assessing the impact of an aging workforce across global organizations

Assessing the impact of an aging workforce across global organizations

30 April 2008 Presentation titlePage 2

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► 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

Source: U.S. Census Bureau

Under 5%

5% to 12.4%

12.5% to 20%Above 20%

Percent of Population Age 60+:


An aging world – 2025

Source: U.S. Census Bureau

Under 5%

5% to 12.4%

12.5% to 20%Above 20%

Percent of Population Age 60+:


Assessing the global aging workforce

► 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

► 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

► 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

► 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► 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 findings► 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► 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

► 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

► 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 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 ► 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

knowledge across 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

► 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

► 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

assessing the impact of an aging workforce across global organizations

Documents

aging workforce slide

global aging workforce

global workforce

aging workforce boards

aging world

workforce survey

presentation titlepage

todays workforce