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Abstract

20 countries around the world currently show zero or negative population growth. With birth rates on the decline, the aging world may well be sitting on a demographic time bomb.

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Keeping the WorkforceAn acute workforce shortage stares us in the face

- Dr. Martin Lockstrom, Girish Khanzode

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1950-55 65-70 80-85 95-2000 2010-15 25-30 45-50

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Declining Birth Rates

The worldwide fertility rates for developed and developing countries are dropping and will stagnate.

One quarter of European Union now has a declining population

Low birth rates will result in shifting of talent base from established geographies (Europe as stated in slide) to emerging geographies giving rise to more remote work

The shift in age pro�le has serious implications for nations, industry and society, not least of which is an acute workforce vacuum. By 2025, the United States alone will be short of around 29 million workers, as 77 million baby boomers (those born between 1946 and 1964) retire from the workforce, but only 48 million individuals belonging to Generation X (those born between 1965 and 1980) enter it. This retirement will deal a double blow to organizations unless they �nd a way to prevent the tacit knowledge (which apparently accounts for 42% of a company's knowledge) and connections held by their mature workers from leaving with them; for research shows that when even a few key members of a network - such as those who possess important knowledge or integrate the network - leave, they leave a disproportionate impact on its connectivity.

F O R E C A S T

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Therefore, it is in the interest of employers to retain or re-hire their senior workforce. Studies indicate that only 20 to 40% of 55 to 65 year olds say that they are fully retired, implying that the majority is still open to the idea of employment. The desire to continue working beyond retirement age is primarily driven by economic factors, including the rising cost of healthcare and the need to �nancially provide for longer life expectancy as well as bolster savings that were badly impacted by the �nancial crisis. That being said, companies must recognize that their older employees will stay on only if their expectations (shorter/�exible working hours, respect of colleagues or sense of ful�llment) are met.

Baby Boomer Retirement will Create a Workforce Vacuum

77Millions

48Millions

The young, tech-savvy generation that will �ll this gap has entirely di�erent work expectations from earlier generations

By 2025, total 77 million US Baby Boomer would retire, creating a loss of expertise

The group of 48 million Gen Xers is too small to replace boomers

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Another way that organizations can bridge the workforce gap is by recruiting millennials - those born in the two decades between 1980 and 2000. Once again, they will only be able to retain these employees by catering to their important needs, some of which are unique to their generation. At the top of the millennial employees’ wish list is access to technologies at the workplace, which are at least as, if not more sophisticated than what they’re habituated to in day-to-day life. Balancing the idiosyncratic needs of two (or three, when including Generation X) generations will be a daunting task for organizations and their HR managers. This paper suggests ways to meet this challenge.

One of the key reasons for high attrition rates and premature retirement is that organizations often fail to take their employees’ expectations into account. The risk of employee discontent is amplified in the case of a demographically diverse workforce, where employees from different generations have varying and often conflicting needs.

Accordingly, employers must pay closer attention to their demographic structure, in order to assess who knows what and whom, as well as gain a better understanding of work patterns and attitudes toward technology among different age groups. One size does not fit all.

A comparison of the workplace expectations of baby boomers and millennials reveals some interesting findings. As expected, the two groups have very different career motives - while mature workers seek an income (or nest egg) to live on and want to make productive use of their time, for the young workforce, a job is all about career and skill development, and exposure to cutting edge technology. But they also have several things in common, such as a desire to contribute to society through work; a preference for flexible work arrangements (albeit for different reasons: baby boomers want a lighter workload, whereas millennials are very focused on work life balance and being single, can afford “flexibility”); and an appreciation of the social connections formed at the workplace. This is not surprising given that millennials are the children of baby boomers, and therefore the inheritors of their values.

Generation X, on the other hand, is more concerned about the corporate ladder and compensation.

It is imperative to reduce attrition among workers of all ages.A significant proportion of people of retirement age want to continue working but don’t because they feel that their companies’ structure, processes or culture, are not supportive of their needs. On their part, organizations might be prejudiced against extending the tenure of older workers, especially since they cost more than inexperienced employees. Common stereotypes, painting older employees as resistant to new ideas and technology, add to the bias. Before coming to a hasty decision, HR managers must weigh the higher salaries of mature workers against their higher productivity, the cost of recruiting and training fresh hires, and of course, the loss of connectivity and tacit knowledge occasioned by their exit. A closer look reveals that the workplace expectations of the baby boomer generation are mostly about finding fulfillment and dignity. By providing an intellectually stimulating environment, autonomy, exposure to new challenges and recognition, organizations can hold on to their valuable and mature human resource assets for a while longer. And what about the millennial generation?

Baby boomer retirement will affect almost all industries, but have the biggest impact on sectors, such as energy and utilities, where nearly 3 in 5 workers were aged between 41 and 59 in 2005. Government, aerospace and education sectors will also be significantly affected.

The problem is compounded by the fact that it takes very long to train the new workforce in these sectors (as long as 5 years in the energy sector), where most of the job-related knowledge is tacit in nature.

With technological advancement enabling automation of routine work, specialized skil ls and knowledge are rising in value.

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Let’s take a look at some typical personality traits to understand the influences shaping the millennial employee. The millennial is a digital native, a technophile. He is spoilt for choice, in an Internet world of instant gratification, and ever improving services and experiences, many of which are available free of cost. His decisions are shaped by peer opinion, flowing freely over the online social networks that he is part of. As a consumer, the millennial is highly demanding – (remember, he benchmarks against the Googles, Amazons and Facebooks of the world) – and equally fickle. There’s no reason to believe that he will be any different as an employee. In contrast to the older generation worker who would spend an entire lifetime in a single company, the millennial is expected to be a job hopper. Born to financially secure (helicopter) parents, the millennial can afford to be choosy about where he works.

What this means is that employers will have to make special efforts to attract and retain millennial talent. In 2010, the Harvard Business Review published that the millennials’ top expectation from their employer was an opportunity to enhance skills for the future, followed by adherence to strong values, customizable benefits, work-life balance and a visible career path. They viewed the boss as someone who would guide them in their career, and as a source of honest feedback and mentoring. The millennials’ love of technology was once again evident in their strong desire to learn new technical skills on the job, which ranked above the need to improve personal productivity, leadership abilities, functional knowledge and creativity. This explains the findings of a survey in which more than half the millennials said that (the quality of ) technology would strongly influence their choice of employer.

But as mentioned earlier, like the baby boomer, the millennial also values relationships with colleagues, flexibility, peer recognition and exposure to new experiences and challenges.

Such similarities open up many opportunities to organizations to simultaneously mitigate premature retirement and attrition among their baby boomer and millennial staff respectively. Flexible or part-time hours and remote work arrangements answer the need of both generations for a balanced personal and professional life. Mentoring of various kinds - remote, group or anonymous - can bring both age groups together to benefit mutually. For instance, during the course of reverse mentoring, millennials can teach seniors how to use technology, and hone their own leadership skills in the bargain. Seniors can mentor young executives in functional areas, as well as pass on their wealth of tacit knowledge during face-to-face interaction. (This is much more effective than relying solely on a collaborative technology platform to gather and disseminate such hard-to-codify knowledge.)

Needless to say, this inter-generational interaction won’t materialize by itself, needing a mandate from the top as well as internal champions to spearhead the efforts.

Different problems require different solutions.

Although workforce aging is more of an issue in the United States and Europe at present, countries like India and China, despite large youthful populations, also face talent shortage of a different kind. These high-growth markets haven’t yet developed a sufficiently deep middle management resource pool, so necessary for nurturing junior employees in any organization. As a result, many employees do not realize their full potential and become discontented. The usual response of organizations is to raise salaries, which rather than ameliorating the situation, worsens it, as competitors continuously outbid each other to induce a vicious cycle of job-hopping and wage escalation. Instead, companies should focus more on mentoring, coaching and basic orientation training in order to lower the threshold at which workers become productive.

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This is not just about the aging workforce.

Managing the aging workforce is only part of the story. In order to ensure access to world-class talent in the 21st century and turn their human resources into a competitive advantage, organizations need to configure their workplaces to meet the future needs of their people.

Some key trends indicate what these might be

• Increasing femaleworkforce. According to the Bureau of Labor Statistics, women employees are a two-thirds majority in 10 industries out of 15 that are tipped to grow the fastest over the next few years. For example, in the United States, women already make up half of the workforce. As organizations hire more women to fulfill various positions, they will have to accommodate their dual responsibilities by offering flexible work arrangement and other support services.

• Dynamicworkingschemes. Working schemes will not only become remote and flexible, but also more innovative. Solutions such as eLancing will be used more frequently to quickly bring a trained workforce on board.

• Flexibletraining. Not just jobs, even training will become more flexible, as younger workers embrace on demand, anywhere, anytime learning.

• Smartercommunication. Increasing use of personal devices like smartphones (even at work) will enable millennials to maintain work-life balance.

• Newassistive technologies. These will help the ageing workforce remain productive longer.

• Virtualworkplace. Distributed technologies will enable all types of workers to work from anywhere to improve productivity, reduce travel time and infrastructure costs, and promote sustainability by leaving a smaller carbon footprint.

Organizations that embrace these trends will improve their supply of talent by making existing workers more productive, reducing attrition and delaying the retirement of older employees. Those that reject it may well end up looking down the barrel.

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About the Authors

Dr. Martin Lockstrom Principal Consultant, Building Tomorrow’s Enterprise, Infosys Labs

Martin is a specialist in Supply Chain and Operations Strategy, Outsourcing/Offshoring and International Management. During a six-year stint in China, he established the research and education activities at the SCM, Sustainability and Automotive academic centers at China Europe International Business School, Shanghai.

He established the first endowed chair for Purchasing and SCM in China at Tongji University, Shanghai, and was also responsible for setting up Supply Chain Management Institute China, an international network of SCM research and education hubs.

Martin co-founded Procuris Solutions, an IT company specializing in SCM-related solutions, offering consulting services to companies like Accenture, Ariba, BMW, Clariant, Dell, Dow, Ernst & Young and Intel, among others.

He has a Ph.D. in Supply Chain Management from European Business School, Germany, a bachelor’s and master’s degree in Industrial Engineering and Management, from Chalmers University of Technology, Sweden. He speaks Swedish, English, German and Chinese, has published over 50 articles and papers and presented at more than 60 conferences.

Girish Khanzode Products & Platforms Innovator for futuristic technologies, Infosys

Girish has around 20 years of Enterprise Software Product Development experience. He has built and led large engineering teams to deliver highly complex products in various domains, covering the entire product life cycle. Currently, he is engaged in innovating and building the next generation products and

platforms in the area of future of work. Earlier, he worked on Enterprise Data Privacy Product. Before joining Infosys, he setup a startup engaged in creating financial technology products. Prior to that he worked at Symantec for 8 years and delivered core security technology engines of the company. The products using these engines had a combined revenue of more than US$ 2 billion. One of his products, Symantec LiveUpdate, had 300+ million software client installations with 24x7 operations to protect worldwide computers from emerging viruses in real time.

Girish holds an M.Tech. degree in Computer Engineering and a bachelor ’s degree in Electrical Engineering from Government College of Engineering, Pune.

© 2012 Infosys Limited, Bangalore, India. Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.

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