Dramatic changes to age profiles – and generational differences in the workforce – are posing HR and management challenges for companies worldwide.
The population is ageing in virtually every country, with more employees than ever approaching retirement, some of whom may not be ready to retire.
At the same time, post-millennial Generation Z is entering the workforce with different values and skills to older generations, creating new challenges in multi-generational offices.
Complex age phenomenon, coupled with advances in technology and changes to the way we work, have major implications for firms at both domestic and international level.
Diana Verdun, HR Director at US accounting firm Plante Moran, says: “In the accounting profession we are in a unique situation because we are hiring individuals directly off the campus. More than half of our staff members are millennials. We span all generations and we are continually facing differences.”
To understand these differences, and how to respond effectively, we need to examine the key trends.
Population profiles are changing at an alarming rate but there are marked differences worldwide:
- The number of people aged 60 or over is expected to more than double worldwide by 2050, rising from 962 million in 2017 to 2.1 billion in 2050, according to United Nations estimates;
- China has the most ageing population and the number of working age people is set to fall 23% by 2050 (Bloomberg);
- Japan has the highest old-age dependency ratio of all OECD countries, with more than one person aged 65 for every two people aged 20 to 64 in 2017 (OECD);
- India has one of the world’s youngest populations with half of its 1.25 billion population below the age of 25, and a quarter below the age of 14 (Guardian);
- By 2050 all regions of the world except Africa will have nearly a quarter or more of their population at age 60 or above (United Nations).
These differences present significant recruitment and training challenges. In Japan, for example, the challenge is to allow older people to continue contributing their skills to the economy and encourage more women to remain the labour force, according to a report by the OECD called Working Better with Age. Japan also has the greatest skills gap according to OECD data.
In India the main problem is lack of training and opportunities for the young workforce. The World Economic Forum says India has a “unique demographic advantage” but warns the opportunity will be lost without proportionate investment in human capital development.
A survey of more than 5,000 youth in India by the World Economic Forum and the Observer Research Foundation found young Indians are ambitious and are eager to undergo training, but various factors are blocking their ambitions and preventing them from adapting effectively to the changing nature of work. The Forum calls on the private sector to do more to bridge the skills gap and to help ensure training is demand driven and matches job requirements.
Geographic differences are only part of the age challenge facing HR managers. Generational issues facing every company include:
- How to attract and retain young, tech-savvy talent?
- How to manage multi-generational offices?
- How to handle retirement and replace key staff?
- How to accommodate those willing and able to contribute beyond historic retirement age?
Engaging young talent is likely to be paramount for companies in 2019 and beyond. Generation Z (individuals born after 1996) makes up less than one in ten of the workforce today but will represent 31% of staff by 2025, according to social researcher and Millennial Claire Madden.
Speaking at the Sydney Global Conference of Praxity, the world’s largest alliance of independent accounting and consulting firms, Claire Madden described this new generation as “the most materially endowed, technically literate, formally educated generation to ever grace the planet”.
To attract and retain Generation Z’ers, she urges firms to communicate a clear understanding of this new generation. Also, to show what is required in a role and the journey young talent can go on to reach their goals.
But what about the rest of the workforce? As a new generation reaches working age, businesses could see up to five different generations working together, each with different skill sets, outlooks and approaches.
Diana Verdun at Plante Moran says: “This is perhaps one of the biggest challenges we face. Senior individuals focus more on succession planning, experiential learning, face to face meetings and talking to people on the phone. New individuals are used to communicating through technology as opposed to face to face and this can create misconceptions about people.”
If an individual chooses to communicate via a WhatsApp message, for example, rather than face to face, different employees will perceive this in a different way. Some may think the individual doesn’t want to talk to them face to face but it could be they just want to send a quick message and give the other person time to think about the information before responding.
Research by global staffing firm Robert Half Management Resources reveals that CFOs believe the greatest differences among employees of different generations are communication skills (30%), followed by adapting to change (26%) and technical skills (23%).
Baby Boomers (born 1946-1964) are apparently more reserved in their communication style while Generation X’ers (1965-1980) favour control and demand style. Conversely, Gen Y’ers or Millennials prefer a more collaborative approach and Gen Z’ers prize in-person interactions.
The research also indicates Baby Boomers and Gen X’ers value traditional instructor-led courses or self-learning tools while Millennials (including Generations Y and Z) prefer collaborative and technology-centric options.
While it can be useful to be aware of generational differences, Diana Verdun says it’s important not to label. She adds: “It’s easy to say millennials like recognition but we all like recognition. It’s very important to create a culture that respects differences. Diversity is important at Plante Moran; we promote it and we understand it.”
The challenge is keeping everyone happy. David Meagher, Head of the People and Culture team at ShineWing accounting firm in Australia, says this requires a more flexible approach.
He says: “Many workplaces in Australia are addressing the needs of an ageing workforce and the needs of the Gen Z’ers with the same solution – flexibility. There are many differences between generations, but one thing that remains consistent is the desire for flexibility in various ways.
“We believe if a firm has strong values, these will resonate with any one of any age and this is what underpins a culture for delivering great outcomes for clients, while supporting a workforce that is demanding flexibility.”
In an article published by Robert Half recruitment, the firm’s Executive Director, Tim Hird, says companies should see differences as a positive, not a negative, and should embrace the unique characteristics that each generation brings to the workforce. Companies are advised to:
- Understand everyone wants to do a good job and help the company;
- Tailor management for each person’s strengths, personality and aspirations;
- Host team-building events outside the office to give employees a chance to get to know each other in a different setting;
- Let newer team members advise and share their insights with veteran colleagues, and invite team members from all generations to share their unique areas of expertise;
- Combine groups with complementary skills and diverse perspectives to drive innovation.
As the population ages in most countries, the subject of retirement in particular needs to be handled with care.
Among the key challenges for managers are:
- How to broach the subject retirement in a sensitive way?
- How to help prepare employees for retirement?
- How to fill the gap when talented individuals leave?
At many companies, more than 50 percent of the workforce will be retiring in the next three to five years. Most of these personnel are in key management and supervisory positions with important knowledge on how to manage a department or business.
Firms need to consider how to capture this knowledge and communicate it within the organisation through training and documented procedures.
Diana Verdun says the current trend at Plante Moran is for individuals to consider early retirement, but crucially, the firm has a detailed succession planning process. “From a generational viewpoint it’s so important that we are transferring knowledge.”
In many cases the ageing workforce are looking to reduce their hours but not retire completely but companies should see this as a positive.
David Meagher explains: “Providing them with some flexibility in the hours they work meets their wishes but you also retain their knowledge of the business and it helps with succession planning. This same flexibility works for the Gen Z workforce as well. Many young workers are seeking flexibility in their employment with their mantra being ‘work is something you do not where you go’. Providing employees with the option of working from home on occasions or providing them with technology that gives them mobility goes some way to meeting their flexibility requirements.”
Where retirement is taboo
However, some countries are lagging behind when it comes to adapting to changing age profiles. In the UK, for example, retirement is almost a taboo subject according to an article published by the Economic and Social Research Council (ECRC).
Professor Sarah Vickerstaff, Professor of Work and Employment at the University of Kent, says: “Age discrimination legislation and the abolition of compulsory retirement at 65 means that employers are worried about talking to older workers about retiring, for fear of being accused of ageism.”
Changes to the law mean it is illegal to discriminate on the basis of age in the UK, as in many parts of the world. It is also illegal to force someone to retire at a particular age. “These changes firmly place the onus on employers to extend working lives by recruiting and retaining older workers,” Professor Vickerstaff says.
Without a clear process in place, line managers cannot plan for succession because they don’t know when people will go, and employees have little support in making decisions about when to retire.
The problem is confounded by the physical condition of some employees. Not everyone is fit enough to work into their late 60s and some may be at risk of burn out if retirement is not broached earlier.
Experts recommend talking to employees long before they are due to retire and putting in place a detailed, transparent process for every stage of the retirement process.
The ageing workforce and multi-generational differences present unique challenges in the workplace, but with advance planning, clear procedures and a willingness to be flexible, companies will be better placed to respond in an effective way.
This article was written for Praxity Global Alliance, the world’s largest alliance of independent accounting and consulting firms.