How Will the Age Wave Affect Your Company
According to David B. Friend, a physician and senior partner in Watson Wyatt Worldwide's Boston office, in the not-too-distant future, such a manufacturing company will probably face increased health and disability costs, as well as a severe shortage of skilled workers. The high-tech firm, on the other hand, also will suffer from the labor shortage, but the most pressing issue will be one of employee retention.
Friend suggests that human resources professionals who don't want to be caught off guard by issues related to the aging workforce should undertake an "aging diagnostic," in which they evaluate:
- The age composition of the workforce currently, as well as five years ago. "Companies will also want to project the age distribution five years from now taking into account such potential events as mergers, acquisitions and downsizings," Friend says. "These events can radically alter a company's age distribution."
- Employee turnover rates.
- The kind of work employees are doing. For example, does it require manual labor or highly sophisticated technical skills?
- How employees are compensated, including benefits and the cost of providing those benefits.
Completing the diagnostic will help HR professionals uncover the issues they're likely to face as their workforces age, as well as the financial implications of those changes. With this information in hand, companies can begin to align corporate human resources strategies with labor-force strategies.
For example, a company that relies on a lot of manual laborers might want to encourage people to retire early, whereas a company that relies on knowledge workers might consider flexible-employment options that allow employees to work past age 65. That same company might also consider changing the compensation system from one that's seniority-based to one that's performance-based.
"With the aging workforce, there's no longer a bountiful supply of fish out there," Friend says, "and companies have to think harder about using each of their people more strategically." The aging diagnostic will help them do just that.
Workforce, December 1997, Vol. 76, No. 12, p. 44.