE counselor.
Next comes creating assessment tools and potentially providing financing for succession. These can be development plans for employees or training and educational opportunities to add to their experience base.
"A company needs succession planning only if someone leaves," Ricchiuti said. "It’s like insurance. If everyone you have is 30 years old and is never going to leave, you don’t need it now. But if someone gets hit by a truck on the way to work or hired away, you’d better know what you’re going to do."
There are local resources available to help companies make a plan for leadership development, such as Clark College, which offers open enrollment workshops and seminars for business leaders as well as customized contract training. Within the fee-based customized training, college instructors conduct a full audit of a business, assess its needs and provide coaching and training.
• Clark College: www.clark.edu
• SCORE, a nonprofit association dedicated to providing entrepreneurs and small business owners with confidential, free business help: www.scorevancouver.org
• Small Business Development Center, a partnership of the U.S. Small Business Administration, Washington State University’s College of Business and Economics and other Washington Institutions of higher education and economic development organizations: www.wsbdc.org
• Southwest Washington Workforce Development Council, offering leadership and resources to increase economic development with a trained and productive workforce in Clark, Cowlitz and Wahkiakum Counties: www.swwdc.org
