By Dennis Turner, Chief Economist, HSBC Bank plc
The oldest members of the Baby Boom Generation turn 65 this year – that magic number once associated with retirement. As the largest and richest generation in the history of humanity, they are redefining what it means to be older.
With a visible shortage of new graduates in certain disciplines, such as science and engineering, this represents a significant skills gap risk to companies.
With fewer people retiring at 65, there are fewer internal promotions, resulting in a trickle down effect of fewer entry level opportunities. As more senior roles are retained by longer tenured employees, the next generation is being denied opportunities at the next level. This in turn poses a risk for employers – for retention and development of required capabilities.
I’ve always thought tenure in senior positions tends to favour alternate generations – a bit like the royal family. Queen Elizabeth is enjoying a long reign, which means Prince Charles will probably have a comparatively shorter reign. It’s the same for corporate management. Like most things in life, your next promotion is somewhat dependent on timing - luck of the draw on when you were born, and waiting for us Boomers to move out of your way.
Other factors are destroying ‘traditional’ careers, such as the flattening structure of organisations. The majority of companies today have less than six levels of management compared to 15 levels a generation ago, largely thanks to the efficiencies of technology. That means you’re likely to stay in a middle job for longer today than your predecessors did.
This is why organisations need to redefine what they consider to be a ‘career’. Most people think of a career as sequence of promotions that people move through. In today’s labour market, this is not sustainable. In the future, a career will be more characterised by promotions, transfers, secondments, and projects that allow individuals to build portable capabilities in the workplace. Research by business execution software specialists, SuccessFactors, reveals that more than 50% of the workforce is not likely to have more than one promotion for the rest of their career, and 65% will not have more than two promotions. A career today is not about a sequence of promotions over a life time, but rather building the employment value proposition of the individual through a mix of experiences.
From an organisational perspective, it’s not so much about timing as it is about planning. This is a workforce going through significant and unprecedented change. Organisations need to make decisions about their workforce with the same rigour, logic and confidence they make about money, clients and policy. The problem is that the majority of companies are trying to do this blind.
Organisations usually have a lot of workforce data, but struggle to turn it into actionable insight because it’s locked away somewhere in siloed IT systems. SuccessFactors also points out that the ability to execute on business strategy is now a CEO’s biggest concern. This means having the necessary granular insight for planning and executing against business strategy.
Workforce Analytics can give you that insight – from knowing who your key talent is, which roles are critical, forecasting future gaps, predicting employment costs for various business scenarios, to how engaged employees are and how they stack up against their peers.
Most savvy business leaders instinctively know they have a ticking time bomb when it comes to Workforce Planning. It’s just that most of them don’t know where to start. Every department has a different perspective. By creating a common workforce language, and a single version of the truth, organisations can create a reliable data foundation that measures the things that matter to the business – such as developing needed skill sets for the future, reducing turnover of critical roles, and building bench strength in key talent.
The ageing workforce issue is not a blip in labour supply. It reflects growing competition for the available workforce. Companies that fail to address this issue risk future staff and skill shortages, and any competitive edge they now enjoy. It’s not so much the cost of implementing a strategic response to changing workforce dynamics that companies should be focused on, but rather the cost of not implementing one.