Who knows wins

Baby-boomer retirement and a new work culture mean change for human resources.

By 2008, 19 percent of current executive, administrative and managerial positions in the US workforce will retire. The surge comes as the baby-boomer generation gets set to hit retirement en masse, and with a large proportion of talent approaching the end of the working line a wealth of knowledge, skill and experience could potentially go with them. Those that are left must stretch to fill the gaps; to maintain stability, companies are going to have to become more responsive to their people, and they will need to find an increased awareness of where new skills and talent are needed – and where they are available. The issue has the potential to punch holes in a wealth of companies and their profits, especially those who don’t see it coming.

The specter of the ageing workforce is one that that looms large over the entire economy, with few industry sectors likely to escape its shadow. For instance, the federal government will witness a big impact over the course of the next two years. IBM’s Mary Sue Rogers has been assessing the effects of the ageing workforce and warns that, in terms of looking at particular skills and roles, the government will have around 30 percent of the workforce in fairly important roles retiring in 2008 – a trend she sees reflected across a number of industry sectors. “If you don’t have a plan in place in the next 12 months, you are going to have some real challenges,” she says.

Utility companies represent another sector with an ageing workforce and a shortage of younger staff with the skills and competencies to take over the reins. Such companies have struggled to attract a new generation of workers because of competition from more glamorous (and now widely available) white-collar work. “Manufacturing companies need critical skills,” says Mercer’s Steve Heinen. “ But unfortunately, people haven’t been going to school in these areas, people haven’t been getting the technical training required to help fill those jobs. Consequently, manufacturing companies are facing situations where they really have an undersupply of resources.”

It’s a problem with a broad impact that requires more than one solution. For knowledge-based occupations, a transfer of experience and information is needed to help bridge the gap; in industries such as utilities and manufacturing, companies are going to need to increase and encourage training and development programs similar to what were traditionally known as apprenticeships.

Transferring knowledge and attracting talent
For positions that are predicated on knowledge, companies face the challenge of incorporating training and development whilst also transferring knowledge accumulated over careers that may have spanned decades. Knowing where to begin is understandably a bewildering prospect for many HR departments and managers, but Rogers insists that this can be overcome by simply defining the problem. “Once you know when and which segments of your population will be effected, you can start defining your strategy,” she says. “This means you can catch implicit and tacit knowledge and turn that into development programs that preserve such knowledge for training up younger workers.”

Indeed, recent steps in human resources have led to the development of a range of retirement programs and schemes to make the transition smoother. The theme running through them is the importance of understanding the wants and needs of the mature workforce to keep them working for longer. Both Rogers and Heinen say this buys more time and ensures a healthy transition period in which to transfer knowledge so that it doesn’t walk out the door with the worker.

“What companies are finding in a lot of cases is that larger numbers of these people actually want to continue working – but they may want either more time off or other kinds of flexibility in their schedule in order to be able to do certain things,” says Heinen. “Also, because of the way the stock market has dipped and the fact that a lot of pension plans at many organizations have disappeared altogether, some people need to work financially.” Consequently, companies are increasingly finding roles that the mature workforce can continue to do that still add value to the organization, and are restructuring some of the benefit plans to allow phased retirement that does not penalize people or their retirement options who want to continue working.

Rogers also mentions that in addition to moving to part-time work or working from home, in some cases it may be prudent to consider reshaping the work itself and to consider if the organization actually needs to perform certain functions. “You could potentially look at outsourcing or moving that work to a different structure so you don’t have to actually replace the skills and competencies within your own organization,” she says. Of course, outsourcing is not always a politically popular move with in-house staff, but considering the potential gap in the workforce Rogers’ suggestion is one that will no doubt be discussed in boardrooms hoping to compensate for the exit of knowledgeable employees across the US.

The manual labor industries face a different problem and must find a different solution. “It really is about how you attract people to the role,” says Rogers. “It’s about what you need to do with the job, the lifestyle attached to it and the skills needed to be able to perform it in order to make that job attractive.” She cites the example of the UK, where the government recently introduced a new apprenticeship program, and suggests the US could benefit from something similar. “Maybe in some cases the US needs government help in terms of making certain jobs more attractive for both the employee and the employer to be able to invest and build on that.”

Knowledge management
For the present, however, it seems HR departments are choosing to concentrate on knowledge management – a more complex and intricate problem for them that will take more time to work on. For example, what knowledge are they trying to capture? How do they capture it and who has it?

One answer is to use technology, as Heinen explains. “It’s been done in different ways and now we have people designing computerized management programs. They are storing and gathering knowledge by working with senior, experienced people to document this knowledge and create systems to make it more easily retrievable.” However, technology often misses the human touch. “It can often have difficulties because you get the content but you don’t really get the experience,” cautions Heinen.

Another solution is pairing people up with projects where they work across generations. According to Heinen, this is common practice in Japan. It can be approached from different directions, but the primary route takes the lower-level roles and involves them in tasks that are not usually attributed to their station – and in so doing, gives them valuable experience of working and observing their colleagues in the higher echelons. This is similar to what Heinen refers to as “action learning”, a process that sees people from lower-level roles being put into training courses that prepare them for higher levels by getting them working on actual business problems.

A method that sees employees working even closer together is reverse mentoring. “Reverse mentoring is where you have a mature employee work hand-in-hand with a younger worker for an appropriate period of time in order that the younger worker is able to learn from that individual the tacit knowledge about a certain job, not just the role,” explains Rogers. This approach is based more on mentoring and is aimed at conveying to the younger worker more than just how to do the job; rather, it encourages the passing on of knowledge from many years of experience.

Among these various approaches, Heinen acknowledges that there is also room for solutions that provide a mix of technology and mentoring. “The most successful ones are blending how they take advantage of technology, with people actually working in cross-generational teams on problems so that they get exposed to how people think and work and what the issues are.” Programs such as these not only fill a gap, but create a type of fast-tracking where companies can look at their former employees’ paths to successful development and calculate how long it took them – and ask themselves whether they can repeat it in a fraction of the time. If such practices became commonplace, the standard of staff and their knowledge would get considerably better through the generations, despite retention problems with younger staff.

Career development
Retention programs are confidently pronounced as measures to manage the ageing workforce through this period of mass retirement and aid in the troublesome transition. Yet generations X and Y throw up a very different retention problem to the future of human resources management and industry as a whole. It is a cultural shift that cannot be ignored and will change the way businesses manage people in the coming decades. “The challenge of generations X and Y, particular those who are currently aged 21-25, is the fact that it’s a generation that will change jobs more often,” says Rogers. “Thinking about how you can retain them for 30 years is not a realistic strategy.” How this issue is approached will depend on how well it is understood, which is conditional on the awareness of the company. As Heinen says: “Most people today want to look at this as a pay issue and say it’s about dangling money in front of people to make them stay – but if someone else dangles enough in front of them, they’ll leave. Whether they are a clerk in a grocery store or a senior level executive, if you give them that increment above what they are normally getting, people can be bought to go to the next level.”

Heinen’s preferred approach is to create a total work experience, wherein the focus lies on career development and the experience of working with other people. He goes on to say: “There is a constant need to re-recruit your top people. You must keep letting them know in a variety of ways that you value them. Having said that, any organization that has a strong reputation for developing talent will also lose people.” He suggests this is because they are often seen as training grounds and are thus poached from more regularly; they compensate by holding a “good batting average” of losing less critical employees than they do lower-level workers.

However, with so many opportunities around the world, generations X and Y are going to change their employer far more often than their predecessors, and Rogers questions the attempt to hold on to them indefinitely. “It’s more about how you can make them extremely productive from day one,” she says. “We can no longer afford to have 6-12 month ramp-up periods before someone becomes a fully productive employee within an organization.”

As well as increased adaptation, Rogers believes alumni programs will become an integral part of the business network. “You are not going to retain these people forever; that’s not in their culture. The key thing is to make the leaving experience as pleasant as the joining experience, because you will be able to re-attract them back after they go through the cycle of going somewhere else. If you are seen as someone who values the fact that people do move, appreciate and understand that, and build a social network that allows these people to stay connected to you, you will win in the aim of getting them back.”

A cultural shift
Companies cannot ignore the cultural and social-demographic changes that have happened between the baby-boomers and today’s generation. At the time of baby-boomer graduation there was recession, and Rogers recalls that her generation saw thousands of people looking for very few jobs. “The whole demographic and socio-economic environment was terribly different. There are many more opportunities and chances for someone to move, particularly the 20-year-olds who grew up being constantly connected. The world shrunk, they grew up playing chess with people in China.” Rogers explains that this is also important on another level, as the socio-demographic changes permeate into the culture of an organization. “The ones who win in this game of attracting and retaining the workers will be the ones who learn how to manage culturally multiple generations in their workforce.”

In response to both the demographic and cultural changes, knowledge management – although a well-used term – purports to be the shining answer to human resources management over the coming years. At first it seems like a buzzword that suggests a systematic use of information, technology and rationality that may miss out the real ‘human’ nuances of knowledge and experience. But perhaps behind the notion of the term is the sense that things are changing. The old is to be replaced by the new, and the new workforce that will emerge in the coming years will have to hold on to as much experience and knowledge from the baby-boomers as they can – whilst at the same time making their own way into a new era of opportunity, both for them and for industry as a whole.

The one-minute interview
With Gerry Crispin, SPHR Chief Navigator, CareerXroads, Society for Human Resources

How much of a problem will the ‘baby-boomer’ retirements be to human resources?
Boomers will (once again) come to the rescue of human resource managers desperate to hire quality candidates for their company’s core positions. The challenge, however, is that the boomers will insist on doing it their way. They may prefer to only work a few days a week, one week per month, a couple of months a year or simply do it from their retirement home using collaborative online tools. The bad news is that boomers are not going to be working 40-50 hour weeks. The good news is they will be working. HR professionals are going to need crash courses in workforce planning, succession planning, phased retirement and work design in order to keep up.

What can be done in preparation for the oncoming wave of retirements?
First, HR needs to audit their firm’s vulnerability. How many boomers are there with the potential to leave in the next six months, or the next one, three or five years? How many have knowledge that is critical to the firm’s performance? Second, succession planning must go beyond replacement and actually engage the incumbent and successor in knowledge transfer activities. We can buy time with phased retirement programs.

How can companies make the most of their experienced staff and transfer their knowledge and skills to the next generation of workers?
One word. Flexibility. Let them do it at their own pace from wherever they want.

What strategies, programs or policies can help to achieve this?
Tax incentives for phased retirement programs that favor both the employer and the employee will be critical.

As more people choose to change employer as part of their career progression, how can human resources management adapt to keep pace with the change?
Workers will have increased mobility, but they will also be less likely to have the full plate of benefits that long-term workers will ‘earn’. For example, 10 years’ earning can be rewarded with a one-year paid sabbatical. These kinds of retention programs will be available only for high-performers that companies need to retain.

Steve Heinen, Mercer
Steve is a Principal with the Performance, Measurement and Reward Practice of Mercer Human Resource Consulting. He is an industrial-organizational psychologist and works with companies in the areas of talent management and organizational development and change, especially performance management, selection and executive development. Over the years, he has worked with Adena Health System, General Motors, General Motors Acceptance Corp., General Electric, Verizon, Barilla Pasta, Knight Foundation and National City Bank.

Before joining Mercer, Steve was employed by General Electric Company for ten years. The last four years were spent as a human resource manager with responsibility for staffing, organizational design, compensation, career development, performance management, and employee problem-solving. Steve also directed and implemented GE’s employee involvement program.

Mary Sue Rogers, IBM
Mary Sue Rogers is currently the global leader of IBM Business Consulting Services’ Human Capital Management team. She is responsible for over 3000 staff around the world whose main focus is the transformation of HR and learning within IBM clients. She has over 15 years of HR consulting and line experience, and ran the Human Capital Management practice for PwC Consulting prior to the acquisition of PwC in 2002.

With a degree in industrial engineering, Rogers has a variety of experiences in different industries, geographies and roles. Her primary focus has been with large multinational clients who wish to transform the efficiency and effectiveness of their HR function, and her current portfolio of clients comes from the automotive, banking and electronics industries. Along with deep expertise within the HR domain, Rogers also specializes in driving cross-cultural change and transformation.