The statistics are clear. As reported by Natasha Tiku in Inc. magazine, "Over the next two decades, 78 million Baby Boomers will turn 65, the traditional retirement age. That's going to create a talent shortage, particularly in industries such as healthcare, education, engineering, and financial services. In 2005, workers over 55 represented 16 percent of the workforce; by 2020 that number will rise to almost 25 percent."

Small to mid-sized companies (defined as companies with fewer than 5,000 employees) are struggling with the pending retirement of many of their leaders during the next five to 10 years and trying to determine from where their next generation of leaders will come. At one mid-sized utility company, the general manager of power generation (the largest group within the company) said that nine of the 11 top people in his business unit were eligible to retire in the next five years, and he had no idea where to find their replacements. When asked what the company had done to develop replacements for these key people, he replied: "I sent one guy to a week-long program at [a well-known training vendor]. It cost a small fortune, and it didn't change a thing!"

Many large companies have built substantial leadership development organizations, usually as part of their HR groups, to develop leaders at all levels of the company. Perhaps the most respected company in this category is General Electric, which has a long tradition of leadership development, consistently promoting new CEOs from within, and supplying both themselves and many other Fortune 500 companies with generations of chief executives and other top-level officers.

In much of the business literature on developing future leaders within a business, General Electric's approach to leadership development is cited as a best practice. But few small to mid-sized companies have the resources to build a facility like GE's Crotonville, and most companies do not have large staffs dedicated to developing their companies' next leaders. So for them, this best practice is irrelevant, but developing their next generation of leaders is not.

Has your company identified high potentials to groom as the next generation of leaders? What are the key leadership competencies that future leaders will need to succeed? It is crucial that you have a program that identifies and cultivates future leaders so that they will be ready to lead.

The basic question is not, "Should the company invest in a leadership development program?" but rather, "Can the company afford not to invest in developing the next generation of its leaders?"

This is an excerpt from Feeding Your Leadership Pipeline: How to Develop the Next Generation of Leaders in Small to Mid-Sized Companies. You can purchase the book here.