Employers ignore the demographic time bomb at their peril says Talentsmoothie founding director Justine James. Instead, organisations need to work hard to attract and retain older workers.
New research by the Chartered Institute of Personnel and Development (CIPD) and the International Longevity Centre shows that Britain could face severe skills shortages in the next 20 years if managers do not change their approach to workforce planning.
Statistics highlighted in Dr Ros Altmann’s report to the government on this subject shows that by 2022 there will be 700,000 less people in the UK between the ages of 16 to 49, and 3.7 million more aged between 50 and 65. If the over 50s continue to leave the workforce at the rate they have historically, then there will be serious labour and skills shortages.
The good news is that there is a solution. Older workers actually want to work longer and can fill this gap. Sixty per cent of the older workers surveyed for our report “The Ageing Workforce – What’s your strategy?” said they do not want to retire and it appears that they aren’t. The number of working pensioners in the UK has increased by 85%, from 753,000 in 1993 to 1.4 million in 2011. So the opportunity to fill the predicted skills gap is there.
For this plan to be successful organisations need to wake up to this demographic time bomb. Our research suggests that eight out of 10 employers do not have plans to change any policy relating to the ageing workforce. For the minority that have, we’ve found great innovative examples that have created a win-win all round. However, many organisations still aren’t taking this subject seriously and making space for it on their people and business agenda. I believe those that do will create a competitive advantage.
Here are seven reasons why you should have an older workers policy in place:
1. Demand for educated talent will outstrip supply
It is hard to believe, given the economic turmoil we recently experienced, that over the next ten years the UK will have a skills shortfall. Over 13.5 million job vacancies will need to be filled, but there will only be seven million school and college leavers in this period, and immigration will not fill the gap (according to CIPD research). This is not just a UK phenomenon; other economies will face daunting skills shortages too.
2. The ageing population wants to work longer
Advances in healthcare and nutrition mean people are living longer and people want to work longer. Thus there is a balancing equation that could work effectively to help with the predicted talent shortfalls and lead to a win-win. Let those that want to, continue to contribute. The key is for organisations to understand what motivates and engages people at this stage of their careers, to enable older workers to be effective contributors for longer. This is a new stage of career, the extended career, and it could help individuals with the transition to eventual retirement and provide a valuable new talent pool for the employer.
3. The ageing population has the right to work longer
The combination of the projected skills gaps of educated workers, an ageing workforce and the lifting of the default retirement age (October 2011 in the UK) is a combination that can’t be ignored. Employees now have the right to continue working past statutory retirement age. Business managers must be aware of this when developing their business and investment strategies.
Will being able to keep older employees for longer be an unqualified bonus for your organisation, or will this create a range of other issues? Thirty five per cent of employers who took part in our research said the ageing workforce is a concern and a further 13% weren’t sure. The three main concerns are:
- Will employees (particularly in manual jobs) be physically capable of continuing in their roles as they get older?
- What support will organisations need to provide to older workers to enable them to continue to contribute effectively?
- How should we prepare for the loss of experience and knowledge when employees do retire?
- While 83% of employers who responded to our research think the ageing workforce is an issue, 65% admit to having done no research on the subject. Here are some of the questions I believe you must ask yourself:
- Do you know what the age composition of your workforce is?
- Are you confident you have a suitable succession plan for your business-critical talent?
- When do you expect some of your business-critical talent to retire?
- Are some of your older workers in hard-to-find talent segments, and if so do you have a recruitment plan to replace them?
- Have you assessed the risk to your business of the loss of know-how if your older workers retire? Have you got a plan for this?
- Do you ever get feedback on how engaged your older workers are? You could be losing out on productivity by having a segment of the workforce that is not as productive and engaged as it could be.
4. Older workers are the main untapped source of talent – our ‘hidden talent pool’
There has been a steady increase in the number of older workers continuing to work. In the UK, the employment rate of both men and women aged 50 to 64 increased between 1995 and 2010. For men this increased from 65% to 72% and women from 49% to 58% in this 15 year period. The employment rate of men and women aged 65 and over also increased over this period; men from 8% to 12% and women from 3% to 7%. It’s a trend that’s expected to continue.
We have up to 28% of men and 42% of women aged 50 to 64 in the UK that could work. This represents a sizeable hidden talent pool.
5. There are business benefits from improving your approach to the ageing workforce
Some businesses have already benefited from employing older workers. Nationwide and B&Q are familiar examples. The benefits quoted include reduced turnover, an increase in profits, and better customer service.
Some companies, worried about losing the skills and institutional knowledge of older employees as they retire, are providing more flexible options. In Japan, for example, Toyota Motor aggressively recruits among its retiring employees to bring workers back in part-time roles. A different approach has been taken by P&G. They work closely with companies like Your Encore, a company staffed with older workers – ‘expert veterans’ as Your Encore describe them – who provide additional support to in-house teams. Bosch is also taking a similar innovative approach to retaining skills.
6. Understanding generational diversity is a must as we approach having five generations in the workplace
Having four generations in the workplace is a reasonably recent occurrence, and one that many organisations are still getting to grips with. Soon it will be five when Generation Z starts work – the oldest of Gen Z are now 18. As our older employees stay working longer, we will experience the challenges of creating a working environment that will make the most of talent from all generations.
7. Other organisations have already recognised the issue and are doing something about it
The diagram below shows the main reasons why our survey respondents want to improve their approach to an ageing workforce.
We found that the organisations already putting policy into practice around this are focusing on a range of issues that impact their particular business. For example, BMW in Germany has adapted its physical work environment to help older limbs continue to be productive on their assembly line. Barclays Wealth has introduced a flexible working policy aimed at all workers not just working parents. Sodexo has introduced an intergenerational network to harness the skills and talent across their diverse generational employee base.
Our research has found five broad areas we believe organisations need to focus their attention on to transform the demographic challenge from a serious strategic threat to an opportunity.
1. Assess the business need
The starting point for addressing the challenge of an ageing population is to understand the nature and urgency of the resourcing issues facing your organisation. It will be important to: quantify the need for skilled personnel required by your business strategy; clarify the retirement intentions of older workers in critical roles; identify where a new supply of experienced talent will come from; establish your attractiveness as an employer to mature workers from other organisations.
2. Understand your workforce
How well do you understand what is important to your mature workers? You need to understand this population in order to make an extended career or phased retirement an attractive win-win proposition for them. We asked our survey respondents to tell us what would really motivate them. Flexibility in working hours, the opportunity to work less hours, and to be able to take longer holidays are top motivators.
3. Provide extended career support
We strongly advise you to encourage open conversations about retirement. Our research identified a significant discrepancy between employer and employee perceptions. We have dubbed this the R-Word as it’s a conversation very few people are comfortable having. Provide the training and support for managers to confidently address the full range of likely employee circumstances and needs.
4. Manage the cross-generational mix
A multi-generational workforce offers significant potential benefits to an organisation and its employees. Train your leaders to value difference, promote cross-generational networking and reciprocal mentoring, and communicate success stories throughout the business.
5. Make the ageing workforce a priority for human resources
Leadership on the issues highlighted in this article needs to come from the HR function. The ageing population is a medium-term challenge which will likely be overlooked in a business environment where short termism often predominates.
To conclude, organisations, and HR leaders in particular, need to be proactive in response to the threat posed by the forecast shortage of educated workers, and the reality of an ageing population. Business leaders need to pay serious attention to these issues if they are to retain, motivate and, as necessary, recruit experienced, skilled workers.
Main image credit: https://www.flickr.com/photos/michaelduxbury/