America's Aging Workforce: Battling the Brain Drain

Attracting and retaining skilled and motivated employees is crucial to the long-term profitability of any organization.  Because of the expense involved with seeking out, hiring, and training new employees, mitigating turnover is a high priority.  A major problem on the horizon for employers is that almost 40% of the workforce is nearing retirement, and the pool of applicants entering the workforce is shrinking.  By the year 2008, 34.1% more workers will be in the 50-59 age group than ten years prior.  Based on 2002 census data, almost half of the United States ’ workforce is over the age of 40.  Adding to the issue is the percentage of workers between the ages of 25 and 40 will have decreased by over 15%.[1]    

An employee staying with one company for 15-20 years, or even for their entire career, is a fading trend.  Research shows most employees are employed by an organization between five and seven years, and the average college student will go through at least five career changes.  All of these statistics suggest that employers have a hefty responsibility to prepare for the employment shortage that will begin to affect organizations of all types within the next five to seven years.

Most employers view retention as a challenge amongst recent hires only – in order to get a return on their training investment, it is often necessary to keep new employees for at least five years.  As age demographics shift, employers will need to consider how to retain those nearing retirement for they offer irreplaceable knowledge and experience in the workplace.  On the bright side, research shows that as the “baby boomers” near typical retirement age, many are choosing to remain members of the workforce and work into their early seventies[2].  In recent years, though, many companies have chosen to offer early retirement packages to cut costs, thus letting all of that experience leave with no plan to capture it.  

Strategic solutions to ensure a bright future

There are many opportunities for those employees who wish to work past the typical retirement age or are nearing retirement.  Because of the challenges presented by the shift in age demographics, companies are already developing strategies and programs to retain the skills and knowledge that would otherwise leave when an employee retires.  The American Association of Retired Persons (AARP) went to their “Best Employers for Workers over 50” list and compiled a report that identifies best practices on how companies are already working to retain the knowledge and skills older workers possess.  Below are programs already in use by a number of companies:

• Development of mentorship programs and additional training modules.  These will help to capture best practices from more senior employees and better prepare mid-level managers for the senior positions which will become more available as those employees holding leadership positions retire.[3]
  
  
• Recently retired employees often are called back so a newer employee can shadow them, to teach seminars, and to become parts of “action learning teams,”  which are multi-disciplinary teams comprised of older and younger workers that are exposed to high-level projects so the newer employees can learn from the retiring project managers.[4]

• Start-up companies are hiring older or post-retirement workers because they require little or no supervision and they will have seen most kinds of projects at one time or another.[5] 

• The IRS and Treasury Department are considering new rules which would allow for retirement age workers to phase into retirement gradually.  This would prove valuable to organizations attempting to develop initiatives to lessen the affect of the brain drain.  Under this plan, the IRS would allow for employees 59 ½ and older to continue to accrue pension benefits despite working fewer hours[6]. 

• Implementation of flex-time or part-time schedules so that post-retirement employees can continue working on projects where their expertise could prove extremely valuable. 

There are other issues that arise with the graying of the workforce.  One of the most prevalent concerns is employee benefits.  With benefits costs reaching 30% of companies’ labor costs, employing near and/or post-retirement individuals can be costly to an organization.  Benefits have, for the most part, become a standard part of employment packages, and costs of health care are rising dramatically across the country.  This combination creates a large cost center for employers.  With the baby boomers reaching retirement, the number of employees contributing to Social Security will decrease dramatically.  Programs are being developed, and funding is available as part of the President’s High Growth Job Initiative.  This initiative mitigates the costs employers face with looming retirements.  One such program called “E3,” which stands for Employment, Education, and Economic Development, is strategizing for how to better utilize the older, post-retirement worker to ward off the mass exodus of knowledge workers.

With all of these issues and opportunities looming on the horizon, it is important that companies look inward to see where they fit into this picture.  A good way to gauge the retention issues for your organization is through focus groups where ideas and concerns at different levels of the organization can be unearthed.  This will help employers look inward at their organization and develop action items to address this issue.  The information gathered in the focus groups will also be very useful during strategic planning time when companies’ focuses are on long-term profitability.  By utilizing any or all of these tools, employers will be armed with the programs and strategies necessary to turn this seeming problem into a great opportunity to mold their younger employees and create better leadership for the future.

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