The Unretired

The Unretired

          
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The Unretired

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    • YvesMorieux
    Washington, D.C. more about Yves

    • In the United States, 38 percent of salaried people are over the age of 45, with comparable figures in other developed economies.

    • When the future holds no substance, personal horizons that determine behavior stop well before retirement and the wear of time is accelerated.

    • Conversely, when engagement-driving horizons are extended—sometimes even beyond the end of careers—both the employee and the company are energized.

     

    Many companies now recognize that they need to anticipate and plan for the retirement of baby boomers. However, there is another problem: the unretired, or workers who will not retire for several years but who have in many ways already checked out of the work force. When companies really tackle this issue, they simultaneously increase satisfaction and performance for the whole work force.

    Take a company whose age pyramid is similar to that of today’s average work force. It can regain the motivation of workers over the age of 45 and use 20 percent of the time of workers over age 52 to decrease the ramp-up period of junior workers by 5 percent. In doing so, it will likely increase productivity by more than 8 percent.

    Beyond Future Skill Gaps: Improving Current Performance

    Companies are preparing for the potential skill gap resulting from the departure of the first baby boomers. They are aware of the risk involved in their age pyramids and the related needs in terms of work force planning. However, what is also at risk is the current corporate performance embedded in the motivation and productivity of a cohort much larger than that of retiring seniors.

    When companies fail to tackle motivation and productivity issues among the unretired, work-force-planning initiatives are themselves often disappointing. One company, for example, developed an elaborate plan to tackle the skill gap resulting from future retirements. The plan included aggressive recruiting, internal mobility, and measures to transfer experience. The entire initiative was driven by a task force staffed with the most experienced employees and managers in the company. But the task force was a failure: it was slow to act, its productivity was low, and it produced conservative solutions. The board concluded that the diagnosis was clear—and not surprising given the age of many task-force members: aging people, with their “dulled capacities” and other symptoms of the “wear of time,” adversely affect the entire organization, including the effort to solve the problems posed by aging.

    The diagnosis was clear—but wrong. In this company, as in many others, the reality proved to be the exact opposite: it is not mature employees who age the enterprise, it is the enterprise that ages them. The organization, in its functioning and policies, created the conditions for the observed behaviors. Indeed, companies involuntarily multiply the disincentives for employees beyond a certain age to stay engaged—be it in their daily tasks, in innovation efforts, or in learning and training. Disincentives include early retirement schemes bestowed like a blessing by both boards and unions, promotion dynamics that are often flat for employees over the age of 45, and career paths whose only potential lies in providing a way out. Too often, it is remaining engaged that would be a sign of dulled intellectual capacities.

    This spiral of self-fulfilling prophecy—policies that lead to lower engagement, which produces still more disincentives—is not new. What is new is that it now affects a massive part of corporate performance. In the United States, 38 percent of salaried people are over the age of 45, with comparable figures in other developed economies. The demographic bump of baby boomers is now inflating the proportion of workers whose motivation and productivity—not only in their contribution to skill gap planning and transmission of experience but also in their fulfillment of all the daily tasks that determine today’s performance—are undermined by this spiral. Because competitors are confronted with the same demographic conditions, any solution that breaks the spiral is a basis for competitive advantage.

    See “Autumn Leaves,” BCG Perspectives, June 2006, which documents the skill gap issue and the work-force-planning needs entailed by demographic risks.
    How Can We Break the Spiral?

    The solution resides in what game theory calls enlarging the shadow of the future. For a person, the shadow of the future depends on the individual’s stakes and on the horizon over which his or her present behavior will bear consequences. When the shadow of the future is enlarged, individual engagement grows. People engage according to the difference that their present behavior will make on what matters to them. To enlarge the shadow of the future means to increase the worth of people’s present engagement to themselves because their stakes are rising and the horizon over which their behavior will bear consequences is extending.

    Individual stakes can be raised in many ways. First, by giving people more autonomy in their tasks and organizational responsibilities: when people have more room to maneuver, their present behavior matters more—it can make a greater difference for themselves and for others. Second, by evaluating and stimulating performance, even—in fact, above all—for the “best in class”: no one can evolve without being challenged. Third, by triggering new aspirations, such as expert career paths, as alternatives to management positions: to equate promotion only with managing more people often discourages those who can’t do it or elevates individuals who don’t have the required management skills. Those same people, however, could be very useful as experts in the necessary experience transfer.

    Similarly, there are different levers to extend the horizon that drives engagement—without the need to increase the legal retirement age. The first lever is the regular renewal of job content, as well as functional and geographic mobility: it then becomes useful for the individual to keep engaging and learning in order to take advantage of the opportunities embedded in future “rounds.” People do not always initially agree with such changes, but they often feel refreshed and energized afterward: the new situation winds up mobilizing their energy. The second lever is systematic, continued training, which helps people discover new territories in their area of expertise and keeps their added value competitive: continuing education is poor in many companies and often not linked to performance improvement or innovation opportunities, thus underleveraging people’s intelligence and ability to evolve. The third lever is decoupling performance reviews (which often occur every year) from the assessment of competence growth (which should take place on a three- to five-year horizon). Eventually, the engagement-driving horizon can be extended even beyond the actual age of retirement: earning the right through one’s present results to join, after retirement, a special group charged with training new employees is often a source of motivation.

    When stakes and the future hold no substance because everything is determined in advance, the personal horizon that determines present behaviors stops well before the actual time of retirement, and the wear of time is accelerated. Conversely, when engagement-driving horizons are extended—sometimes even beyond the actual end of careers—the company is energized. But such personal horizons do not boil down to just a time span. Increasing the legal retirement age without real stakes does nothing except extend disengagement.

    The Opportunity

    In many organizations, motivation has been achieved largely by tapping into two basic reward reservoirs: financial incentives and hierarchical promotion over time. The bad news is that company demographics—combined with less hierarchical organizations—are exhausting the latter because further promotion is impossible for a growing proportion of employees, while cost hurdles limit the ability to use the former as a substitute.



    The good news is that, instead of confining motivation to reward systems that are not tied directly to the actual tasks that people carry out, companies are learning to embed motivation within work processes themselves.

    Such processes display two central characteristics that nurture personal stakes and horizons for the whole work force: their outcome makes a greater difference for people, and people can make a greater difference in the outcome. Because of the former, people are more directly exposed to the consequences of their actions and are thus more motivated to do well. Because of the latter, the work processes themselves incorporate more individual added value. Overall, the company becomes more sensitive to what its people do, and people become more sensitive to how their company does. Thus, human intelligence and the organization are more tightly knitted together: the organization becomes more intelligent. In that sense, the threat inherent in the demographics of many companies is also an opportunity that can have lasting benefits beyond the risk window.

    The opportunity is to design a more effective organization that simultaneously improves performance and satisfaction for its whole work force. This is the organization we now need to create.

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    • Washington, D.C.
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