By 2015, millions of baby boomers will have retired, leaving a significant gap in the American workforce. And it's an issue that two out of three of small and midsize businesses (SMBs) are willfully ignoring. A mere 35% of SMBs have a succession plan in place, the recent report, "The Looming Leadership Void: Identifying, Developing and Retaining Your Top Talent," by the Aberdeen Group found.

"It all comes down to a lack of urgency among senior management," says Kevin Martin, research director in Aberdeen's human capital management practice and co-author of the report. Additionally, he says, SMBs "lack awareness of solutions that are out there."

Building bench strength

Succession planning is far more than grooming the next generation of the family members or senior managers for company takeover. SMB job functions, even at lower levels, often require very specific skill sets.

"It's about how to have the right supply of people for your organization when you need them," says Brian Wilkerson, national practice director for talent management at Watson Wyatt.

Training and succession planning go hand in hand, says Fran Luisi, principal at HR recruiting firm Charleston Partners. Many of Luisi's clients have focused succession planning on grooming people to step into specific roles. It's a step in the right direction, he says, but not enough.

Organizations like to talk about having "names in the box," says Luisi, but the question is whether those people are ready to take over their potential new job function immediately. "Succession planning is two-fold," he says. "It's learning and skills in the long-term and development [in the short-term] to have that ready-in-24-hours factor."

Says Martin: "Succession planning is a combination of process, tools and disciplines that enables an organization to plan for anticipated leadership needs as well as identify, develop, retain and allocate key talent."

Smart SMBs may know that succession planning is critical, but it's clear that they aren't doing enough. Sixty percent of best-in-class organizations have a succession plan that is integrated with their company's strategic plan, the Aberdeen data shows.

Large companies are twice as likely to have established a companywide succession planning strategy that is integrated with the company's strategic plan, as opposed to a reactive approach used to address needs as they arise, says Jayson Saba, research associate at Aberdeen and co-author of the report.

Best practices

Nearly 40% of best-in-class organizations maintain some sort of database of both "active" and "passive" succession candidates over the past year, the survey suggests. Seven in 10 plan to do so in 2008. In addition, 58% have defined both "hard" and "soft" skills required for each position; more than one-third plan to do so in the next year.

Best-in-class organizations measure the skills of successors and potential successors though analysis of key performance indicators on a regular basis. More than half measure such indicators on at least a twice-yearly basis.

While many believe that internal hiring is the way to go, "it needs to be a blend" of internal and external, Luisi says. External hires can bring in fresh ideas and a new perspective in a way that those immersed in a corporation's culture are sometimes unable or reluctant to do.

Along that line, Saba observes, "Almost half of our best-in-class companies allow access to employees across divisions rather than limiting internal search to each business unit."

The old "one-to-one" idea of succession planning is a thing of the past, Wilkerson says.

"[Companies] need to create a set of options to build that next generation of leaders."

Tech tips

As companies grow increasingly familiar with using technology for day-to-day business needs, they should consider automating the succession planning process, Martin and Saba suggest.

While the majority (64%) of organizations surveyed by Aberdeen currently use a paper-based succession planning solution, more than half intend to go paperless in the next year. Automating the process can be as simple as maintaining a computer file or Excel spreadsheet on each employee in a leadership role. Update the information regularly with the employee's latest tasks, scores on performance reviews and performance metrics, and keep track of employees in other departments with similar skill sets.

New technologies such as high-quality data organization charts or in-house tracking metrics can also make the process much more streamlined for larger SMBs (300 employees and up).

But most of all, it's a matter of action. Retirement and labor gaps are looming, whether you want them to or not.

"Don't get caught up in the term succession planning,'" Martin says. "Forget about that - get caught up in what succession planning is supposed to do."