A recent study from Deloitte has revealed that 60 per cent of new jobs in the 21st century require skills that are only possessed by 20 per cent of the current workforce.

The UK labour market is undergoing a reduction in workforce-aged residents; there are currently 17 million people in the UK aged 20-40, and 14 million between the ages of 45 and 65. By 2020, the projections are that the younger group will decrease to 16 million, while the older group will increase to 17 million (CIPD: Talent Management: understanding the dimensions, May 2006). The problem is faced not only by the UK labour market, but by others, including the US. Dwindling populations mean competition for labour is becoming increasingly intense.

At a time of such change and falling populations, the link between succession planning and talent management is irrefutable. Both areas need to be aligned with HR management in every business, and a successful talent management programme can act as a pipeline for a fruitful succession planning model.

In addition to the decrease in the number of people of working age, those that are coming into the workforce are doing so without the requisite skills to fill the jobs available.

To overcome the increasing competition to recruit the best staff, the business world is realising the importance of managing and nurturing their existing talent. Businesses need to look at holistic solutions to this increasingly important issue, by implementing strategic learning programmes to address their goals and talent needs.

Whilst historically companies would look at staff management and recruitment as a solution to resolving skills gaps, the changing marketplace has meant that employees have to manage their workforce as a single entity. By managing them as a whole at any time they can know where their key employees are, what skills are being developed and where skills gaps need plugging.

Succession management is necessary to ensure that key employees are identified and developed to successfully fill key roles within organisations of all sizes. A programme which enables businesses to identify employees that demonstrate key skills and prepares them for advancement or promotion will reduce the risks when key employees leave a company. In smaller companies, the difficulty in replacing key individuals is multiplied by their importance in an environment of fewer people.

Effective succession management leads to higher employee satisfaction and thus productivity. Individuals who feel that their future career is being considered by the company, especially those who have been selected as a succession or talent pool candidate are further motivated and committed to their employer.

Succession planning becomes increasingly complex in the UK market because of the potential lack of senior staff mobility and lack of transferable skills. A CIPD survey in 2005 revealed that one in five UK businesses had no succession planning activity in place. Being able to secure candidates from an internal pool can considerably reduce the costs and time required to recruit a replacement.

The businesses which are going to succeed in this period of increasingly competitive recruitment are those which demonstrate they are developing individuals’ capabilities to achieve personal goals. A business which builds its talent internally will, in-turn, recruit the best talent when it first enters the workforce.