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.