Meeting the Capability Challenge
The pandemonium hasn‘t quite sunk in yet. Perhaps that‘s why nobody seems to be doing much about it. 76 million baby boomers are going to retire by 2011 leaving a huge vacuum in America‘s workforce. That leaves us with 3 years to get alternative strategies in place. Whether you are running a small family business or you‘re seated at the helm of a multinational, it‘s essential that you consider the exit planning strategies of your baby boomer workforce.
Some statistics you‘ll want to consider
- According to a recent report titled Grading the States 2005, from the Government Performance Project, one in five employees will retire over the next five years in more than 25 states.
- The first of the boomers reached age 59-1/2 on July 1 of 2005. This age allows them to start withdrawing retirement funds without suffering early withdrawal penalties.
- According to the U.S. Bureau of Labor Statistics, the percentage of workers above 65 years of age will increase from 14.4 percent of the work force in 2004 to 19.7 percent by 2014. This essentially means that the fastest-growing part of the U.S. work force will be retirement age!
- In a survey of companies by RHR International in Wood Dale, 50 percent of company executives expected to lose more than half their senior managers in the next three years. 15 percent said they were likely to lose 75 percent or more.
- These findings were echoed in yet another survey by Ernst & Young LLP, where six out of ten respondents claimed that the expected retirements over the next half decade would cause a major brain drain in some business functions.
So what‘s the cause for alarm?
- Loss of Knowledge
Better than anybody else, they are in a key position to look back over the years and take crucial business decisions. When they leave, they will take with them valuable business knowledge gleaned over the last 40 odd years.
Filling their place will be a number of Gen X-ers, who have not been groomed for leadership and are distinctly different in their management style. A popular blog arguing about the leadership styles of boomers and X-ers states that just as boomers learnt from their mistakes and grew to current positions, so too X-ers will learn as they go along.
What‘s so faulty about this argument is that it is foolish to repeat the mistakes of the past, without learning from them. If the course of the future is to be sensibly determined you need to know the pitfalls of the past.
In this context, it is essential that companies planning for baby boomer retirement have succession planning strategies in place to manage and transfer knowledge, maybe, even institutionalize it.
- The Figures Don‘t Add Up
While the baby boomers number about 76 million, the Gen X-ers constitute a mere 47 million. Generation Y numbers about 60 million, but many of them are fresh to the work world (even more are still in university) and lack the expertise to contribute much to decision making at least for the next several years.
What emerges is a clear call to action to Gen-X. On them falls the huge responsibility of taking the American economy forward. This means that a lot of X-ers at the lower levels of management will suddenly be thrust into the front-lines of the organization, and many will find themselves inadequately equipped for the task.
A Federal Reserve study warns that retirement by baby boomers may slow down the nation's economic growth as there won‘t be enough workers to fill key jobs. It goes on to say that over the next decade, the annual growth will fall to 3% annually as compared to the 3% growth of the 1990‘s.
What is to be done?
When you come against a statistic that tells you that the Baby boomers number 76 million, and the Gen X-ers only 47 million, you may conclude that there is a dearth of 29 million workers. However, that is not necessarily true, as it is possible that with the automation of work, X-ers will be able to handle two or more positions.
What is Succession Planning Strategies?
Economists point out that the following procedures could lessen the blow of the baby boomer exodus:- Advanced technology makes it possible to automate work
- Retain the baby boomers for a longer time by allowing them to work part-time or as consultants
- Reduce the impact of the exit through a measured ‘phasing out‘ policy
- Succession planning and mentorship programs where succeeding managers are identified and mentored under a baby boomer mentor
- Document the knowledge of boomers so that it can be referred to in the future
For all of this to be implemented it is essential that the organization as a whole increases their focus on core activities and offshore non-core activities.
Offshoring - a Viable Option for Companies Planning for Baby Boomer Retirement
The importance of global recruitment in a shrinking talent pool cannot be over emphasized. Offshoring can help companies cope with the baby boomer exodus in two ways.- Offshoring theJobs Currently Done by Baby Boomers
According to research by the McKinsey Global Institute (MGI), India's pool of young university graduates (having seven years or less of work experience) is estimated at 14 million - the largest of all 28 countries MGI had studied. This is 1.5 times the size of China's and almost twice that of the United States. What‘s more, this huge number of young graduates is topped up by 2.5 million new ones every year.
- Greater Focus on Succession Training and Exit Planning
Yet another way in which offshoring can help is by freeing up X-ers from wasting time working on non-core activities and systematically grooming them to fill key positions within the company. This is especially essential for companies where it may not be possible to offshore core-activities.
Though technology makes it possible to offshore white-collar jobs, some companies may find that their core activities are very area-specific. In such cases, offshoring could pose significant challenges.
So, in the next few years it may be a great idea to free up human resources and focus on training them for leadership, while offshoring their standard jobs.
TA is situated in Bangalore - the Silicon Valley of India. With expertise in customized software and financial services solutions, TA has been offering support to various clients in their non-core activities like finance and accounting, receivables management etc.