New Workforce Management: The Aging Workforce
By: Peter Cappelli
The long-term trend of the multigenerational workforce is creating a new and important challenge for management and workforce planning, one that has been exacerbated by the Great Recession. Older workers are deciding that it makes sense to stay in the workforce longer, not only because they are living longer, but because of the uncertainty associated with their retirement income.
401(k)’s and other retirement investments taken a hit, but arguably more important is the sense that it may happen again and that a prudent older individual needs to keep at least a foot in the labor force to hedge their financial bets.
We can see evidence of the aging workforce in recent government data. The percentage of individuals over age 65 who are in the labor force jumped about 40 percent from 1998 to 2008. Since the Great Recession began, the number of individuals over age 55 and over 65 who are working has risen even while declining for the population as a whole.
This reflects not only the fact that there are more older individuals but also that a greater percentage are working or trying to work: The percentage of the overall population that is in the labor force has declined as more workers get discouraged about finding a job, but it has held up well for older individuals.
For employers, this means that older workers will be applying for more jobs. Many of them will be applying for the same jobs that younger workers are also applying for.
New Challenges in Managing People
This takes us to a new set of challenges to team work, driven by the possibility of younger supervisors managing older workers, a significant reversal of the traditional norms. Despite the fact that older workers actually perform better than their younger counterparts on virtually every dimension of job performance, and despite the fact that they offer precisely the “just-in-time” experienced workforce that employers say they want, older workers struggle to find jobs.
The vast majority of individuals approaching retirement age report that they would like to keep working in some fashion, yet only a small proportion are able to do so.
The explanation centers on the fact that younger supervisors, who would be doing the hiring, are unsure or even afraid of how to manage someone with more experience than they have. And many are simply uncomfortable with being the boss of someone who is old enough to be their parent. Discrimination against older workers appears to be greater than that directed at any other demographic group.
The restructuring that removed many experienced managers in the Great Recession means that newer managers are often in charge of older employees, creating the same challenges even when no older workers are being hired. A stunning 88 percent of employers report that they are worried about potential age-related workplace conflicts like these.
A New Model for Employee Engagement
Employers need to do something about this situation not only because it violates age discrimination laws but because they are missing an extraordinary opportunity. In fact, employers are falling over themselves to figure out each new cohort of workers (Gen X, Gen Y, Millennial Employees and all the other acronyms) while they completely ignore the far bigger and more important pool of older workers.
A new approach begins with a basic change in workforce management style. The outdated model of employee management through employee termination and incentives for promotion and financial reward just doesn’t work as well for people who are toward the end of their careers. Neither does saying “do this because I know better” to more experienced workers who may, in fact, know better themselves.
For a better model, consider the military. Fresh-faced lieutenants have long been put in charge of much older and more experienced sergeants, sometimes with disastrous results. An exemplar of the new model is the Marine Corps where lieutenants and sergeants are taught to form a partnership for making decisions.
Approaches that engage subordinates in solving problems aren’t new, but they are especially effective with older workers. Younger supervisors sometimes find it difficult to hold older subordinates accountable and give them feedback, and participatory models of leadership like goal-setting where workers develop their employee performance goals make that easier to do.
Establishing Employee Performance Standards
Employers who make a push to increase their use of older workers might take a page from the city of Singapore’s model of offering short employee training programs to both younger supervisors and older new hires.
They begin by recognizing the uncomfortable nature of this reversal of traditional relationships and then outline expectations going forward: Older employees want their expertise acknowledged and used, younger supervisors are still in charge, and employee performance standards still have to be met.
The need for older workers to work longer is clear, and the need employers have for conscientious workers who have experience is clear as well. The central impediment to getting them together lies with addressing this new reversal of authority in the workplace.
Peter Cappelli is a Professor at the Wharton School and co-author of Managing the Older Worker: How to Prepare for the New Organizational Order, with Bill Novelli. Harvard Business, September 2010.