Bill Thomas was just 41 when he took over as chief executive officer of KPMG LLP in Toronto last year. He'd barely begun warming the seat before he began the process of grooming a successor for the audit, tax and advisory firm.
It may seem surprising for someone with expectations of a long career to be worried about who will come next.
But it's an astute move: With many of the current generation of leaders reaching retirement age, companies know they have to prepare younger employees to take over top jobs.
However, many companies are failing in this regard: Identifying and preparing talented employees to move into management has become a victim of the immediate demands of the economy, a new study finds.
Many companies have put succession plans on the back burner as they tackle more pressing issues. Others have been lulled into complacency by the fact that many veteran executives have delayed retirement due to the market meltdown, the study finds.
The ramifications are unsettling. As the economy recovers and older executives start to retire, companies that haven't taken pre-emptive action are going to have to scramble to install people who aren't prepared for the job, or will have to go raiding the competition, the study finds.
While 71 per cent of U.S. and Canadian companies say they have succession plans, just over half -54 per cent - have curtailed or let their plans lapse in the past year, according to the survey of 212 large organizations done by recruitment and executive coaching company OI Partners Inc.
Because of this, 54 per cent of employers said they don't have enough people in their organization who are ready to replace current executives and senior managers.
If an immediate management change was needed, 40 per cent said they would be forced to poach a leader from the competition.
That scenario creates a big opportunity for aspiring leaders to raise their hands and get on the leadership track, career experts say.
"Corporate boards are starting to raise alarms about the risks organization face by not having options for smooth leadership succession. Because of that, companies are likely to revive their efforts to identify and develop executive talent," says Tim Schoonover, chairman of Cincinnati-based OI Partners.
It also means that those who aren't seeing promotion come fast enough at their current employer will find willing ears if they shop themselves to the competition, he adds.
The study found that companies that have let succession plans slide are more than twice as likely to hire new leaders from competitors as they were before the recession, and are almost twice as likely to hire from outside their industries, Mr. Schoonover says.
It's not as though companies are being taken by surprise. As the baby boom generation now in leadership roles nears retirement age there are fewer employees in succeeding generations to replace them, according to a separate study released this month by the Conference Board of Canada.
"Job losses have resulted in temporary slackness in Canada's labour market, and baby boomers may be temporarily delaying their retirements due to the plunge in equity markets," says Pedro Antunes, the Conference Board's director of forecasting in Ottawa.
However, even if some boomers decide to delay retirement, it will likely be for only a short period of time, he says. "If organizations fail to adequately plan ... they could lose out on having leaders with the required skills, which could dampen their future growth prospects."
It's a warning that is not lost on Mr. Thomas, who got his own big break by going through a two-year KPMG program called the Chairman's 25. The program trained talented employees to take on senior leadership roles in the lead-up to the retirement of then-CEO Bill MacKinnon in 2008.
