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Weekly UpdatesImagine you are an HR executive and there are two possible scenarios you might experience. In the first scenario, you are fully aware of and concerned about the aging of your organization's workforce. You are especially concerned about the retirements of knowledgeable and experienced baby boomers and that steps have not yet been taken to transfer those potential retirees' valuable knowledge to others in the organization. You bring this concern to the attention of senior managers, but you feel like the little pig crying wolf when you are accused of unnecessary alarmism and failing to have your priorities straight. Or, equally troubling, you remain silent because you happen to work for an organization where negative news is unwelcome, and you fear the inevitable fate of the messenger who brings bad news. Either way, the organization fails to address its aging workforce challenge in a timely manner.
In the second scenario, you are not sufficiently informed about the aging of your organization's workforce and the risks from a large number of retirements. Or, equally troubling, you have such an awareness, but you do not think the aging workforce is an immediate or particularly serious concern for your organization because of other priorities. As a result, you take no immediate action. Subsequently, after the magnitude of the problem becomes apparent in the organization, you are summoned before the executive committee to explain why you, as the senior HR professional, did not alert management to the risk of the aging workforce.
Where do such scenarios leave the HR professional? Not, it must be acknowledged, in an altogether comfortable position. Consider for a moment, though, that these and similar scenarios are likely to manifest themselves in most organizations in one form or another over the next few years. Organizations must take steps to develop a strategy for successfully transferring the valuable knowledge that resides in their older workers to other members of their workforce. Denial, delay, or doing nothing may be appealing responses in the short term, especially when there is some evidence that older workers are working longer and that the supply of workers appears to be in balance with or exceeding demand. Taking action is also more difficult during times of economic slowdown, when an organization is focusing on controlling expenses.
The Critical Importance of Knowledge
Researchers and practitioners have discussed the importance of knowledge transfer to an organization's success, and knowledge has become recognized as the most strategically significant resource of organizations. (1) When Peter Drucker (2) alerted organizational leaders to the rise of the knowledge society, he described the radical change in the meaning of knowledge and how knowledge had assumed even greater importance than either capital or labor for nations. As the workforce driving the knowledge economy ages, new challenges will arise, particularly the risk of a significant loss of valuable knowledge as older workers retire from the workforce. In the knowledge economy, even flawless execution cannot guarantee an organization's continued success, as the failure to incorporate new information can cause an organization to fall behind. (3) Intellectual capital and employee talent have become areas of competitive advantage, and even of survival, for organizations.
Many executive decision makers are increasingly treating equipment, technology, unskilled labor, and capital as commodities. Employee knowledge, experience, and wisdom, however, are not organizational commodities, and they cannot be managed as commodities. The knowledge held by individuals must be passed on to others in order for that knowledge to be leveraged. (4) Yet it is noteworthy that so many organizations continue to maintain a short-term focus by laying off talented workers and facilitating early retirements before putting in place a strategy to capture and retain the valuable knowledge that is lost when the most experienced individuals leave the organization.
Recruiting, motivating, and retaining a talented workforce are not short-term problems or passing fads. They are systemic, protracted, and chronic problems that organizations will face for the foreseeable future. Demographic and workforce management will be as critical a strategic issue for organizations as financial and technological management. This harsh reality may be difficult for many organizational leaders to appreciate and accept. Workforce demographics have almost always worked to the advantage of organizations. Yet current and projected workforce supply and demand challenges are complex and multifaceted. These challenges may be broadly conceptualized as a "perfect demographic storm." A perfect storm is a situation in which multiple undesirable and uncontrollable conditions come together at the same time. Currently, there is a convergence of three demographic-influenced realities that will affect the ways in which organizations' workforces must be strategically managed-the loss of knowledge due to the retirement of baby boomers, a projected shortage of workers, and an overall aging workforce.
Loss of Knowledge From Baby Boomer Retirements
An inevitable reality of organizational life is that valued employees leave the organization, voluntarily or otherwise. Some of this loss of talent can be predicted and controlled, but some loss cannot. Death, disability, voluntary resignation, and other life events cannot always be predicted and controlled. Yet organizations have great opportunity and resources to both predict and, to some extent, control the retirement of baby boomers.
Organizations run the risk of losing great stores of knowledge from the impending retirement of large numbers of baby boomers. Many of these employees have amassed great knowledge, skills, and wisdom that has either not been captured within the organization's collective memory system or which has not been personally transferred to other individuals in the organization. Given the age demographics of many organizations, an unprecedented loss of human capital will occur between now and 2020 unless steps are taken to proactively transfer the knowledge from valued longtime employees. The risk of knowledge loss is especially acute in the public sector, as job tenure tends to be greater in the public sector than in the private sector.
What organization would not take immediate corrective action if it identified a steady decline in customers, a rise in customer complaints, or a billing system that was losing it money? Yet many organizations do not act with the same sense of urgency when the lack of a knowledge transfer process results in a continuous loss of unrecoverable knowledge as valued employees transition to retirement.
Knowledge management is a broad concept that has been defined as "a conscious strategy of getting the right knowledge to the right people at the right time" (5) and as a way of putting knowledge into action to improve organizational performance. How to transfer knowledge from one person to others or to the broader organizational knowledge base is a challenging aspect of the knowledge management process because knowledge transfer does not occur spontaneously or naturally. Ensuring an effective transfer of knowledge requires having an understanding of the dynamics and organizational processes of the knowledge transfer process.
In reflecting upon what he learned from archaeology, Robinson (6) noted that the ancients knew many valuable and significant facts that no one knows today and that the amount of lost knowledge is beyond estimation. Once it is lost, knowledge can never be fully recovered. It is wise, therefore, for organizations to focus on capturing knowledge before it is lost rather than on trying to buy knowledge or recover it. While it is difficult to accurately calculate the financial consequences of losing critical knowledge, the risks certainly include lost productivity, increased errors, and diminished creativity. The essential point organizational leaders need to recognize is that once knowledge and expertise has left their organization, it is difficult to recover, so difficult as to be unlikely. Knowledgeable older workers will be leaving organizations in record numbers over the coming decade, so before they leave, it is imperative that organizations take steps to retain their knowledge.
A Shortage of Workers
Demography is not an exact science, but it provides reliable and useful data for workforce planning. Demographers, like climatologists who can alert us to changing weather patterns such as global warming, can alert us to changing patters of birth and longevity rates. It is up to us to decide what to do with this information.
The evidence that the populations of developed countries are aging rapidly due to decreased birth rates and longer life spans is undeniable. For example, the fastest growing segment of the workforce in the United States is individuals older than 55 years, whereas the population of workers who are between 35 and 44 years of age, which are considered the prime executive development years, is declining. (7) There were early indications that the workforce was aging when Workforce 2000 (8) was published in 1987, but the predictions about aging issues were overshadowed by the more immediate issues of racial, ethnic, and gender changes in the workforce that needed to be confronted by organizations. Now is the time to meet the challenges of the aging of the workforce with the same vigor with which those other challenges were met.
During the downsizing drives of the 1980s and early 1990s, many organizations reduced hiring and training. As a consequence, many organizations are now experiencing shortages of midcareer managers and employees with the skills, experience, and institutional knowledge to flu the knowledge void that will occur when older workers retire. Much of this dilemma has been precipitated by practices in organizations that focused on removing older workers from the workforce. Older workers became increasingly viewed as an expendable resource to eliminate rather than as a valuable resource to retain. In times prior to the downsizing era, older workers were the group most likely to be protected by internal labor markets, but they have seen a dramatic decline in their job stability. Medoff (9) found that the proportion of prime-age workers (ages 35-54) permanently displaced from their jobs nearly doubled between the 1970s and the early 1990s. Men aged 55-64 saw their job tenure fall from 15.3 years to 10.5 years between 1983 and 1996. (10) There has been a noticeable shift, then, from previous periods in which job loss was traditionally determined by the "last-in, first-out" rule. Whereas in these previous periods of job loss, in which younger (versus older) workers and shorter-service (versus longer-service) workers were more likely to be displaced, these patterns have largely been reversed in the period of job loss from corporate downsizing and reengineering.
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