IBM Business Consulting Services The Maturing Workforce Innovation in Workforce Enablement Human Capital Management Bad news, good news First, the bad news. The global workforce is getting older. And now here’s the good news. The problem is not Vital skills are getting scarcer and many businesses will insolvable. Some organizations are already responding to struggle as a result. individual, age-related workforce issues. But what’s really needed is a coherent strategy to bring these responses The baby boom that lasted from the 1940s into the 1960s together and integrate them. That’s where IBM comes in. fuelled a global economic boom. But the world that the We have the experience and the industry knowledge to boomer generation was born into is unrecognizable from make the strategy work. the one they will begin to retire into in the next five years. The other side of the coin is that the problem is also Across the world, the number of workers aged 55 and older a wonderful business opportunity. If the issue of the is increasing rapidly. Age is catching up with baby boomers, aging workforce is tackled properly, it will provide a rare and more and more of them are leaving the world of work opportunity to create a new and better way of working and due to retirement or disability. a significant competitive edge. Those who act now will be the winners, because they will have been both prudent and When they go, they take their skills and their knowledge visionary at the same time. with them, and the organization they’ve left behind is much the poorer. For many organizations, the pursuit of the grail Ask yourself this: when the shortages really begin to bite, of knowledge management – making the best use of the would you rather be at the head of the line – or jostling at knowledge available in an organization and increasing the back with the rest of the latecomers? awareness in the process – has proved disappointing. From China to Japan, Europe and the US, there is a global shortage of talent – now. For example, in the face of burgeoning demand, the global mining industry is struggling with its greatest issue: finding enough qualified people to employ. And these talent shortages are causing delays costing millions of dollars. Across industries, this situation is going to repeat itself and become far worse because most organizations don’t know what skills they possess, and they don’t understand how to avoid similar problems. Where do you want to be when the shortages start to bite? 2 We’re in unfamiliar territory Case study: This is new and unfamiliar territory. It’s clear that the old The Aerospace Corporation, a federally funded model with its fixed retirement ages and rigid adherence research and development center, leveraged the to standard working weeks is disappearing. The challenge experience of retired workers by bringing them back we face is to define and develop new ways of working to work on a part-time basis. and living. The Corporation developed a Retiree Casual program. After 100 years of rapid demographic change, most bets Retirees can work on a project consulting basis for up are now off. Baby boomers will be retiring in their millions to 1,000 hours per year with salaries determined by in the next few years – but they’re largely fitter and mentally their roles and responsibilities. American Aerospace younger than previous generations. What’s more, many of Corporation benefits from the retention of know- them are extremely keen to carry on working – but in a how and the transfer of knowledge to other staff. new way. Participants enjoy the opportunity of continuing to work for as long they want to, and at a pace that suits them. Business and government are struggling to cope with the profound implications of this change. Attitudes, business The program is flexible. About 500 retiree casuals are models, pensions and legislation are all out of step with this normally available, with around 200 at work at any time. new fact of life. When you consider that most people will Most people work two days a week, but others work six enjoy around 20 years of life after they become eligible to months on and six months off. Most participate in work retire, it’s clear the whole concept of retirement needs to into their mid-sixties; others go on contributing beyond be redefined. the age of 80. Just as importantly, business needs the gray hairs just As one program participant, a former Executive Vice as much as the old heads need and want the work. President, explained: “The Retiree Casual program What businesses can’t afford to do is simply rehire their keeps expertise around and helps transfer it to experienced workers and put them back into their old others. People often remark that we don’t have many jobs. Businesses have to think smarter than that. They consultants around here. Actually we do, but they are must learn to leverage the experience and practical called retirees, and they already know the business intelligence of mature people, and get them to work with inside out.”1 younger colleagues and reinvest their experience back into the business. For their part, businesses have to realize that they must After 100 years of rapid change, all bets are now off make the working environment and conditions suitable and appealing to older people, if they are to benefit from their considerable talents. They will have to be flexible about working hours and consider how they use technology to solve the kind of ‘wear and tear’ disabilities like hearing and vision impairment that older people routinely develop. Seizing the opportunity to change the way an organization deploys and manages mature employees calls for vision and a belief in the ability to make it work. What it will give in return is a huge advantage over those competitors that cling slavishly to their old customs and practices. 3 The worst of times, the best of times Case study: Think of the current situation as the human capital De Beers’ research and development division has equivalent of disruptive technology. Because of the aging used expert systems to retain and leverage technology workforce phenomenon, organizations are now facing a know-how associated with mining machinery. period of enforced change. They can either move early, innovate and adopt a new way of working, or they can cling De Beers chose ClickFix, a Web-based diagnostic and to existing practices and face the inevitable consequences. predictive maintenance tool, which uses a combination of model-based and case-based reasoning. It’s natural to focus on the issue of potentially losing talented, qualified workers and the difficulties associated To get the most from the tool, the company identified with replacing them, but the impact and implications and interviewed individuals with expert knowledge, of aging are more profound. There was a time when and resolved contradictory diagnostic processes. They businesses would routinely replace older, higher-salaried then built an expert system based on this knowledge, staff with younger colleagues. Now, with longer career with automatic updates from field technicians who were spans, using older people is a much more viable option, using ClickFix and modified any diagnostic procedures providing employers change strategy and use them that were impractical in the field. intelligently in roles like shadowing and mentoring. By entering fault symptoms into the tool, mining According to their business goals and strategies, machinery technicians can identify potential organizations will face the need to extend the life of their fault causes, access recommended tests and existing models by investing in the restaffing and training suggested actions and find information regarding it requires. Or they will look to transform the business, replacement parts. perhaps by radical changes in process, enabled by technology or by shedding noncore activities, processes Using the tool has reduced downtime and costs and systems, rather than reinvesting in outmoded models. resulting from erroneous and belated fault diagnoses, incomplete fault registers, and missing machine part specifications. Extending the life of your current model may feel like the comfort zone option. But is it a good idea to invest in a model that was created some time ago based on a De Beers say that using the tool has assured that the different set of business goals and talent pool? For example, mines no longer have to rely on the availability of a many of these models assume that there is sufficient time small core of top engineers.2, 3 to train people while they are on the job. As significant numbers of mature workers retire in a short time, that option will disappear. Just like with disruptive technology, the scariest times make The scariest times make for the greatest opportunities for the greatest opportunities. This is a wonderful chance for business to look at the situation and if appropriate make changes in a wide variety of areas from technology to business process models. 4 The diagnosis – who, what, when and how? Over time, organizations have refined their ability to These four questions are answered by investigating such understand, in realtime, just about every facet of their issues as: business – except one. Organizations have tended to know far more about things like cash flow, customer management, supply chain and stock levels than they know about their • • own staff – until now. • IBM has developed a diagnostic tool and services that help employers identify the risks and impacts associated with their maturing workforce, evaluate their overall readiness to • • respond, and recommend a course of action. • The diagnostic provides an accurate analysis of workforce aging and transition data that shows the potential changes in a workforce’s composition due to age-driven attrition. • • It also categorizes job types by their criticality to the business, surveys the assets available to manage maturing • workforce risk and assesses the employer’s readiness Which of your employees is eligible to retire? How many will reach eligibility during the next year? During the next five years? How many of those eligible are likely to retire during this period? How many people could you lose due to disability? What might the timeline be for these departures, as well as to implement measures to compensate? What impact will departures have on your organization’s business? Are qualified replacements available internally? Are training or external recruiting viable replacement options? How much time do you have to execute your replacement strategy? to do so. Many companies think they know the answers to these Using the diagnostic, we find the answers to four questions questions. They usually base their opinions on infrequent that help the employer to understand what their attrition snapshot surveys compiled by their human resources will be, its business impact, and how to develop an departments. These surveys don’t consider the relative effective response: importance of different job roles or the likely impact of attrition on operations. In our experience, an operational • • • • Who will be retiring? What is their business value and what will be the impact of losing them? When is this going to happen? How to respond for the greatest business benefit? problem like this needs to be tackled at an operational and not a functional level of the organization. Organizations manage their workforces in a way that is very different than the manner in which realtime analytics are used to manage and monitor all the other assets in a business. Organizations must learn to manage people – their most critical asset – in the way they manage everything else 5 The solution The diagnosis is not the solution. But once you understand Experienced workers are often those who know how the likely attrition, its cost to the business and your best to make poorly integrated technology and readiness to respond, you’re well on the way to being able applications work together. Improving the integration to chart an effective course of action. of your technology and application infrastructure can soften the impact of losing valuable people. Complex issues such as this require comprehensive responses. Our experience providing clients with It’s important to remember that mitigation is, at best, support on workforce planning and management, talent a temporary strategy – one can only extend people’s management, learning and development, knowledge working lives for so long. management and collaboration, technology solutions, operational techniques and industry-specific solutions Transformation. Radically altering the way you operate is can all have an important role to play in developing the a more strategic response. This can involve altering your right and comprehensive approach. business processes. Successor generations X and Y are generally much more innovative and receptive to technology Understanding a client’s goals is vital. That’s why we carry than baby boomers, so changing the organizational out executive interviews to understand the future business technology and the processes it supports can be a wise goals of the organization and to make sure we are aligned move. And such transformations can yield substantial with those plans. In this way, we develop a specific, and permanent incremental capabilities and increases complementary, value-adding strategy and the plan of in productivity. action needed to implement it. Outsourcing. For some, this can be the next logical step There are three levels of strategic execution – your business beyond transformation. Seizing the opportunity afforded by plans and your appetite for change will determine which is a radical, natural alteration to the workforce to take away right or you. noncore functions and to concentrate on core capabilities can create significant value. IBM has vast experience and Mitigation. This approach doesn’t change the business can provide sound advice and execution for a wide range model but it does ease the damage caused by workforce of outsourcing options. attrition. This can involve keeping employees part-time who would have otherwise left, or bringing retirees back as direct labor or as employees of a third party. The key here is to use these workers in a much more leveraged way, mentoring younger staff or consulting in their area of speciality. Technology has a great role to play too for businesses that want to quickly bring on more people as replacements for retirees. We have experience using e-learning to deliver accelerated, focused training to qualify current employees as replacements. 6 A new way of working We are moving rapidly towards a global talent shortage At some point in the near future, fundamental changes in workforce demographics will force organizations to abandon their current business models. Valuable people will leave either by choice or though age-related disability, and replacing them will prove increasingly difficult. We are moving rapidly away from an over-supply of labor into a global shortage of talent. Importing qualified expertise from the third world, Eastern Europe or the Far East will not suffice – all these places have, or will have, their own problems, as well as their growing talent requirements. There will be global competition to recruit and develop people from a finite labor pool. As we said, this is not all bad news. The time window for action is closing, but there is a definite first-mover advantage for those who are prepared to look carefully and act shrewdly to combat the problem of the aging workforce. Managing the maturing workforce: strategy and supporting responses Strategy • Mitigation • Transformation • Outsourcing Human Capital Management Learning Work Environment Knowledge Management • Policy/Programs • Workforce/talent management • Analytics • Mentoring • e- and in-line learning tools and infrastructure • Content • Applications • Process roles and functions • Interfaces • Preservation/ Capture • Sharing • Transfer Supporting technology infrastructure 7 Many, many others IBM United Kingdom Limited 76 Upper Ground South Bank London SE1 9PZ About IBM Business Consulting Services With consultants and professional staff in more than 160 countries globally, IBM Business Consulting Services provides clients with business process and industry expertise across 17 industries. We draw on the full breadth of IBM capabilities, standing behind our The IBM home page can be found on the Internet at ibm.com advice to help clients implement solutions designed to deliver business outcomes with far-reaching impact and sustainable results. IBM, the IBM logo and the On Demand Business logo are trademarks of International Business Machines Corporation in the United States, other countries, or both. About IBM Human Capital Management IBM Business Consulting Services’ Human Capital Management Other company, product and service names may be trademarks or service marks of others. (HCM) focuses on helping clients improve the value of their human capital assets to the organization. With more than 3,000 References in this publication to IBM products or services do not imply that IBM intends to make them available in all countries in which IBM operates. Copying or downloading the images contained in this document is expressly prohibited without the written consent of IBM. practitioners, Human Capital Management has a full suite of endto-end capabilities to address client’s challenges. Our capabilities include HR Strategy, HR Service delivery, talent, learning, workforce and performance management. This publication is for general guidance only. For More Information To find out more about IBM’s capabilities in Human Capital © Copyright IBM Corporation 2006 All Rights Reserved. 1 Dychtwald, Ken, Tamara Erickson and Bob Morison. “It’s time to retire retirement.” Harvard Business Review. March, 2004. 2 Harding, E. U. “Knowledge Retention Reduces Downtime at a Diamond Mine.” Software Magazine. Jun/Jul 2001, Vol. 21, Issue 3. 3 “Diagnostics Application Will Help Diamond Giant ‘Polish Up’ Equipment Service Performance.” ClickSoftware Press Release. March 16, 2000. Management please visit us at ibm.com/bcs/humancapital or contact one of our IBM HCM experts in your area: Ed Vitalos Americas Maturing Workforce Leader Lisa Tondreau evitalos@us.ibm.com Americas and US HCM Leader lisa.tondreau @ us.ibm.com Global and Europe Mary Sue Rogers Asia Pacific Global HCM Leader Wayne Peat mary-sue.s.rogers @ uk.ibm.com Asia Pacific and ASEAN HCM Leader waynep @ sg.ibm.com Europe José de Ramon Southwest Europe and Spain HCM Leader jose.de.ramon@es.ibm.com Roger Metelerkamp Northeast Europe and UK HCM Leader roger.metelerkamp@uk.ibm.com FEUS01291-1