Many employers are nearing a point at which it will be extremely difficult to meet the demand for skilled employees.
By 2050, the global population aged 60 years and older is projected to exceed the number of people under 15 for the first time in history. In Germany, the number of people over 50 is expected to rise 68 percent by 2020. China faces big demographic risks, too — and even nations such as Brazil, with large cohorts of young people, are not immune from workforce risks.
To stay competitive, companies will have to start preparing now for the demographic risks in all of the individual markets in which they operate. They must master the structured discipline of strategic workforce planning — and then put it into action.
Those are the key findings of a recent study by The Boston Consulting Group (BCG) titled ‘Turning the Challenge of an Older Workforce into a Managed Opportunity’.
The study analysed approximately 600 personnel measures at more than 330 companies worldwide; more than 70 senior managers were surveyed. In addition to demographic risk profiles for 16 major economies, the study describes best-practice examples of how managers can most effectively address the risks.
Needed: A systematic approach
Demographic risk has two components: capacity risks, marked by the growing wave of retirements that see employees taking their valuable knowledge with them; and performance risks, whereby companies will be increasingly challenged to maintain their competitiveness as their workforce’s performance changes.
”To close the gaps, companies will have to train their current employees for the right skills in packages of defined measures, manage their knowledge, and hire new people,” explains Rainer Strack, a Senior Partner at BCG and the firm’s Global Head of HR topics.
“At the same time, the changing performance potential of their workforces will have to be brought into alignment with their business models — for instance, by revising workflows to match the needs of older workers.”
Adds BCG partner Jens Baier, “Only with systematic, strategic human resources planning will companies manage to stay successful as their employees age.”
The BCG study outlines a six-point plan for how companies can best tackle these imminent capacity and performance risks:
1. Segmentation of employees into different job categories, based on the required experience and qualifications and the inter-changeability of the respective functions at the company.
2. Simulation of the company’s future workforce, accounting for relevant parameters such as fluctuation rates, retirement age, and the company’s retirement policies.
3. Forecasting of staffing needs, derived on the basis of the company’s business strategy and the underlying drivers of HR requirements, in order to determine how different strategic scenarios will affect future demand for employees in the individual job categories and locations.
4. Analysis of capacity gaps, based on detailed comparisons of projected demand for the available workforce of the future in different business scenarios. Detailed analysis can show which job categories will have skills surpluses or shortages—and when. Bottlenecks in specialised functions, where the development of skills takes a long time, can thus be identified early on.
5. Anchoring of packages of prioritised measures in order to close capacity gaps—including expansion of the applicant pool (attracting qualified candidates from other industries and disciplines), retraining employees (IT training helps older employees to work more productively with complex software), and supporting job transfers (rotations to other departments that broaden employees’ skills).
6. Developing a strategic HR planning process that is closely and continuously linked to the company’s targets and goals—not just a “one-time thing” but a fixed component of the overall strategic planning process.
‘Turning the Challenge of an Older Workforce into a Managed Opportunity’ contains many insights that can help organisations to implement a clearly structured process of strategic workforce planning.