More Companies Listen to the Needs of the Aging Workforce, But There is Much Room for Improvement

Press Release / News

Apr. 10, 2003

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Companies will face a severe shortage of badly needed skills in this decade, unless they act now to entice top-performing older employees to delay their retirements, according to a report released today by The Conference Board.

“The fierce competition for talent during the 1990s will return with a vengeance once the economy recovers,” says Howard Muson, author of the report, Valuing Experience: How to Retain and Motivate Mature Workers.

The findings are based on the responses of 150 senior human resource executives to an online survey – 76 percent from U.S. companies, 24 percent from other industrial nations. The survey participants were about evenly divided between manufacturing/utility firms and service firms. More than 67 percent of the companies represented have worldwide annual sales of $5 billion or more.

Seventy-one percent of the survey respondents say that an aging workforce is either a “very important” or “fairly important” business issue in their companies.

Of those who say it’s “very” or “fairly” important, 94 percent point to a looming shortage of talent and needed skills as one of the main reasons. More than a third cite rising health insurance costs, which are highest for older workers.

“The world’s industrial economies face a gathering storm of demographic realities,” says Muson. “Experts are predicting a veritable tsunami of retirements in this decade and the next by members of the generation born between 1946 and 1964 – the baby boomers. The prediction comes with a warning: unless companies find ways to retain aging boomers’ skills and experience, productivity in many organizations is bound to suffer.”

“The wild card in this demographic equation,” says Muson, “is evidence that many employees 50 and above are already planning to delay their retirements due to serious losses in their 401(k) accounts and other nest eggs. If large enough numbers do so, that could help managements get through the crisis.”

Maintaining the Talent Pool is Difficult

Corporate policies that for decades have encouraged workforce turnover – in order to permit early retirement of older people and recruitment of younger talent – have been good for both employees and companies. But they run directly counter to what’s needed to cope with future shortages of talent and experience.

In addition, says Muson, spasms of hirings and downsizings in recent years have led to sudden shortages in key jobs.

“What would seem essential in orchestrating corporate responses to economic ups and downs is systemic HR planning,” says Muson. “It’s something that few large companies approach resourcefully and energetically.”

Sixty-six percent of the survey participants reported that their companies don’t have an age profile of their workforce, suggesting that they lack hard data on how retirements will affect various divisions and business units. More than 63 percent do not have an inventory of available skills, and 49 percent do no assessment of their companies’ training and development needs.

HR professionals interviewed for the report suggest ways that companies can keep on the job older employees who like to be challenged by their work. But only a minority of companies seems to offer them. Only 12 percent of the 150 companies use job rotation as a potential motivator.

Older, experienced employees play an essential role in transferring knowledge and skills to younger people. Some companies rehire retirees on a part-time or temporary basis to facilitate knowledge transfer between older and younger workers. But only 5 percent ask veteran employees to mentor younger ones as part of their jobs, even though such programs can demonstrate that the company values experience and would like to see their knowledge passed on to others.

Companies are making an increased use of retirees for a variety of consulting and short-term assignments. Although these arrangements afford flexibility, experts doubt that they can be expanded in a strong economy to meet impending labor shortfalls.

Many employees want to work beyond retirement age in order to keep their health care insurance. But employers, faced with alarming cost increases, are cutting back on coverage or asking employees to pay a larger share.

For many companies, the biggest barrier to greater use of older employees is the “perception gap.” On the one hand, managers sometimes regard older employee as lacking in enthusiasm and energy, resistant to new ideas and supervision, more prone to illness, and more frequently absent. Some employees, on the other hand, perceive that as they get older, they’ll be victims of “ageism” and will have fewer opportunities to advance and take on new challenges.

Other noteworthy findings:

Of the 150 responding companies, 68 have workforces with 20 percent or more employees who are 50 years of age and above.
81 percent do not deal with cross-generational issues in their diversity training.
More than two-fifths of survey participants have 30 percent or more employees who are 50 years of age and above; 77 percent of this group are manufacturing firms.
Almost two-fifths of companies in the survey offer their employees early-retirement incentives.
Of that group, 64 percent say they offer them to “avoid downsizing,” suggesting their aim is to cut costs without the necessity of wholesale dismissals.
The average retirement age in the companies represented is under 59.

Source: Valuing Experience: How to Motivate and Retain Mature Workers, Report #1329-03-RR, The Conference Board.

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For further information contact:
Howard Muson
(1) 914 631 5013