Engaging a Multi-Generational Workforce
Is Your Company Ready for the Challenge?
In today's business landscape there is an increasing connection between a company's financial performance and its overall ability to recruit, engage and retain its employees.
This issue of Premium Incentive Products looks at the changing multigenerational workforce and what this means in developing effective recognition and reward programs.
In coming months we'll look at other employee engagement business strategies, including how multicultural workforces are changing the employee landscape and what a global workforce means to incentive development and management.
PART 3 IN A SERIES
Engaging a Multi-Generational Workforce
Is Your Company Ready for the Challenge?
This shortage, in fact, has become the most pressing concern among employers (even topping the rising cost of health care) according to the "14th Annual Top Five Total Rewards Priorities" survey conducted by Deloitte Consulting and the International Society of Certified Employee Benefits Specialists.
Other studies bear this out, but also point to the fact that companies aren't doing much about it. A 2008 study by Stanton Chase International called "Business Implications of the New Reality" reported that 94 percent of the 37,000 surveyed executives and managers believe there is a talent shortage, and 79 percent believe there is a moderate to significant gap between retiring baby boomers and younger generations when it comes to qualified leadership talent. Yet just 18 percent said their company had a plan in place.
Companies are losing leaders at a much faster pace than they are producing them, say Douglas R. Ready and Jay A. Conger, co-authors of a recent MIT Sloan Management Review article titled "How to Fill the Talent Gap." "More than 30 million managers and leaders will be retiring within the next five years," they report.
Another wrinkle they note is that the downsizing tactics used to gain operating and cost efficiencies during the 1990s have stripped management layers. As a result, "these lean organizations cut out many of the developmental opportunities for next-generation leaders," Ready and Conger write. "So there are fewer and fewer candidates ready to step into crucial management roles as older managers retire."
It's clear that Corporate America is top-heavy. With baby boomers filling most executive positions, there is a disproportionate amount of leadership talent and knowledge vested in employees who will soon be leaving the workforce. Not only are younger employees insufficiently prepared to fill the knowledge and leadership gap—there simply aren't enough to fill the shortage.
This shortfall is coming because the number of baby boomers born within an 18-year period, from 1946 to 1964, was so huge—78 million people. And U.S. birth rates have been on a steady decline since the late 1970s. Citizens of child-bearing age just aren't having enough kids to meet the country's need for future workers.
While boomers don't have any intention of disappearing tomorrow, the oldest are reaching retirement, and some started leaving the workforce in 2006. Members of this group are at different stages in life, and some are almost 20 years younger than others. Many plan to continue working part- or full-time either by choice or economic necessity. But whenever and however the boomers do leave the workplace, we can be assured of one thing: They will leave an enormous workforce vacuum.
Filling their shoes will be two younger generations, each with different expectations about workplace opportunities and rewards: generation X and generation Y (also known as the "millennials").
Generation X, people born between 1965 and 1980, reported to be from 38 to 48 million people, is too small of a group to replace all the retiring boomers. The millennials or generation Y—the 80 million people born between 1981 and 1999—are just launching their careers or graduating from college. They don't have the career experience or knowledge to replace retiring leadership yet.
Who will be hardest hit by the aging workforce and shortage of workers? It's likely that, to some extent, virtually every employment sector will feel the void. Various reports specifically point to employment sectors that encourage long service, those that have hired very few people in recent years, and those that experienced major downsizing in the 1980s and 1990s. Other studies cite companies that haven't cultivated the talent necessary to replace retiring leaders. Industry examples include medicine, engineering, health care, defense and aerospace, education and government, according to a policy brief by the Boston College Center on Aging & Work and the AARP called "21st Century Age Demographics: Opportunities for Visionary State Leadership."
Authors Ready and Conger at MIT Sloan researched more than 40 companies to identify the steps companies are taking to meet the talent gap. While they found that some companies are racing to find solutions, most of them are making a critical error. "They're treating these problems as separate issues. At most multinationals, a host of problems in recruiting and developing talent are converging to create a perfect storm—a crisis that could derail the company's growth strategies.
"To meet the challenge," the report adds, "companies must rethink how they hire, train and reward their employees, placing those tasks at the heart of their business plans. In doing so, they have an opportunity to address all these separate problems with a unified plan, rather than waste time and resources attacking each of the issues individually."
The commitment should extend through the entire company, Ready and Conger explain. "The best-in-class firms that we examined had talent processes that were marked by deep commitment, high levels of engagement and widespread accountability among senior leaders, line managers, human resources and the talent prospects themselves."
MEETING THE CHALLENGE: Multiple Generations, One Workforce
People of different generations have worked together throughout history, so this isn't a new phenomenon. But meeting the needs of an increasingly diverse, multigenerational workforce—and keeping them motivated and engaged—presents entirely new challenges.
For starters, younger workers often want more balance between work and life, a big departure from boomers who often have focused on work to the extent that it has become "life." Younger generations have different expectations about what "advancement" means and a different take on career development. They want more coaching and feedback from managers, and they want it often.
In response, there are big changes under way in almost every area of performance management—from training methods and career development to multigenerational teams and executive temp jobs.
We've pinpointed some of the major "change factors" taking place on these fronts to give you ideas and maybe a bit of inspiration in meeting your own workforce challenges.
CHANGE FACTOR: Evolving compensation criteria
While the issue of employee financial compensation isn't within the purview of this industry publication, it is important to note that some companies no longer automatically tie compensation to an employee's longevity, job title or seniority level.
"Instead, their compensation structure is designed to reflect each employee's actual contributions to the organization—such as rewarding workers for contributions they make to the organization while on special assignment, in addition to base pay," explains Shelly Heiden in a recent article she wrote for Talent Management magazine, titled "Build a Multigenerational Performance Management Strategy." Heiden is executive vice president for Global Field Operations at Plateau Systems, an Arlington, Va.-based company that provides unified Web-based talent management software, content and services to help on-board, develop, manage and reward talent. Some of Heiden's recommendations are based on a 2005 report called "Get Ready: The Millenials Are Coming," written by Claire Schooley, a senior analyst with Forrester Research Inc. Schooley researches the impact of retiring workers and the new generation of workers on human capital management for information and knowledge management professionals.
CHANGE FACTOR: More emphasis on individual career planning tools, development plans and information
According to recent coverage of the millennial generation aired by CBS' "60 Minutes," these workers want to be able to "roll into work with their iPods and flip-flops around noon, but still be CEO by Friday." It's a gross generalization, but millennial workers do tend to view changing jobs as a necessity for career development. Various reports indicate that they anticipate changing jobs an average of eight times during their careers.
Performance management systems need to provide millennial employees with easily accessible, readily digestible information detailing their own individual development, according to Heiden. This includes what they have accomplished so far, what they need to accomplish in the future, and the rewards they can expect to receive in return for their accomplishments. Those rewards can range from advancement, being given prime assignments or working on interesting projects to salary growth.
Millennials are very interested in having insight and input into their careers, and they want a clear understanding of what is required for them to advance. For that reason, explains Heiden, it is especially effective to revamp performance reviews for this generation. The reviews need to define and map performance goals and link them directly to individual development plans that feed the career and succession planning lifecycle.
Younger employees also want more coaching and constant feedback from their managers. Historically, previous generations have been given one-dimensional performance appraisals, often once a year on the anniversary of their hire.
"This group favors interactive, actionable, multidimensional performance reviews that involve regular, proactive communication between employees and their managers and their peers. They thrive on constant praise." Heiden writes. She suggests that talent managers might adjust performance management frameworks to provide these workers with more frequent opportunities to receive individualized evaluation and feedback.
CHANGE FACTOR: More focus on individualized accomplishments
Performance management plans for this group might be adapted to provide venues and opportunities for managers to easily recognize millennials' accomplishments not only in private performance evaluation meetings, but publicly as well, Heiden notes.
This could be supported by individualized reward and recognition programs that reflect each individual's contributions. Millennials have grown accustomed to recognition and rewards throughout their lives, from the time they were small children. According to the CBS "60 Minutes" reports, they were raised by "doting parents who told them they are special," "these millennials played in Little Leagues with no winners or losers, or all winners" and were "laden with trophies just for participating."
While these comments on "60 Minutes" provide more generalizations, the important concept is that younger workers will likely respond well to sincere, thoughtfully designed reward and recognition programs that reflect their individual contributions that help complement and drive organizational strategy and goals.
In addition to more individualized recognition and rewards, consider these implications: Delivery of both recognition and rewards will need to be more immediate (Web-based programs, for example, that can track and fulfill); rewards need to reflect the interests and tastes of a younger generation; and they need to be provided by executives and managers who are equipped and well trained to motivate younger people.
CHANGE FACTOR: More focus on developing nontraditional advancement opportunities
Traditionally, U.S. companies have operated under relatively "flat" organizational structures in which manager and executive positions were based on or limited to an employee's length of service. But now organizations need to think more creatively in order to retain workers from multiple generations, Heiden advises.
"Advancement needn't always mean appointment to a management- or executive-level position," she writes "Workers should be empowered to advance in other ways, such as by job role or project responsibilities."
Heiden cites Western Union Holdings Inc. as an example of how this is being accomplished. The company has a fairly flat organizational structure and employs a large number of younger workers who have high expectations about career development and advancement opportunities. The company uses career planning to address those expectations by creating rotational assignments, often across functions and geographic rotations.
CHANGE FACTOR: More focus on matching training and information needs to learning styles
An organization's training programs should be designed to address an array of learning styles, modality preferences and generational differences, Heiden explains. They would likely include specialized training and learning programs via a Web-based talent management solution to address the short- and long-term goals of its multigenerational workforce.
Baby boomers, for example, tend to prefer relationship-based learning situations, such as coaching and mentoring. They are used to receiving information linearly, thinking about it and digesting it. They prefer to proceed step-by-step and do tasks in order.
Some workers born in the earliest segment of boomers might be less technically savvy than their generation X and millennial associates. In this case, Heiden suggests creating an on-boarding program that allows extra time for technology-related training so that these workers feel comfortable with the tools they'll be expected to use on the job.
But don't make the mistake of believing that boomers abhor technology or that they don't use the Internet. The largest online boomer community, called eons.com, has more than 700,000 members. Some of the site's most popular groups include "Careers for Boomers" and "Growing Old is Mandatory; Growing Up is Optional."
Generation X workers are independent-minded, crave autonomy and want the freedom to find their own way. They may be less appreciative of the traditional "sage on the stage" approach to trainer-led classroom instruction, Heiden explains. Yet, they may leap at the opportunity to participate in collaborative training environments where they are encouraged to share their own insights, knowledge and expertise with others, while learning from their peers and colleagues.
Millennials like to receive information quickly, from multiple sources in real time and parallel-process it immediately. They may not yet have some of the knowledge, skills and experience of previous generations, but they are consummate multi-taskers and very comfortable using multiple digital media and technologies in helping them develop the skills needed.
CHANGE FACTOR: Revamping new-hire on-boarding
Younger workers have a pronounced desire to work for values-based organizations that are committed to making a difference. As a result, more companies are touting their charitable, environmental, local community and global efforts—not only in their recruiting efforts but as a part of on-boarding programs. One example is the global accounting firm PricewaterhouseCoopers (PwC), which revamped its new-hire on-boarding program to better meet the needs of younger workers. PwC incorporated bicycle-building into its on-boarding training. Now new hires learn valuable teamwork skills while working in groups to build bikes, which are donated to various charities.
For additional ideas on revamping new-hire on-boarding programs, please see "Eight Do's to Upgrade Recruiting and On-Boarding," from this series on employee engagement in the May-June issue of Premium Incentive Products (available online at www.pipmag.com).
CHANGE FACTOR: Developing intergenerational teams
In her article, Heiden writes that "companies should first openly acknowledge that generational gaps exist…then provide team members with the knowledge and skills they need to understand one another's perspectives and to work together to bridge those gaps. Remember, employees working within multigenerational teams may need a little help finding common ground."
To capitalize on multigenerational differences, she advises, establish intergenerational teams that merge each generation's work styles while simultaneously improving efficiency, intergenerational collaboration and teamwork. "To establish such teams effectively, finding common ground is an imperative," she writes.
"Instead of focusing on differences between the groups, successful leaders appeal to their overlapping needs and desires," says Tony DiRomualdo, Next Generation Consulting business researcher, writer and adviser, in Heiden's article. As an example, he relayed how an HR executive at a manufacturing firm told him how individual members of one multigenerational team in her company have rallied behind each other over the shared desire for flexible work schedules.
"Members of each age group value time off during standard work hours to pursue their personal interests. Senior workers want to take occasional afternoons off to go hunting. Younger workers sometimes like to stay out to the wee hours socializing," DiRomualdo says. "Young workers pick up the slack for older workers during the afternoon, and their senior colleagues do the same for them in the mornings. Different interests and work routines are an advantage to the multigenerational team, instead of a source of conflict."
CHANGE FACTOR: Work-life balance is critical
The real change in workforce attitudes, among millenials in particular, is a decrease in ambition in favor of more family/personal time and less pressure in life generally speaking, says W. Stanton Smith in his book, "Decoding Generational Differences." Smith is a human relations specialist and a principal of Deloitte LLP, the consulting firm.
Companies can expect work-life balance issues to be equally important to generation X and boomer employees. So exactly what is work-life balance all about?
In his book, "Total Leadership: Be a Better Leader, Have a Richer Life," Stewart Friedman describes the four domains of peoples' lives—work, home, community and self—and what individuals can do to integrate them and improve their leadership skills at any stage in their careers. Friedman is founding director of Wharton's Leadership Program and the Work/Life Integration Project.
"The digital revolution…the 24x7x365 opportunity to be engaged in work-related activity has made life a lot more stressful for many people," Friedman said. "The way you create and maintain useful, meaningful boundaries between the different parts of your life, the different roles that you play, has become a really pressing issue."
In describing his book, Freidman said: "The big idea is that it's possible to create value for the different parts—for work, home, community and your private self, the domain of mind, body and spirit—in ways that you probably didn't think about before. It doesn't have to be a trade-off. Most people operate in a world of thinking about sacrifice as a necessity, that you have to give up something in one part of your life in order to achieve success in another part. That's probably always going to be true to some extent.
"What I've discovered…is that those trade-offs are not as necessary as we often think. And what it takes to get past that trade-off/balance mentality is leadership. The book takes you through the process of developing the leadership capacity you need to integrate the different parts of your life to perform better in all of them."
Now, who can argue with that?