Action Steps for Handling the Aging Workforce Problem

It’s no secret to managers, senior HR professionals, knowledge management experts, and recruiters that in the next few years most firms will once again experience a staffing crisis ó when more and more baby boomers opt to retire. While there is some debate as to whether the bulk of the baby boomers will retire in full or continue to work on a part-time or contingent capacity, there is no doubt that numerous talent-related problems will arise. Some call it the “aging workforce problem”; others call it the “leadership gap.” Whatever name you use, it is a real problem facing HR. It will not be a dramatic, one-time catastrophic event like many are predicting, but rather a gradual escalation that will impact all organizations. I recently served as chairman of a major conference on this issue and my recommendations to the participants are outlined in this article. It’s important to note early on before you stop reading about this topic (probably because you think that this aging workforce problem won’t impact your job or department) that no one will be untouched by this issue. Upcoming Problems Related to the Aging Workforce The dollar impact of the aging workforce problem will vary significantly with the size and employment brand of the organization, but in large organizations it will most certainly exceed tens of millions of dollars. Some of the key negative impacts you should expect to encounter include:

  • An increased workload for the pension and benefits department due to an increased volume of inbound retirement-related questions
  • A stress on existing retirement support systems, as the number of retired workers may actually exceed the number of currently employed individuals in some corporations
  • Increased risk of losing important corporate knowledge that exists only in the minds of a select few if knowledge management systems are not in place to capture and codify their knowledge
  • A slowdown in overall workforce productivity (as experienced workers are replaced with less experienced ones, corporate capabilities and productivity will be impacted)
  • Existing recruiting systems being stressed to the limit (other firms facing similar shortages of experienced talent will increase their poaching and the overall market for experienced talent will become white hot)

Action Steps That Organizations Should Consider Although every organization should approach the aging workforce problem in their own way, I recommend taking proactive actions in each of the following areas.

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  1. Assigned accountability. The problem will be exacerbated because few organizations have assigned anyone with the responsibility to handle the aging workforce problem. Without coordination, budget, and accountability, it is unlikely that any effort will succeed.
  2. Develop metrics. It’s important for your organization to begin developing information-gathering and problem-identification systems to ensure that it accurately identifies and forecasts problems and opportunities related to the aging workforce. Metrics are also needed on the back end in order to assess the effectiveness of the aging workforce solutions that are implemented.
  3. Build the business case. In order to get sufficient funding to address the problem, you must first convince senior executives of its magnitude and importance. The first step in this area is to quantify in dollars the negative business impacts and potential profit opportunities related to the aging workforce. Demonstrating the potential impact and the positive ROI to senior leadership insures that there will be sufficient budget and resources to attack and solve key issues.
  4. Develop an overall aging workforce plan. Develop a written strategic workforce plan to integrate and unify all HR departmental efforts and to ensure that HR budget and time allocations match the goals of the strategic aging workforce plan. The plan should have measurable goals and it should assign accountability to specific individuals.
  5. Undertake retirement forecasting/planning. it’s important to develop forecasting processes that can help to identify which locations and jobs are likely to have the highest retirement rates. It’s also important, whenever possible, to identify the specific individuals that are likely to leave (and when) for both executives and key technical talent.
  6. Reinforce succession planning. The one area of overall workforce planning that will need the most reinforcement is succession planning. It’s important to identify individuals with leadership potential early on in order to insure sufficient development time and a steady supply of trained leaders and key technical talent.
  7. Reinforce talent retention programs. It’s important to reinforce or rebuild current retention programs that attempt to lengthen the stay of key executives (delay their retirement). In addition, blocking strategies and programs will be required for battling the poaching of scarce experienced talent by other firms. When the long economic downturn finally ends, the pent-up job frustration among workers will lead to an explosion of turnover and increased difficulty in retaining experienced people at all job levels.
  8. Retention of “transferred in” talent. Because some industries will suffer an acute shortage of experienced talent due to large scale retirements, there will be a need to import talent from other industries. However, because talent that “transfers in” from other industries has historically had turnover rates as high as 50% turnover within two years, programs are needed to stem the loss of these imported people, who bring you much-needed innovation and new perspectives from other industries.
  9. Improve the development of your up-and-coming talent. It will be important to increase your capability for rapidly developing up and coming talent. There will be a need to improve or create leadership and technical skill development programs that provide on-the-job development opportunities, in addition to traditional development efforts.
  10. Expand your traditional recruiting for experience talent. Traditional recruiting programs will need to increase their focus and capability for recruiting experienced talent replacements from other firms.
  11. Expand your traditional recruiting for college talent. In addition to traditional recruiting, the lack of experienced talent in the marketplace will mean that the role of college recruiting will increase in importance. New tools will be required and there will be a shift to truly global college recruiting.
  12. Institute global recruiting for talent. It will become increasingly important in a global economy to seek out the best talent no matter where it resides around the world. This will require the transforming of traditional recruiting efforts, especially in geographic areas where the aging workforce problem is less significant.
  13. Develop knowledge transfer programs. It’s important to develop programs that identify key individuals who possess non-codified essential knowledge. Then, knowledge transfer programs must be developed in order to capture key information from executives and technical talent who do leave, in order to ensure that the firm retains this vital information.
  14. Develop plans to maintain diversity. High retirement and turnover rates will also negatively impact diversity ratios. Therefore, it’s important to develop HR programs that ensure you maintain your diversity goals at all job levels.
  15. Develop part-time work opportunity programs. Because retired individuals are often willing to do part-time work, it is important that HR develop programs that allow the firm to utilize retirees on a part-time, as-needed basis.
  16. Build your external brand. Smart HR executives will also focus on building their external brand/image so that college and other potential candidates from outside your industry will look favorably upon your firm and your industry.
  17. Reward managers for excellent people management. Because the aging workforce is such a difficult issue, managers will play an important role in resolving it. If you want your organization’s managers to pay attention to great recruiting and retention, it’s important that you implement processes that ensure that both line and HR managers are measured and rewarded for excellence in the areas of employee development, retention, and recruiting.
  18. Develop and improve worker motivation programs. Most workers at some point in their career become unmotivated. The problem is more difficult as individuals choose retirement because they no longer see opportunities for advancement and salary increases as a result of hard work. As a result, it’s important for HR to develop pay-for-performance and non-monetary motivators in order to ensure there is no drop off in worker productivity as workers approached retirement.
  19. Increase your capacity for managing the expanded volume of retirees. The large number of retirees and potential retirees are likely to stress your benefits operation. As a result, it’s important that these organizations prepare for the dramatic increase in question and the number of people receiving pension benefits.
  20. Rebuild employee trust in management. Many experienced employees lost their trust in corporations and senior managers as a result of layoffs, mergers and the dot-com emphasis on youth over experience. As a result, it is important that HR develop programs to rebuild that trust so that experienced managers will trust and believe in the aging workforce programs developed for the benefit of them.
  21. Convince shareholders that your organization has the aging workforce problem handled. Because of the magnitude of the aging workforce problem, it is important that external stakeholders like shareholders and business analysts be made aware of programs that have been developed to resolve this issue. This is especially important because the loss of senior executives can have a dramatic increase on firm’s stock price.

Conclusion The aging workforce issue has in many cases been over-hyped. It is still, of course, a difficult issue, but it need not be a catastrophic one if HR departments take the appropriate steps to prepare now. The most critical areas for immediate attention include succession planning, knowledge retention, and aging worker motivation programs. Although these programs will be developed by HR, it’s essential that HR involve line managers early on, because they are the ones that will ultimately be responsible for developing the next generation of leaders.

Dr. John Sullivan, professor, author, corporate speaker, and advisor, is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high-business-impact talent management solutions.

He’s a prolific author with over 900 articles and 10 books covering all areas of talent management. He has written over a dozen white papers, conducted over 50 webinars, dozens of workshops, and he has been featured in over 35 videos. He is an engaging corporate speaker who has excited audiences at over 300 corporations/ organizations in 30 countries on all six continents. His ideas have appeared in every major business source including the Wall Street Journal, Fortune, BusinessWeek, Fast Company, CFO, Inc., NY Times, SmartMoney, USA Today, HBR, and the Financial Times. In addition, he writes for the WSJ Experts column. He has been interviewed on CNN and the CBS and ABC nightly news, NPR, as well many local TV and radio outlets. Fast Company called him the "Michael Jordan of Hiring," Staffing.org called him “the father of HR metrics,” and SHRM called him “One of the industry's most respected strategists." He was selected among HR’s “Top 10 Leading Thinkers” and he was ranked No. 8 among the top 25 online influencers in talent management. He served as the Chief Talent Officer of Agilent Technologies, the HP spinoff with 43,000 employees, and he was the CEO of the Business Development Center, a minority business consulting firm in Bakersfield, California. He is currently a Professor of Management at San Francisco State (1982 – present). His articles can be found all over the Internet and on his popular website www.drjohnsullivan.com and on staging.ere.net. He lives in Pacifica, California.

 

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4 Comments on “Action Steps for Handling the Aging Workforce Problem

  1. Well – this article includes ‘alarms’ that were being raised 20 years ago, when I was in the Banking industry. Knowledge management made sense then and makes sense now, but the reality is that companies are unwilling to pay for it.

    A far less expensive solution than overloaded pension/retirement benefits, etc., is to keep your aging workforce in place and partner them with your newbies to create a fluctating, educated, I-know-how-to-do-it upcoming and well-trained staff.

    As an ‘aging workforce’ person myself, I don’t expect to retire, but intend to work as long as I can. I enjoy working, am unmarried, and have no particular desire to quit working. As long as I am sharp enough to do the job well, I expect my employer to leave me alone, and in exchange, I expect to assist any co-worker learning the ropes in any way I can, and solve any problems coming up that I have learned how to solve because of years of experience.

    If one-half the ‘aging workforce’ experienced staff are left in place, even with higher salary levels that will have to be paid, far less of the company’s assets will be devoted to retirement benefits.
    Meantime, experienced staff make it possible for a company to function more efficiently and at a higher profit. Carrying a staff full of inexperienced workers who don’t know about expectations from the employer or how to do the job, or how to talk to a troubled customer is a good way for any organization to lose money.

    The idea that came in 20 years or so ago, that no time or money should be dedicated to training a new employee was a disaster. Just try any customer service division anywhere, in any company, especially banking.
    Let’s try something else.

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  2. What’s most interesting is that some of John’s suggestions require the input of areas outside HR…can you imagine creating a stronger brand without the assistance of marketing (hint: integrating product/service branding and employment branding)?

    Also, it’s time to more fully integrate recriuting and OD activities – for example, succesion planning is a very important recruiting activity NOT just an OD initiative.

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  3. John lays out a well thought-out series of steps for this acute problem. An additional proactive initiative implemented by many organizations is the creation of an alumni program, with the explicit goals of:

    – enhancing the ability to tap into a rich source of talent (retirees and voluntary leavers)

    – promoting a re-hiring culture, sending a message that high-performers are welcome back

    – creating a base of on-demand consultants for flexible staffing programs

    – strengthening the talent referral base

    It is interesting to see how progressive organizations approach seemingly negative phenomena and turn them into areas of competitive advantage.

    Cheers,

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  4. Dear Dr. SUllivan:

    An interesting and timely article that is on target. However there is another side to the coin, ‘Age Discrimination in the Job Market’. The problem of age discrimination against ‘Mature Workers’ (individuals over 40 years old, it used to be 50 years old) has been on the rise since the early 1990’s. Very few individuals are covering this issue. Many ‘Mature Workers’ are either unemployed, or underemployed. Others, their careers no where near over, have been encouraged to accept early retirement or buy out packages. Most companies are not interested in hiring them.

    In many cases the discrimination is very subtle, but it is there. Comments such as, ‘You sounded much younger on the phone’, ‘How do feel about working with younger workers ?’, ‘Do you feel that you have the energy to work in a fast paced organization?’, all contribute to this problem. Another comments is, ‘You are over qualified’. If you are, then you are qualified to do the job and should be considered for the position. The new comment today is, ‘You do not fit the company profile’. This comment is usually made by individuals in companies where the workforce is primarily made up of individuals in their early twenties and thirties.

    I have been committed to this issue since 1993. I have been downsized three more times since 1993. The most recent occurrence was in August of 2003. The company that I was working for is funded by grants through the U.S. Department of Labor. When they applied for their grant for the new fiscal year, the funding was reduced substantially. Consequently, they had to reduce their workforce across the U.S., our group lost six out of eleven people. All of them were over 40 years old.

    I am a member of The Mature Workers Coalition. I joined in 1993 when I was downsized from Digital Equipment Corporation. The coalition includes fifteen organizations. We are working to improve the plight of ‘Mature Workers’. We all agree that we can not force companies to hire ‘Mature Workers’. We believe that there are things that can be done to improve this situation. Yes, we do have suggestions that we have presented to various Politicians, or would be Politicians. But they shy away from the issue.

    Maybe industry should start looking at experienced, reliable, willing to work, quality unemployed mature workers to fill the void of others that are leaving the workforce. There are many of us out here.

    Maybe you could do an article on this subject in the future.

    Thank You
    AJI

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