How Companies are Managing 'Unretirement'
In the talent wars. be careful what you wish for. Until very recently many of our client organizations were looking for ways to forestall the expected wave of baby boomer retirements and hold on to their experienced talent a bit longer. Now, with many employees' retirement savings and home values decimated by the market meltdown and continuing uncertainty about full economic recovery, companies are wondering when—or if—their boomer workforces will sail off into the sunset.
In a recent Towers Perrin survey of about 500 human resources and benefits executives, 59% indicated that employees are postponing retirement, and roughly 40% thought employees have been depleting their retirement assets, either via loans or reduced contributions to savings plans. In view of these trends, some employers have begun to focus on the issues they will face in trying to manage a growing cadre of the "unretired."
These issues hold important business as well as social implications. In a study Towers Perrin conducted for AARP, we found that an aging workforce poses both opportunities and potential challenges for companies. On the cost side, our analysis confirmed that a rising percentage of older workers in the workforce tends to raise company costs for programs such as health insurance, paid time off, and traditional pension plans. But the offsetting advantages of lower turnover/replacement costs and a more experienced and engaged workforce can often outweigh the added benefit costs. Moreover, in a knowledge-based economy, older workers can remain highly productive well past the age when those in earlier generations typically retired.
The trend toward postponing retirement had been under way even before the recent turmoil in the financial and housing markets convinced many older workers that they can't afford to retire anytime soon. A survey of employees in the G7 countries we conducted as part of another study for AARP shows that many employees have a new view of retirement that includes continuing to work in some capacity after exiting their primary careers. Better health and longer life spans are clearly part of the story. But many older employees also want to continue to work later in life to stay active, connected, and engaged. They're motivated by the social dimensions of work as much as the financial considerations.
Of course, from an employer's perspective, there's a big difference between a sharp, active worker in the traditional "retirement zone" (ages 55-65) who wants to work for continuing growth and fulfillment and an older, less engaged person who feels compelled to work primarily to make ends meet. The former can boost company productivity by leveraging his or her knowhow and mentoring younger workers, while the latter may undermine organizational effectiveness with negativity and "presenteeism."
Managing these unretired workers across the age and motivational spectrum requires a thorough understanding of people's needs and concerns and the right kinds of HR programs to balance their needs with those of the organization. For the first time, many organizations already have, or will soon have, four generations working side by side. Organizations we work with vary widely in their level of preparedness to manage this challenge. Some are just beginning to consider the issues and possible approaches, while others are already highly proactive in devising new strategies to harness and harmonize the multigenerational workforce.
While specific strategies and program elements will vary from organization to organization to address unique business and talent issues, all employers seeking to maximize the performance of an increasingly intergenerational workforce should pay close attention to the following issues:
• Provide meaningful learning and development programs.
Our research with employees of all ages underscores the importance of meaningful training and career-development opportunities in keeping employees engaged and motivated.
One of the myths we explored in our research for AARP is that the mature workforce is less interested than their younger colleagues in learning new skills and moving forward in their careers.
Nothing could be further from the truth. However, the boomer generation (which already has many years of work experience) may have different content needs and learning styles than Gen X or Y. Companies may need to be more flexible in adapting training programs and work processes to various groups. But relevant training programs, opportunities to be part of intergenerational teams, and career-path options that help employees avoid stagnation are as critical for the oldest workers as they are for the newest recruits. Career paths, including lateral opportunities or part-time and project-based assignments, must be created and communicated. Employees need to understand that promotions up the ladder and a full-time role aren't the only way to have a successful and fulfilling career with the organization.
• Ensure effective performance management.
Perhaps no organizational process is more pivotal in managing an intergenerational workforce than an effective performance-management system. Regardless of age, employees need to see that good performance is recognized and rewarded, while poor performance is actively discouraged, corrected, and/or addressed fairly, respectfully, and assertively. In high-performing organizations, performance is the basis for everything from training to work assignments to financial and other rewards.
Managers and supervisors need to "own" the process and may require additional support in applying it to different age cohorts, but the need for a robust performance-management system is paramount, especially when the need to counsel disengaged or underperforming workers (of any age) out of the company arises.
• Offer the right rewards:
The right mix of pay, benefits, and various organizational intangibles (e.g., reputation, work/life balance) is the key to attracting and retaining the talent an organization needs. Compensation should be market-competitive and reflect individual performance, while benefits can help define the organizational culture and address specific employee needs. For example, some organizations focused on recruiting and retaining older workers have enhanced their health-care programs to address older workers' concerns about coverage. Such companies should also ensure that wellness programs are in place to help reduce and manage health risks of an aging population. An added focus on ergonomics and flexible work design may also be appropriate.
Ultimately, a growing group of unretired workers can be a significant asset for organizations with the commitment to sustaining a high-performing multigenerational culture that engages employees of all ages and at all levels.