Annis Fuller thought she had everything in place to retire this past June. But when the Abbott Laboratories (ABT) accountant and her husband, who manages construction projects for the company, met with their financial planner last December, the news wasn't good. Retiring early as they'd always dreamed—they are both 57—was going to be much more difficult with a cratering stock market and an economy in crisis.
As reality set in, the Fullers decided to postpone their golden years after looking into a new program at Abbott for employees nearing retirement. Called "Freedom to Work," it allows staffers to reduce their schedule to four days a week or take up to 25 more vacation days a year. While their overall take-home salaries are reduced, contributions to their 401(k)s will still be made as a percentage of their full salaries, and their pension formulas will remain intact, allowing them to earn more years of service at their highest pay level.
"I love my job. My husband really likes his job," says Fuller, who has used the program to take a cruise, help out with her grandchildren, and plan a 14-day trip to England next summer. "Did we really want to get out there and find out at 75 or 80 we're out of money?"
Antidote to the Recession
With some 24% of Abbott's workforce over age 50, a percentage that's growing every year, the $29.5 billion health-care company was looking for a way to transfer hard-earned knowledge from their senior employees before they retired. But the program has also turned out to be the perfect antidote to a tough recession that has put many retirement dreams on ice. Older employees are able to sock away the same amount of cash in their retirement plans while working a little less. They delegate more to rising managers who might otherwise become frustrated by stagnation at the top. And Abbott gets a more seamless transition of high-end technical and scientific knowhow between generations of employees.
"We're like a lot of employers," says Tim Richmond, Abbott's divisional vice-president for benefits and compensation. "We looked at the demographics of our workforce and knew it had potential to impact our business."
While Abbott did not create the program in response to the recession, workplace experts say initiatives like theirs are just the sort of program many companies may need to fight the resentment mounting among the ranks. As the recession crumples nest eggs, companies are struggling to manage both their unretired senior employees and the staffers behind them frustrated by deferred promotions, postponed changes in responsibilities, and clogged talent pipelines.
Tammy Erickson, a consultant who has studied workplace demographic trends, says that even before the recession brought retirement to a standstill, employees in their 30s and 40s were "marking off the days on the calendar until those dreadful boomers would leave." Now, she says, employers are really scrambling. "How are we going to keep our next wave of leaders truly happy?"
Empower the Young
Erickson notes that staged retirement programs aren't the only way to address this looming problem. Companies can also make changes to their organizational and leadership structure to help combat the issue. Flatter hierarchies and more collaborative decision-making can give the next generation of leaders more responsibility or help them feel more empowered. She cites technology giant Cisco Systems' (CSCO) committee-led management structure as one example.
Rather than a traditional hierarchy, Cisco's managers are part of "councils," or teams who make decisions on $10 billion opportunities; "boards," which consist of executives who can make calls on $1 billion bets, and "working groups," which are organized to deal with a specific issue for a limited period of time. While the structure wasn't created to combat frustration in the middle ranks, Erickson notes, it's a clever option for other companies looking to address it. "It brings more people into the conversation," she says.
Abbott's program, which is open to employees with 10 years of service who are age 55 or older, doesn't just give employees a way to take additional time off. Another option is for senior technical staff to take on "emeritus" status, giving up some of their management and administrative responsibilities to return to full-time scientific endeavors. That frees up management opportunities for rising leaders while retaining older staff who can advise or share insights when needed. Abbott says response to the program has been growing over the past year, with more than 100 employees now enrolled.
While other companies offer flexible arrangements for older workers, Abbott's Richmond believes the offer to keep retirement benefits intact distinguishes its program from others. When participating staffers set up a "knowledge transfer agreement" with their supervisors—a road map for sharing what they've learned over decades with their younger colleagues—Abbott is in effect handing out more in retirement contributions than the employee's hours or responsibilities might earn. Employees like Annis Fuller, who now hopes to retire in 2011, appreciate the gesture: "This is the next best thing to retirement."