Retire Retirement:Career Straegies for the Boomer Generation

Tamara Erickson has been a colleague and friend for over 20 years! Among her outstanding qualities is her ability to identify future human capital issues and write succinctly and compellingly about her views.

In 2004 Tammy and her co-authors Ken Dychwald and Robert Morrison were honored with the McKiney award for their breakthrough It Is Time To Retire Retirement.

Tammy’s most recent book on the fascinating topic of the shifting global demographics is available through Amazon.com.  In the meantime I would encourage you to check out an interview Tammy recently conducted with Forbes magazine and can be accessed on Forbes.com

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Global Workforce Demographics – Part 2 of 4: Japan’s Workforce

This is Part Two of a four part blog on Global Workforce Demographics.  Here is the link to Part One

 Japan’s Workforce Demographics

Japan is a country with 66 million workers, yet 1 in 4 is 55 and older.  In the US that figure is 1 in 6.  Out of the 13 countries studied, Japan has the highest percentage of aging workers.  Like many other developed countries, trends in life expectancies and birth rates have taken their toll on the Japanese workforce.  Because of the aging population and the reduced number of births, Japan is very exposed to Age and Retirement risks.

Age and Retirement risks each reflect an aging workforce but generate different outcomes.  Age risk is the potential productivity loss associated with an older worker while Retirement risk is the potential loss of an employee to retirement. 

For Age risk to become a “real” issue for corporate executives depends on a combination of the job and worker.  For certain manual occupations, an aging worker will become less productive.  Examples are agriculture and construction workers.  Yet, the same worker in a different job, say inside-sales could display an increase in productivity.  The point is that while Age risk is less certain and in some instances, difficult to measure, its threat at a macro-economic level is real.

Three reasons support an assessment that Japan has higher levels of Age and Retirement risks:

  • 26% of its workforce is 55 years and older.
  • In the next five years, it is probable that the percent of 55 and older workers will grow to between 30% to 35% of Japan’s workforce.
  • 30% of its economy, as measured by GDP, comes from physical occupations in agriculture, fishing, mining, manufacturing and construction.  These industries, by their nature have high exposures to Age risks.  By comparison, the US economy produces 22% of its GDP from these same industries.

Since 2002, Japan has enjoyed  a return to economic growth that it had not experienced since the late 80’s, yet, unmitigated Age and Retirement risks loom which could contribute to an end to their economic recovery.

Here is the link to Part 3

Parts Three and Four of this Blog are in Process and will be posted soon.   

Global Workforce Demographics – Part 1 of 4

Over 75% of the world’s goods and services are produced by a handful of countries.  With all the chatter around demographic trends and the talent crisis, I thought it would be interesting to examine age demographics for these countries and determine risks to our global economy.

  Analysis Scope

The World Bank lists 14 countries producing over 75% of the world’s goods and services in 2006, measured by GPD.

  1. United States
  2. Japan
  3. Germany
  4. China
  5. UK
  6. France
  7. Italy
  8. Canada
  9. Spain
  10. Brazil
  11. Russian Federation
  12. India
  13. South Korea
  14. Mexico

  

While the European Union is not a country, it does have economic clout and so I added it to the list and collected data on its 27 member countries.  Including the EU gave us 15 “countries” in the study.

Labor market data for this exercise was provided by the International Labour Organization which has 2005 workforce by age demographics for all countries, but India and China.  Therefore, these countries were excluded from the analysis, bringing the total number of countries to 13.

The analysis revealed that 55 and older workers make-up about 14% of the workforce, in the 13 countries on average.  By comparison, the same figure is 16% for the US. [data table

Of the 13 countries, two jumped-out.  Japan, because 26% of its workforce is 55 and older, and Russia, because less than 10% of its workforce is 55 and older.

Here is the link to Part 2

Avoid Boiling the Ocean Developing a Workforce Plan

The tragic truth is most organizations definition of workforce planning is a modest prediction of how many new people will be needed after attrition.  Those that aspire to more elegance develop these terrificly complicated plans complete with graphs, summaries, dire predictions of calamity, unintentionally creating  confusion….what BSG Concours calls boiling the ocean. 

Our suggestion to Avoid Boiling the Ocean is to concentrate on creating plans that focus on Critical Constituencies with the folliwing Principles:

  • Identification of those enterprise roles that are the most essential and are not covered under Senior Level Succession Plans
  • In the determination of what role is or is not a Critical Constituency use a Mission Criticality framework focused on Core Financials such as impact on Profit and Enterprise Analytics such as relevance to New Product Development
  • Once CC’s are determined conduct a comprehensive demographic assessment on issues such as time to retirement, level of engagement, compa ratio vs. others in Salary Band etc.
  • Conduct an external labor market assessment of these roles to determine the degree of difficulty in hiring endeavors
  • Consider an alternative sourcing stragtegy scenario as part of the analysis

The war for talent is an overused phrase now….but based on a recent SHRM study where approximtatly 70% of respondents indicate they are not concerned about the impact of shifting demogrpahics, it still has relevance today.

BSG Concours in our research and client work anticipate the ability to attract and retain qualified and skiled workers will only intensify.

Consequently we would suggest that workforce planning endeavors focus intially on Critical Constituencies! 

Book Review: Understanding Statistics – A Guide for I/O Psychologist and Human Resource Professional

Workforce planning requires knowledge of many domains.  One that is frequently over looked is statistics.  I have read several books on the topic and feel that Understanding Statistics – A Guide for I/O Psychologist and Human Resource Professional by Aamodt, Surrette and Cohen is an good starting point for those needing a refresher. 

Workforce planning describes and analyzes an organization’s employee population in terms of retirement, age, hard-to-fill and turnover data.  Performing these activities for large volumes of data, such as a 10,000 employee workforce is done using statistics.  Yet, most business managers have not calculated r-squared since their sophomore year in college. 

Many managers require a refresher in statistics to be effective in workforce planning.  The book by Aamodt, Surrette and Chohen does just that.  While many books exist on the subject, this book integrates statistics with employee population data, making its descriptions and examples relevant to workforce planning.  While reading this book, you won’t need to figure out how a concept applied to a random sample of 75 Ford F-150 trucks relates to an employee population.

The book addresses the following:

  1. The concept of statistical analysis
  2. Statistics that describe
  3. Statistics that test differences between groups
  4. Understanding correlation
  5. Understanding regression
  6. Met-Analysis
  7. Factor Analysis

  

If you’re looking for a quick overview of statistics that uses employee population data as examples, then this book is for you.

Demographic Trends – Energy Utilities

In this posting of demographic trends, I thought I’d examine an industry that is really being rocked – an industry that everyone cares about.  Demographic realities have created a labor shortage for Energy Utilities that can no longer be ignored. The potential risks to the industry are clear when you consider the roles effected by demographic trendsfossil plant managers, nuclear engineers, shift supervisors, transmission construction managers, technology professionals and energy traders. These roles are central to an Energy Utility’s ability to deliver uninterrupted power to its customers. For example: 

  • 48 years is the average age of a utility employee.  Only one other industry, out of 54, has a higher average age—Real Estate.
  • 19.2 % of the industry is within 5 to 7 years of retirement.
  • 16,000 fewer 16 to 34 year olds work in the industry, compared to 1990.

  

This Age Distribution chart depicts how demographic trends are influencing the Energy Utility’s workforce.  The chart is organized as follows: 

  • Workforce data for a single year is divided into six age categories
  • Each column represents the percentage of workers for an age category
  • Within an age category are multiple columns – each representing a different year’s data
  • The six columns for a single year depict the percentage distribution of workers by age.
  • The five columns within an age category depict trends in an age category’s workforce’s over time
  • Examining the chart in its entirety depicts how trends are shaping the flow of workers.

 This chart helps us see two critical events: Aging Workforce.  The average age of an Energy Utility employee is steadily rising.  In fact, since 1995, the number of workers, 55 and older has increased 2 ¼ times.  Older workers are the fastest growing segment within the industry. Shrinking Workforce Segment.  Since 1995, the 25 to 44 year old segment has contracted by 25%.  That means we have fewer managers and supervisors to support increasing demand for energy. These trends are significant and require utility executives to act now to address this business problem.  My concern is that while the executives I have spoken too are aware of the workforce crisis, they are not doing anything about it.  I can’t tell if they are hoping this will go away or if they plan to retire before the “pot boils over.”  Regardless, I’m still concerned……are you?  

All data is courtesy of the Department of Labor, Bureau of Labor and Statistics

Demographic Trends – US Workforce

Introduction

Demographic changes are having a sweeping effect across the US economy.  For a few sectors and industries, the changes are creating high-levels of age and retirement risks.  These risks will impact not only the number of workers that companies have to attract but also the efficiency and effectiveness of those workers.  

Economy Overview

As of December, 2007, the US had 153 million workers.  This figure includes both the employed and unemployed.  Now, depending on your college economic professor, you’ll recall that an economy is composed of either three or five sectors.  This analysis uses the less common, but more detailed, five sectors: 

·        Primary Sector.  Produces raw materials and basic goods, such as: agriculture (both subsistence and commercial), mining, forestry. 

·        Secondary Sector.  Manufactures finished goods, such as: automobiles, chemical and industries, energy utilities and construction. 

·        Tertiary Sector.  Provides services, such as: retail sales, transportation and distribution, entertainment, restaurants, insurance, banking, healthcare, and law. 

·        Quaternary Sector.  Provides intellectual services, such as: libraries, education, and information technology. 

·        Quinary Sector.  Provides high-level analytics and decisions, including, science, universities, healthcare. The distribution of US workers using December 2007, by sector is: 

  • Primary: 2%
  • Secondary: 20%
  • Tertiary: 38%
  • Quaternary: 17%
  • Quinary: 23%

 What you generally find is that countries with developing economies have a higher percentage of their workforce in Primary sector jobs.  As a country’s economy matures, like the US, the percentage shift to other sectors with higher economic outputs.. Within each sector are specific industries, categorized by outcome or output.  This analysis uses twenty-two industry classifications.

Age and Retirement Risks Overview

Changing demographics are creating higher levels of workforce age and retirement risks.  These risks are a result of two trends: higher life expectancies and lower fertility rates. Age and retirement risks each reflect an aging workforce but generate different outcomes.  Age risk is the potential productivity loss associated with an older worker while retirement risk is the potential loss of an employee.  Comparing the two risks, retirement risks is more prevalent than age.  Age risk really depends on a combination of the job and  worker  Without question, aging workers in some jobs will become less productive but the same aging worker in a different  job could display an increase in productivity.  While age risk is less certain and in some instances, difficult to measure, its threat is real.  

Findings

This analysis established 55 years of age and older as the criterion for age and retirement risks.  This criterion was applied to workforce demographic data to determine the workforce percentage that is 55 or older.  This percentage reflects the workforce population with age and retirement risks.  Here are the findings:  

  • Three of our five economic sectors are exposed to above average levels of age and retirement risks (Primary [25%], Quaternary [21%], Quinary [19%]).  These sectors are responsible for raw materials, intellectual activities and analytics and decision making.
  • The historical US workforce benchmark for 55 and older was 15%.  The current US workforce benchmark is 18%. 

 The above average risks for three sectors are a function of age and retirements risks in key industries: 

  • The Primary sector is above average because of the Agricultural industry [27%]
  • The Quaternary sector is above average because of the age and retirement risks with Educational Services [23%] and Public Administration [22%] industries.
  • The Quinary sector is above average because of the age and retirements risks with the Healthcare & Social Assistance [20%] industry

 While the Secondary and Tertiary sectors do not have age and retirement risks, each is composed of industries that do.   

  • The Secondary sector has one industry at risk: Utilities [18%]
  • The Tertiary sector has four industries at risk:  Real Estate [25%], Other Services [24%], Wholesale Trade[20%] and Transportation & Warehousing [20%]

 All data used for this analysis is found in the attached table.  

Recommendations

Here are some thoughts on what these sectors will need to do to address their talent crisis. 

  • Primary sector
    • Agriculture.  Growers will most likely continue to rely on automation and technology to continue reducing their dependence on workers
  • Quaternary sector
    • Education.  Administrators have at least three interventions, including:
      • Increased usage of internet based learning
      • Demand reduction initiatives to reduce the number of teachers needed.  For example, high school students will have more opportunities to test out of classes.
      • Rural and urban schools will use video-conferencing so a single teacher can instruct multiple classrooms of students in different locations, simultaneously.  
    • Public Administration.  Government Leaders will reply on automation and technology improvements to fill workforce gaps.  When that fails, services will be reduced
  • Quinary sector. 
    • Healthcare.  Executives and Administrators will explore these options:
      • Home healthcare services in South American (Mexico, Costa Rica) for US citizens
      • Off-shore ambulatory care facilities and medical and diagnostics laboratories
    • Social Assistance.  Similar to Public Administration, when Administrators determine that automation and technology are not filling the workforce gaps, services will be reduced

  Conclusions 

Demographic changes are sweeping through the economy.  While having less broccoli and soy patties might appear to some to be part of the solution, I don’t think most of us will view “less as more.”  Sector and industry leaders will need to depend on more of their right-brain to invent new solutions to the aging phenomenon.  

All data is courtesy of the Department of Labor, Bureau of Labor and Statistics