Many employers in the United
States remain unprepared for the looming brain drain stemming from the aging of
the “baby boomer” generation, leaving themselves open to economic
and productivity challenges if strategic plans are not put in place over the next
five years, according to a new report by Ernst & Young LLP.
As follow-up to Ernst & Young LLP’s 2006 report, “The
Aging of the U.S. Workforce: Employer Challenges and Responses,” this
latest edition was developed utilizing the results of a survey conducted among
human resource (HR) executives from Fortune 1000 companies. The survey’s
purpose was to benchmark changes in corporate attitudes and examine key operational
issues as the workforce ages. The resulting report, “2007 Aging U.S. Workforce
Survey: Challenges and Responses – An Ongoing Review,” confirms
that a gap in strategy exists across organizations when preparing for and developing
programs to meet the demands of this population as it nears retirement.
Survey findings suggest employers may be experiencing a disconnect
with this demographic in areas such as succession planning and employee benefits
programs. For example, 41 percent of respondents say middle management level
employees will be most affected by the brain drain; however, of those with formal
succession-planning programs in place, 75 percent are focused on monitoring
senior management only.
The absence of deliberate planning appears linked to increasing
costs in recruitment and retention efforts. Fifty-two percent acknowledge they
have seen increased costs related to hiring new staff, while 43 percent admit
to seeing an increase in training and development needs. Results indicate a
more proactive approach is needed to prevent serious financial and productivity
issues from arising in the future.
“This is an issue that goes well beyond HR risk –
it’s a critical business risk,” said Bill Leisy, Principal, Americas
Markets and Services Leader, Performance & Reward Practice. “When
you consider how many employees will be retiring in the next few years, it’s
clear that an aging workforce will impact the entire organization. Finding a
way to solve this will be a shared responsibility across the company.”
Key Findings
Despite limited resources, escalating responsibilities and increased regulatory
demands, HR executives are able to tackle many of the challenges that come with
an aging workforce. However, a gap still remains between the issues being reviewed
closely by HR executives and the plans currently in place to address these areas,
as evident in key findings:
* The goal of employee compensation packages is to retain key
talent; although 44 percent say it would be desirable to have senior management
stay beyond the normal retirement age, 60 percent say current programs are “neutral”
in terms of encouraging or discouraging retirement at a certain age.
* Also, only 29 percent are considering phased retirement programs (with only
9 percent having such programs in place).
* When it comes to keeping employees on board, 39 percent agree health care
is the main driver in one’s decision to retire – but more than half
are considering increasing employee co-pays (54 percent) which could lead to
the loss of talent.
* Additionally, 58 percent either have not, or do not know if their company
has analyzed their benefit plans and conducted a compliance review to gauge
whether employees are receiving accurate benefit amounts.
Planning Partnerships for Future Success
“Losing experienced employees to something as natural as retirement leaves
companies wide open to a wisdom withdrawal,” said William J. Arnone, Principal,
Employee Financial Services. “To stop this from occurring, companies need
to develop programs that ease this process for all employees, not just the ones
leaving. Retirement is no longer the main event – it’s a process.
”
According to the report, employers may also benefit from helping
HR executives comprehend how certain regulations will impact their benefits
and compensation programs. Results show that 77 percent of HR executives are
responsible for identifying the financial risks associated with their aging
workforce. However, 54 percent say they are neither making nor considering changes
to their benefits and compensation programs in light of potential financial
risks.
“A greater level of coordination between HR executives,
the C-suite and the board of directors on both regulatory and operational issues
as they pertain to the aging workforce is necessary to avoid serious financial
consequences,” said Christopher Lipski, Principal, HR Risk Service Line
Leader, Performance & Reward Practice. “From a regulatory standpoint,
a strong partnership needs to exist within a company so that both employers
and employees can face these challenges together and move forward strategically.”
Approaching the Challenges of the Aging Workforce
Findings in the report suggest when it comes to meeting the challenges of this
demographic, employers must break down organizational silos and work together
to form a coordinated approach that will protect the health of the company for
years to come. “The issue of an aging workforce is a critical business
risk that affects entire organizations. It is both bigger and more complex than
one department can handle,” said Leisy. “Therefore, the HR executives,
C-suite executives, board of directors and employees must work together to address
this impending challenge”
About Ernst & Young
Ernst & Young, a global leader in professional services, is committed to
enhancing the public’s trust in professional services firms and in the quality
of financial reporting. Its 114,000 people in 140 countries pursue the highest
levels of integrity, quality, and professionalism in providing a range of sophisticated
services centered on our core competencies of auditing, accounting, tax, and
transactions. Further information about Ernst & Young and its approach to
a variety of business issues can be found at www.ey.com/perspectives. Ernst
& Young refers to the global organization of member firms of Ernst &
Young Global Limited, a U.K. company limited by guarantee, each of which is
a separate legal entity. Ernst & Young Global Limited does not provide services
to clients. Ernst & Young LLP, a Delaware limited liability partnership,
is a U.S. client-serving member firm of Ernst & Young Global Limited.
About the Survey
Survey findings are based on responses from a sampling of senior human resources/human
capital executives from Fortune 1000 companies in a variety of industry sectors.
Greenwald and Associates conducted the survey electronically and via telephone
interviews from May 14 to June 25, 2007.
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