Earlier this year, the Human Capital Institute collaborated with Ernst & Young to conduct research into the effects of the aging workforce in the United States
Earlier this year, the Human Capital Institute collaborated with Ernst & Young to conduct research into the effects of the aging workforce in the United States. We surveyed several hundred C-level talent officers, senior managers and directors of HR, mainly in large organisations and across every industry. The findings, published in a paper entitled, The Ageing of the US Workforce, uncovered a paradox. While the majority of those surveyed felt that the ageing population will result in workforce shortages and almost two thirds said that it will create a “brain drain” in their own organisations, less than 25 per cent consider the aging workforce to be an issue of strategic importance to their firms.
In other words, very few senior HR professionals are doing much about a problem that most of them agree could become a crisis by the end of the decade. Moreover, almost 40 per cent said that the availability of talent will be their number one concern over the next five years. Talent leaders in organisations are as fixed on short-term priorities as other corporate executives. Vacant positions are more serious than the prospect of losing institutional memory and knowledge. As older workers retire, the first priority in most organisations is to replace them rather than to “download”their knowledge. Knowledge management is still a vague concept in the minds of most HR leaders. Financial returns are difficult to track, and the pay-off, if measurable at all, is in years rather than months.
And yet the stakes are incredibly high. As David Delong, author of Lost Knowledge warns, critical public services are at risk. The nuclear industry is an example. According to Delong, the knowledge to maintain a nuclear weapon, of which there are thousands scattered throughout the US, is at risk.
The last Americans with direct, experiential knowledge of testing a nuclear weapon are today in their 70s and 80s. In healthcare, utilities, oil and gas and throughout all levels of government, more than half of all employees will be eligible to retire in the next ten years. Many of them possess critical knowledge that cannot be found elsewhere, some of them may even be critical to the health and safety of the country.
NASA has started to pay attention. In addition to mandatory workforce and succession planning, it has developed knowledge transfer tools and techniques that include knowledge databases, mentoring and a unique knowledge-sharing process based on storytelling, which involves older workers sharing stories with their younger colleagues about how past missions and projects were accomplished.
In the corporate sector, the consequences of lost knowledge can be severe as well, impacting productivity and competitiveness. But Knowledge Management (KM) isn’t about convincing the entire older worker population not to retire – it is not a numbers game. Rather, it is a vital part of talent management, which is an enterprise-wide, ongoing series of initiatives to ensure that the right people are in the right jobs at the right time.
As part of the science of integrated talent management, KM relies on proper workforce planning and the creation of skills inventories. It borrows from performance management and is informed by compensation and incentives management. It is part of the retention and engagement effort and a critical component of learning management.
Leaders have to know which of their older workers possess critical knowledge, own vital relationships and institutional wisdom, and which have proven to be of sound judgment throughout their careers – a difficult task. Valero Energy is an organisation often cited for its exceptional workforce planning. And while it faces a massive brain drain in the coming years as its older workers retire, it really only wants to keep about one in three of its potential retirees – the ones with the skills and knowledge that can’t be replaced.
Proactive organisations like Valero identify the older workers they wish to retain and then apply predictive modelling to understand not only who will become retirement eligible, but who is actually going to retire and when. Talent that is considered critical is approached well ahead of retirement eligibility and “re-recruited” to the company by offering flexible work schedules, phased-in retirement, retention bonuses, mentoring and by offering “emeritus” positions.
Our demographic future isn’t nearly as bleak as many portray it. Generation X (23 to 41-year-olds) is 6 million people fewer than the baby boom generation (42 to 60-year-olds) but the generation behind it, usually referred to as Gen Y (4 to 22-year-olds) is nearly identical in size to the boomers. There are, and will continue to be, challenges in recruiting talent, but those challenges will be greatly exacerbated if talent leaders fail to harness and pass on the knowledge of the boomers before they’re gone.
By Allan Schweyer, president & executive director of The Human Capital Institute.
