When it comes to identifying and developing future leaders, ignorance can be costly. Without a robust succession management plan, your company will spend more money recruiting and potentially replacing leaders who turn out to be the wrong fit.

Unfortunately, many companies struggle to get a handle on succession management as they experience downsizing and mergers that have eliminated entire departments. Additionally, as leaders among the Baby Boomer generation approach retirement age, Millennials and Gen. X employees are becoming a more crucial part of the leadership pipeline. In fact, in the next five years, Millennials will make up nearly half the global workforce, and many of them will be in leadership roles, whether or not they are prepared to lead.

Attracting and retaining talent is among the top five most critical risks today’s organizations face, according to a 2015 Aon Hewitt Global Risk Management Survey.

Yet only 15 percent of North American companies surveyed by Harvard Business Review said they had enough successors in the pipeline for key leadership positions.

Without a succession plan in place, companies can make costly mistakes. Here are the most costly poor succession planning issues and how to overcome them.

Cost: Promoting The Wrong Candidates

Knowing which candidates to promote into leadership roles is not an easy task. There are many criteria to take into consideration, and companies often look at subjective factors rather than objective data when gauging potential. When candidates are not measured against all relevant factors, your company wastes time trying to mold them into leaders or loses them altogether.

This can result in higher costs due to leadership turnover and the need to recruit new talent.

Solution: Know What Good Looks Like In Your Organization

Some qualities are easy to identify, such as interpersonal skills, the ability to manage others and an understanding of organizational dynamics. These traits can be learned over time, but there are some essential characteristics of leaders that cannot be easily taught.

These traits aren’t always obvious to discern on the surface. For instance, an individual may say he is capable of remaining calm under pressure, but he may not reflect this in response to a high-stress situation.

A rigorous assessment process that includes multiple forms of evaluation, such as behavioral interviews, leadership questionnaires, and situational judgment tests, will yield more accurate results than asking your managers to select their top picks.

Cost: Not Engaging High Potential Employees

To become a successful leader, employees must have the aspiration as well as the ability to lead. Those who do aspire to a leadership position also need to be actively engaged in your organization and feel they are being supported at every step along the way.

Solution: Provide Ongoing Communication

Take the time to engage in an ongoing dialogue with your high potential employees once you’ve identified them, and provide them with the development opportunities they need to succeed.

The Millennial generation, in particular, appreciates regular feedback on what they can do to improve their performance.

In general, most Millennials also appreciate being paired with a mentor who can provide frequent, specific feedback and coaching.

Cost: Failing To Measure Success

Without a consistent way to measurement the impact of succession management, you could be repeating the same mistakes over and over, wasting time and money.

Solution: Evaluate Your Efforts

The best way to find out if your succession management efforts are working is to perform assessments that will comprehensively evaluate the candidate’s performance and qualifications. Once a company has placed an employee in a new role, use assessments to measure what the new leader has learned, how others feel about the new leader and how the leader has improved the company. This information will show what’s working and what isn’t so processes can be refined for smoother successions in the future.  In addition, look at aggregate data to identify learning needs for the organization and use this as the basis for training and leadership development efforts.

Finally, track metrics such as turnover and retention in your high potential population to measure progress over time.

Identifying high-potential employees and preparing them to make the transition to leadership positions is no simple task. Without a formal succession management process in place, companies can waste time, effort and money that could have been put to better use finding the right leaders to take over.

One of the biggest factors influencing changes in succession management is the Baby Boomers entering retirement and Millennials becoming eligible for leadership positions. This group brings unique traits and needs. To learn more about leadership development for Millennials, download the eBook, “Developing Future Leaders: Preparing Millennials for 21st Century Challenges.”