the organizational retirement dilemma

09/22/2010

by carolyn mathews

Organizations of all kinds find themselves in a retirement dilemma. From industry to academia, the situation is much the same. Baby boomers are near retirement/pre-retirement age. If they leave all at once, there will be a huge gap in knowledge and skills. If the boomers stay, there is little room to develop high potential talent, inadvertently clogging up the talent pipeline. And, there’s an economic factor pertinent to the organization. Executives and other employees hired and retained for their established expertise cost more than those starting their careers. Conversely, those starting their careers may cost the organization in lost opportunities due to lack of business contacts or know-how.

In an article found on factiva.com, Carole Rickard Hedden, who writes exclusively about the aerospace and defense industry (A&D), addresses this topic. Much like the doomsday predictions we all heard as we entered a new century, the predictions regarding a boomer retirement exodus have not happened – yet. It turns out, the global recession changed the plans of many pre-retirees who saw their retirement accounts and/or property values plummet. Using research from the 2010 Aviation Week Workforce Study, Hedden states that from 2009-2010 the retirement rate lowered from 5.7% to 2% of those eligible in the aerospace/defense industry.

The report states that by 2014, nearly 40% of employees in A&D will be eligible to retire. And, it appears no one knows when they will. Factors such as the economy and talks of raising the benefits retirement age to 70 will play a role in these decisions. But, of course, economic factors are just part of the story. Some people simply like the work they do and want to work longer. Lockheed, for example, has established a transition program for near-retirees that allows employees to continue working longer, but with a flexible schedule.

I suggest this dilemma extends well beyond the A&D arena. For instance, in academia where there is no mandatory retirement age, tenured professors stay well into their 70s and sometimes even beyond! Pilots, although they still have a mandatory retirement age, had it extended a few years ago from 60 to 65. Even “younger” tech companies like Microsoft are full of boomers! When you love what you do, and you continually build your expertise throughout the years, economics of retirement may be less of a factor than passion and purpose.

And therein lies the dilemma… While organizations provide the means for older workers to remain past retirement age, those in the early or mid-career stages have no place to ascend. There are only so many positions at the top, and if those who are already there remain well past their expected departure date, the careers of others may stagnate. The challenge for organizations is to:

  1. Keep employees engaged so they want to remain with the organization – at any level, but particularly with a focus on top talent
  2. Find a way to enhance knowledge transfer so if the mass exodus does occur, the organization is not caught short
  3. Develop a retirement transition program so near-retirees are prepared not only financially, but also have an established means that provides purpose and direction in their lives so they feel comfortable leaving

Although the doomsday retirement predictions probably will not occur in any predictable way, it behooves organizations to be prepared for the most likely. This can be facilitated by conducting industry research, and also by talking to your employees. Find out how engaged they are; learn more about their retirement needs.

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