Assessing the impact of an aging workforce across global organizations.

Assessing the impact of an aging workforce across global organizations

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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

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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+:

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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+:

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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

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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

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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

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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

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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

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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

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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

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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

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“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

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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

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“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

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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?

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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