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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
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.