By Alison Weiss
In the United States alone, 10,000 baby boomers are reaching retirement age daily, according to a Pew Research Center report. Baby boomers, generally born between 1946 and 1964, have dominated the workforce for decades. They are the people with business-critical expertise and deep knowledge of processes who are able to smooth relations with long-time clients or help fellow colleagues solve problems. In fact, your organization may already be experiencing this critical exodus of talent and not even realize it. A study by the Center on Aging & Work indicates that 77% of employers have not examined the retirement rates of current workers, and only 19% to 37% have created strategies to capture knowledge from veteran workers and transfer it to younger successors.
Instead, HR decision-makers largely are concentrating on attracting and retaining digital-native employees (born between 1981 and 1996 and also referred to as millennials or Generation Y) because these employees are expected to account for 75% of the global labor force by 2025, according to research by EY. Yet this laser focus on young professionals ignores the real hits to an organization’s productivity and profitability that can occur when older workers retire. Findings from the Kenan-Flagler Business School reveal that baby boomers still make up 31% of the US workforce, with 56% holding leadership positions.
According to Oracle’s Vice President of Human Capital Management (HCM) Transformation Cara Capretta, strategic succession planning can help companies that are concerned about losing tacit expertise due to retiring employees, but to do it correctly requires accurate data. “Today, organizations don’t have the metrics to identify the people who have the institutional knowledge or the secret sauce that differentiates the company from a cultural, productivity, or technological standpoint,” she says.
Along with gathering information, Capretta believes that as baby boomers retire, effective succession planning requires creating opportunities to connect employees of all ages across the organization to nurture talent and to exchange expertise and experience. Fortunately she sees that there is a culture of giving and sharing knowledge in today’s workplaces, and respect is given for the different skills people bring to the table.
The technical component necessary for succession planning is a talent management platform that harnesses data and incorporates analytics to enable HR decision-makers to gain critical HCM insights. Christine Yokoi, director of HCM product strategy at Oracle, says that some organizations put a lot of power in the hands of their managers when it comes to succession planning and talent management, while other organizations keep this function central to leadership and HR. So any talent management solution needs to be flexible enough to accommodate differences in work culture.
In Capretta’s view, a central piece to successful succession planning is identifying what skills gaps will emerge across an organization as baby boomers retire. “Without a skills gap analysis, it’s impossible to determine whether an organization has enough time to build capabilities from within with people who are ready now, or will be in the future, or the organization will have to allocate the funds to go out and buy capabilities with proactive hiring,” she says.
The data for a skills gap analysis comes from mining employee talent profiles to see if there are internal employees who can replace exiting retirees. For a majority of companies, however, this is easier said than done because there is often more data out in the public domain about employees on Facebook or LinkedIn compared to what is typically captured in internal HCM platforms.
Capretta cautions that the answer is not to just import public domain talent profiles into internal systems, because companies will not necessarily harvest the most pertinent employee information or classify and categorize job experiences in the way that is most valuable to their organizations.
She suggests that HR professionals and business function leaders need to work together to create a skills library in their internal HCM system using a common language to precisely define talent and job skills, such as “problem solving” or “strategic capability.” Then, the skills library can be leveraged across the organization to write job requirements or post job opportunities. When employees use similar language in their talent profiles, they can more easily be found internally via adaptive intelligence or machine learning.
As baby boomers retire, effective succession planning requires creating opportunities to connect employees of all ages across the organization to nurture talent and to exchange expertise and experience.”
With the right HCM solution in play, it is also possible to devise employee talent profiles where listed job skills and mission-critical competencies have been systematically verified by an employee’s supervisor or manager. For Capretta, this is crucial because when it comes to succession, people no longer get promoted simply because of their job tenure or job history, which were the standards two decades ago. Now, it’s about identifying who has the functional or technical skills, interpersonal savvy, experience, and learning agility to step into new roles as older employees retire.
“We need to have a common language about talent to identify the competencies and behaviors that really differentiate the best performers from the rest,” she says.
Having a clear way to identify the best internal talent is paramount to succession planning, but another essential element is to find ways to engage employees at different levels in the process. In the past, this wasn’t so important because succession planning was limited to executive roles, but both Yokoi and Capretta agree that it now applies to diverse, pivotal roles company-wide. Luckily, there’s much more community involvement in succession planning compared to 20 years ago, and veteran employees, before making an exit, are quite willing to help identify, guide, and support younger successors.
“There’s a desire with employees at all levels to help build the next generation of leaders,” says Capretta. “And, there’s a greater culture of wanting to leave legacies behind, something we used to hear only CEOs talk about. It’s a huge change for succession planning in this modern era.”
For some forward-thinking companies, community succession planning involves group talent reviews. Participants use HCM tools to evaluate a population of employees and assess employees’ individual skills. Then, everyone comes together in a group setting to discuss results and get feedback and advice, analyzing which employees may be ready for new opportunities and who may need more support to perform better. Community talent assessments help organizations plan more effectively for the future because they can bring to light important realities. For example, a community talent review may uncover the fact that the highest performers in a certain sales region are all over age 55, indicating a need to kick off succession planning to identify internal employees and raise their skills sets or bring in new talent to avoid huge deficiencies three years down the road.
Community succession planning isn’t limited to selecting talent to replace baby boomer employees. Another aspect is finding opportunities for veteran workers to leave a legacy by actively transferring their institutional knowledge before they retire. According to Divya Malik—director of product marketing, analytics, and big data at Oracle—sometimes this sharing of knowledge happens organically. She observes this not only as part of her work with HCM solutions but in her own group at Oracle, in which five different generations routinely work together. She notes that creating cross-generational projects is an ideal way to encourage employees of all ages at different levels to collaborate and share experiences.
Another option to connect employees is mentoring. While mentoring can certainly happen informally, Yokoi says that some customers she supports are getting positive results by using flexible HCM system-based mentoring solutions. Rather than dictating who is a mentor and who needs a mentor, these solutions support employee self-directed talent management. So, if an employee has strong skills in a specific area and is willing to volunteer to be a mentor, this information is captured in the internal HCM platform. Then, the expert can easily be found by other employees who need to improve their skills and are seeking mentors.
Companies are also beginning to create flexible knowledge transfer jobs for baby boomer employees who want to share their experience. Capretta notes that when employees are near retirement age, they may not be interested in continuing to work 40 hours a week. Instead, with phased retirement positions, they may be given the chance to come in two days a week to teach classes, help hire people, or add value by helping with critical deals.
In other scenarios, seasoned employees may be enticed to stay on to work on interesting part-time or short-term projects with new work teams. “For everyone involved, it’s an opportunity to build beyond normal work networks and connect with new people,” says Yokoi. “It’s a great way to gain new skills and transfer skills.”
While many companies are still unaware of how many of their baby boomer employees are exiting the workforce and what impact this has on the bottom line, organizations willing to tackle the issue head on will be at a distinct competitive advantage. Successful companies will also support succession planning strategies with modern HCM platforms that use advanced features such as AI to manage all aspects of planning. Then, companies will be in a position to enable expert veteran employees to leave a legacy when they retire by giving them opportunities to share their deep institutional knowledge with younger personnel. “People want to go out on a high note,” Capretta says. “They want to know someone is going to pick up where they left off.”