VideoIt's no secret that the 76 million Americans born between 1946 and 1964 — the baby boomers — have been driving cultural trends since their infancy, from rock 'n' roll to Rogaine to real estate. But the next boomer trend will likely have the biggest impact on Corporate America yet: retirement.
With one-fifth of American workers reaching retirement age by 2020, an estimated 25 million people are poised to leave the workforce. The mass exodus will not only create a shortage of workers to fill jobs — one Bureau of Labor Statistics estimate put the shortfall at 2.3 million by 2014 — but it will precipitate a "boomer brain drain" that will be felt for decades.
The loss will hit some harder than others. In fact, sectors with higher concentrations of older employees, such as retail, utilities, manufacturing, and health care, could suffer a shortage of skills large enough to have a dramatic impact on their global competitiveness. "This can be viewed as a crisis," says Stacey Wagner, managing director of the research and education arm of the National Association of Manufacturers. "But it's a skills crisis versus a simple loss of bodies." She says that many manufacturers have done a poor job of filling the pipeline behind retiring experts with workers who have the education and skills to master increasingly complex manufacturing technologies and processes.
A CFO survey of senior financial executives (see "Hard Choices") found that 63 percent of respondents are concerned about the loss of human capital due to impending retirements. Given the potential loss of workers, many companies are starting to make an effort to protect against such a skills drain. They are offering more training to younger workers, developing formal mentoring programs, and enticing older workers to stay on the job past retirement age by embracing partial retirement, telecommuting, and job-sharing arrangements. "Those who aren't on top of this issue are taking a big risk," says Daniel Weinfurter, CEO of Capital H Group, an HR consulting firm based in Chicago. "The bottom line is that there aren't going to be enough highly skilled people to go around."
It's not entirely bad news. Some industries could actually benefit from mass retirements. Charles Fay, a professor at the Rutgers University School of Management and Labor Relations, says that the government sector, higher education, and highly unionized industries that still operate on seniority could see some benefits from large-scale retirements, because their older workers are more costly. In general, they use more health care and earn more, and in labor-intensive jobs, they are less productive. However, those benefits could be a long time in coming. The impending retirement wave will inaugurate a protracted graying of the workforce that will increase the average age in most industries for some years before it starts to drop again. The youngest baby boomers won't generally start retiring until 2026. "The average worker age is not likely to go down for a long time," says Fay.
Increases in productivity and outsourcing, as well as the need or desire of some workers to remain employed beyond age 65, are also likely to lessen the worker shortage that could result from the baby boomers retiring. In fact, some equate the idea of a vanishing workforce with Y2K: a much-ballyhooed crisis that never quite materialized. "It's just not an issue for us right now," says Tom White, CFO of transportation-management company Hub Group Inc., in Downers Grove, Illinois. "For our workforce, we're really not anticipating any shortages."
What is clear is that in industries that are already facing a shortage of workers, things are likely to get worse. And the problem is not limited to certain industries. Companies operating in regions with higher costs of living, especially the Northeast, may also see greater losses as older workers relocate to warmer climates and more-affordable areas.
At Miller, It's Time
When SABMiller PLC took a close look at its staff, it realized that many of its highly skilled employees would be retiring in the not-too-distant future. "We saw this coming," says Pat Henry, SABMiller's director of strategic projects for brewery operations. "We have lots of baby boomers and lots of turnover ahead." In fact, the brewer projected that between 2005 and 2008 roughly 40 percent of its managers in brewery operations would reach retirement eligibility, based on their age and length of service. The reason so many Miller workers are reaching retirement at the same time? In the 1970s, the company grew substantially, building and staffing four new breweries. Many of the managers hired when the breweries opened have been there ever since. And replacing them won't be easy. These workers are considered highly skilled craftsmen, and learning how to apply the precise blend, temperature, and timing in the brewing process takes years.
To make sure that older workers don't take the bulk of the company's collective wisdom with them when they leave, Miller decided to focus on capturing the knowledge of retiring workers before they walk out the door. A three- to five-year strategic staffing initiative for its six U.S. breweries is already under way. As part of the process, Miller is undergoing a targeted staffing analysis of current jobs, forecasting future needs, and determining who has what skills.
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