2008 ManagingDemographicRisk
- (Strack et al., 2008) ⇒ Rainer Strack, Jens Baier, and Anders Fahlander. (2008). “Managing Demographic Risk.” In: Harvard Business Review, 86(2).
Subject Headings: Laborforce, Laborforce Demand, Laborforce Supply, Labour Shortage.
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Abstract
The workforce is aging rapidly. When employees begin retiring in droves, many companies will face severe talent shortages. Managers need to pinpoint now where critical gaps will open - and prepare a strategy for closing them.
Introduction
Most executives in developed nations are vaguely aware that a major demographic shift is about to transform their societies and their companies — and assume there is little they can do about such a monumental change. They’re right in the first instance, wrong in the second.
The statistics are compelling. In most developed economies, the workforce is steadily aging, a reflection of declining birth rates and the graying of the baby boom generation. The percentage of the U.S. workforce between the ages of 55 and 64, for example, is growing faster than any other age group.
The situation is particularly acute in certain industries. In the U.S. energy sector, more than a third of the workforce already is over 50 years old, and that age group is expected to grow by more than 25% by 2020. The number of workers over the age of 50 in the Japanese financial services sector is projected to rise by 61% between now and then. Indeed, even in an emerging economy like China’s, the number of manufacturing workers aged 50 or older will more than double in the next 15 years.
But national and even industry statistics like these serve mainly to put managers on notice of a general problem. The important issue is the demographic risk your own firm faces. As employees get older and retire, businesses can face significant losses of critical knowledge and skills, as well as decreased productivity. The demographic trend has been exacerbated by the relentless focus on cost reduction that’s become the business norm. In their zeal to become lean, organizations continue to have round after round of layoffs — without realizing that in just a few years they may confront severe labor shortages or, if they’ve shed mostly younger workers, be left with a relatively old workforce. In some cases, a company’s ability to conduct business may even be hindered: When people begin retiring in droves, there may be no one left who knows how to operate crucial equipment or manage important customer relationships.
We offer here a systematic approach to analyzing future workforce supply and demand under different growth scenarios and on a job-by-job basis. It enables companies to determine how many employees they are likely to need, which qualifications they should have, and when they will need them. With that information, they can set up a tailored retention, recruitment, and talent management strategy for the job functions at greatest risk of a labor shortage. Such an initiative must be launched long before things reach a crisis stage, because the remedies may need years to take effect. Companies that act early not only will minimize the risk but also will gain an important advantage over their rivals.
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| Author | volume | Date Value | title | type | journal | titleUrl | doi | note | year | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2008 ManagingDemographicRisk | Rainer Strack Jens Baier Anders Fahlander | Managing Demographic Risk | 2008 |