Assessing the impact of an aging workforce across global organizations
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Assessing the impact of an aging workforce across global organizations. Today’s discussion. Assessing the aging world and aging workforce Ernst & Young’s study: 2007 Aging U.S. Workforce Survey: Challenges and Responses – An Ongoing Review Survey methodology Common themes Key findings

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Today s discussion
Today’s discussion organizations

  • Assessing the aging world and aging workforce

  • Ernst & Young’s study: 2007 Aging U.S. Workforce Survey: Challenges and Responses – An Ongoing Review

    • Survey methodology

    • Common themes

    • Key findings

    • Putting the pieces together

  • Facing key issues on a global level

    • Talent management and succession planning

    • Retirement

  • Discussion: Understanding your global workforce

  • Moving forward


An aging world 2000

Under 5% organizations

5% to 12.4%

12.5% to 20%

An aging world – 2000

Percent of Population Age 60+:

Above 20%

Source: U.S. Census Bureau


An aging world 2025

Under 5% organizations

5% to 12.4%

12.5% to 20%

Above 20%

An aging world – 2025

Percent of Population Age 60+:

Source: U.S. Census Bureau


Assessing the global aging workforce
Assessing the global aging workforce organizations

  • How we got here…

    • Declining global fertility rate over the past 4 decades

      • Significant population declines in developed countries

    • Population surpluses in less developed countries with unskilled and uneducated labor

    • US Baby Boomer generation starting to retire

      • 43% of today’s workforce will be eligible to retire by 2018

  • World’s population today 1 in 10 over 60…1 in 5 in 2050


Understanding financial implications of aging workforce
Understanding financial implications of aging workforce organizations

  • By 2030, four Federal programs will consume all U.S. tax revenue without any spending:

    • Retirement of Federal employees, Medicaid, Medicare, and Social Security (MW)

  • By 2050, Medicare and Social Security will be 21% of GDP (4.3% in 2000) (CBO)

  • Global Economies facing impending financial challenges in areas of talent management, retirement, healthcare and compensation costs

    • Source: Ernst & Young LLP’s 2007 Aging U.S. Workforce Survey: Challenges and Responses – An Ongoing Review


E y s 2007 aging workforce study
E&Y’s 2007 Aging Workforce Study organizations

  • Follow-up to Ernst & Young’s 2006 aging workforce study

  • Surveyed Human Resources (HR) executives from Fortune 1000 companies

  • Focused on financial and operational issues of the aging workforce


Common themes
Common themes organizations

  • The aging workforce is a critical business risk, not just an HR risk, impacting all key business risk areas

  • Organizations have been primarily reactive when it comes to managing the challenges brought on by this changing demographic

  • Company-wide accountability exists when meeting the challenges of an aging workforce (Boards, C-suite executives, HR executives)

  • Organizations that understand these concepts and start acting now will significantly benefit financially and non-financially in the future


Key findings
Key findings organizations

  • Potential loss of intellectual capital is imminent among survey respondents

    • 62% of respondents forecast retiring employees will cause a talent gap in critical functions

    • Middle management will be where organizations feel the gap the most

  • Employees are seeking opportunities to reduce work schedules as they age, but do not necessarily stop work completely

    • Re-careering

    • Flexible work arrangements

    • Changing employers


Key findings1
Key findings organizations

  • 40% of surveyed employers desire for senior management to stay at least 2 years beyond their normal retirement age but with no formal program to address this issue

  • Few employers have formal programs established to retain older workers

    • Rules and administrative requirements for phased retirement programs are so complex many organizations do not view them as a viable option

      • Only 9% of respondents allowed employees to receive pension benefits while still working for the organization


Putting the pieces together
Putting the pieces together organizations

  • Aging population will lead to businesses competing more for younger workers

    • 37% of surveyed organizations considering changes to benefits and compensation packages to attract and retain older workers

      • 20% considering increasing compensation

      • 29% considering a phased retirement program

      • 33% considering implementing more “Baby Boomer Benefits” such as financial education, retirement planning and long-term care benefits

  • Employers must gain clear understanding of workforce demographics and employee needs to attract new and retain key employees


Facing talent management on a global level
Facing talent management on a global level organizations

  • Global executives see HR risk as being among the top business risks facing an organization today

    • Talent management is the #1 HR risk overall

      • Source: Ernst & Young LLP’s 2008 Global HR Risk Survey

  • Effective global talent management programs are effective enterprise risk management programs

    • Developing the right person, with the right skills and competencies, in the right job and the right time.

      • Alignment to company business strategy

      • Identification of positions, skills, competencies, experiences, etc. to drive business strategy

      • Understanding of global and local country resources (needs and supply)

      • Established performance metrics and expected returns (financial and nonfinancial) developed and monitored

      • Previous financial analysis conducted

      • Legal and regulatory issues addressed and monitored

      • Communications and change management processes put in place


Must haves for talent management and succession planning
“Must Haves” for talent management and succession planning

  • Follow steps to ensure effective talent and succession planning program is put in place

    • Be strategic, not reactive

      • Connect talent management to business strategy

    • Understand employee demographics, needs, issues

    • Focus on middle management

    • Understand issues that drive retention and facilitate transition of traditional employment

    • Ensure you have effective, comprehensive governance with clear accountability and measurement

      • Effective talent management is at the core of enterprise risk management


Facing retirement programming on a global level
Facing retirement programming on a global level planning

  • Retirement is no longer the main event—it is a process

  • Employers must help employees bridge the gap between their final years on the job and the start of retirement

    • For two years in a row, more than 60% of executives admit retirement will cause a “brain drain” or talent gap

      • Source: Ernst & Young LLP’s 2007 Aging U.S. Workforce Survey: Challenges and Responses – An Ongoing Review

  • Components of an effective retirement program that meets the needs of aging employees must consist of plans which allow employees to be “phased” into the retirement process

    • Employers do not appear to be implementing programs that will help bridge employees into this next phase of their life

    • Absence of phased retirement plans and enticing compensation options

      may lead to lack of desire to stay within a corporation at high level-positions


Must haves for developing global retirement programs
“Must Haves” for developing global retirement programs planning

  • Follow steps to ensure effective retirement programs are put in place that meet the needs of your employee demographics

    • Once again, be strategic, not reactive

      • Connect retirement programs to the business strategy

      • Align with talent management plans to ensure the effective transfer of knowledgeacross levels

    • Increase dialogue across company divisions

      • This will help to foster an understanding of the technical issues surrounding an aging workforce and how retirement is seen among this demographic

    • Understand employee demographics, needs, issues

    • Review anticipated retirement projections within own company


Discussion understanding your global workforce
Discussion: Understanding Your Global Workforce planning

  • What pressures are you feeling from the operational, financial, strategic and compliance areas of your organization?

  • If you could change one item in your current retirement program, what would that be and what impact do you think it would have on the organization?

  • How well do you know your employee demographics (i.e. % retiring in the next 5-10 years) and what do you do with that information?


Moving forward in your organization
Moving forward in your organization planning

  • Identify the human capital needs of your organization in 5 to 10 years

  • Project population shifts with current workforce and culture and identify gaps

  • Assess the needs and interests of the older workers

  • Assess the ability to employ older workers in a variety of positions

  • Assess the organization’s talent management and employee development programs and processes

  • Perform cost analyses of retaining older workers vs. attracting new workers