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The Aging Workforce and Succession Plans

In 1969, Neil Armstrong became the first man to set foot on the moon, marking the culmination of a $24 billion NASA space program. Ten years later, NASA sheepishly admitted they could not return to the moon even if they wanted to — they couldn’t remember how.

This is a perfect example of what is referred to as the “knowledge gap”: the loss of critical information when employees leave their place of employment. In the case of NASA, all the key people involved in the original Apollo 11 project had retired…and no one thought to jot down what they knew. To make matters worse, blueprints for Saturn V, the only rocket powerful enough to travel to the moon, were lost.

Even though this NASA fumble took place 30 years ago, the exact scenario is being played out in spades as Baby Boomers (those individuals born between 1946 and 1964) are reaching retirement age. Most employers have made no effort to capture the Boomers’ knowledge before they eventually leave. In the next 20 years, 76 million Boomers will sing the Johnny Paycheck song as they walk out the door, taking with them an entire generation’s worth of knowledge that can never be replaced. There is an inconvenient truth in the potential calamity, and most companies aren’t ready for the aftermath.

Boomers make up more than one third of the nation’s work force. They fill many of its most skilled and senior jobs. Thanks to their near-workaholic habits, they are among the most aggressive, creative and demanding workers in the market today. Economists predict their exit will cause a great, sucking hole in the workplace universe.

Companies need to bear in mind that the coming retirement years are going to be larger than at any other time in U.S. history. With 76 million Boomers leaving the workforce and only 46 million Generation Xers (those born between 1965 and 1980) available to take the newly vacant roles, there will be a deficit of 30 million workers. So while the Millennials (also known as Generation Y — those born between 1981 and 1995) number approximately 100 million, the oldest of them are still too young and inexperienced to step into leadership roles.

A study earlier this decade by the Bureau of Labor Statistics reported that more than 17% of Boomers holding executive and managerial positions are expected to leave their careers by 2010.

While some companies have begun scrambling to hire trainees, and close the potential knowledge gap created by the Boomer exodus, most companies haven’t even taken notice, according to Elizabeth Kearney, founder and president of Kearney & Associates, a nationwide alliance of experts who specialize in this trend.

In fact, according to the Institute for Corporate Productivity (i4cp), only 29% of responding organizations report that they incorporate retirement forecasts into their knowledge transfer practices. Furthermore, i4cp found that only a third add “skills gap analysis” into those forecasts; less than half say they train their managers to identify critical skills; only 23% are educated in critical skills transfer; and most companies admit they do not formally measure the effectiveness of their knowledge transfer practices.

Cornerstone OnDemand has released a whitepaper finding that most organizations, particularly larger ones, are not ready for the pending talent shortage caused by the looming retirement of Boomers. The paper, titled, “Managing Talent in the Face of Workforce Retirement,” summarizes key findings of Knowledge Infusion’s “2010 Talent Readiness Assessment,” which indicates, among other things that:

  • Organizations with more than 2,500 employees indicated that approximately one in five workers are over the age of 55;
  • More than 50% of respondents said the retiring workforce will cause a knowledge/skill gap; and yet,
  • Less than 30% of organizations that responded had a knowledge retention plan in place.

David DeLong, author of the book Lost Knowledge: Confronting the Threat of an Aging Workforce, recently pointed out that there are direct and indirect costs associated with lost knowledge.

Direct costs occur through the loss of workers with specific knowledge through retirement and attrition. When these experts are no longer around, it accentuates the indirect costs of knowledge loss: poor documentation and storage.

A holistic approach is necessary to deal with an aging workforce and knowledge retention problems, according to DeLong. The approach combines effective knowledge transfer practices, knowledge recovery initiatives, strong knowledge management technologies and finally, more effective HR processes and practices to deal with the problem on a more systemic level.

Here are three things DeLong recommends companies should be doing to deal with aging workforce problems:

  • Harvest critical information now and make it available at point-of-need. Companies should begin by identifying where they are most at risk from the loss of knowledge and experience. This involves, in part, establishing performance management and career development processes that identify employees with the most critical knowledge and expertise. For example, to sustain business after the 9/11 attacks, Delta Air Lines was forced to make workforce cuts to remain competitive. This meant that Delta had less than two months to identify which of the 11,000 laid-off employees had jobs for which no backups or replacements had been trained, and then capture that knowledge before it walked out the door. Supervisors worked with a team from Delta’s learning services unit to narrow the list down to those veterans whose departure would represent a critical job loss. Once these outstanding performers were identified, they were interviewed about their roles at the company. This way, Delta retained as much critical knowledge as possible on very short notice.
  • Use real-time collaboration tools to enable workers to interact with colleagues. As collaboration and knowledge management have grown, relevant technologies and tools have become increasingly sophisticated. Things like workspace portals are revolutionizing knowledge management and collaboration solutions by giving workers access to enterprise data and applications, productivity and virtual collaboration tools, and documented knowledge, all of it personalized.
  • Use advanced e-learning techniques. Performance simulation gives employees the opportunity to practice, in real time, the key skills and competencies they must acquire to address knowledge drain.
  • Employ better workforce planning and targeted knowledge retention initiatives to address the brain drain that now threatens entire industries.

“Companies need to proactively assess their organizations and determine a plan of action before this threat becomes a reality,” said Adam Miller, president and CEO, Cornerstone OnDemand. “Understanding the overall goals of the organization and which employees are key to achieving these goals including their role, skills and level within the company is important to implementing a retention plan.”

Not all employers are ignoring the inevitable. The i4cp study found that there are a number of up-and-coming practices in use or under consideration. “Communities of practice” are utilized by a third of all responding companies to transfer knowledge, and the use of Webcasts and services such as “Lunch and Learn” and “SharePoint” are on the rise.

Harvesting the knowledge is only part of the equation. The captured knowledge must then be reformatted into a usable database with easy access by the employer. It does no good to house the data in a three-ring binder and then place it on a dusty shelf, never to be seen again.

Northrop Grumman has been on the forefront of knowledge management for many years. In 1997, with the Cold War behind them, thousands of NG engineers, who had helped design and maintain the B-2 bomber, were asked to leave the integrated systems sector. In a short period, 12,000 workers filed out the door, leaving only 1,200 from an original staff of 13,000 employees, to help maintain the current fleet of bombers. The 12,000 took with them years of experience and in-depth knowledge about what was the most complex aircraft ever built. Without appropriate measures, this could have been a disaster of epic proportion. Instead, before the exodus, NG formed a “Knowledge Management Team” who identified the top experts and videotaped interviews with them.

To this day, the company uses a variety of tools to retain and transfer knowledge from its engineers — before they retire. The company has implemented document management systems, as well as common work spaces to record how an engineer did her job for future reference. NG also brings together mature and young engineers across the country to exchange information via e-mail or in-person about technical problems.

No company wants to be in the position in which NASA found itself — having to explain why it can’t recreate the single greatest event in modern history. If employers don’t plug the knowledge gap prior to the great Boomer exodus, it’s going to be more than just Houston that has a problem.