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And They’re Off! (But Should You Worry?)

The hysteria over retiring baby boomers is ill-founded, but companies do face a specific kind of labor shortage.

But Thomas O’Flynn, CFO of PSEG, says the situation “is not a crisis.” For one thing, he notes that many people at the company work past retirement age. And the company began to develop its talent pipeline more than five years ago by working with local community colleges to develop curricula for specific skills. Those programs have yielded 66 hires to date, keeping pace with the number of departing workers while giving new employees a chance to receive on-the-job mentoring. O’Flynn is so optimistic about the system that he is doing little to encourage delayed retirements and hires back retired workers on a very selective basis.

Many companies may not even have to go that far, according to Laurie Ruettimann, former human-resources manager at Pfizer and now author of the Punk Rock HR blog. As technology and offshore outsourcers assume ever more commoditized tasks, “what you have left are knowledge workers, who are generally willing to take on more work, as long as it’s not filing,” she says.

Before you can breathe easy, however, it would be wise to engage in a little “strategic workforce” or “human capital” planning. In a recent study, The Conference Board’s Young documented several different approaches. At one end of the spectrum, Dow Chemical, with $54 billion in revenue and 46,000 employees, uses a sophisticated simulation tool that extracts personnel data from its ERP system, projects it forward three to five years, and then forecasts possibilities for demand based on such factors as industry trends and new business strategies. The model can also address targeted productivity increases. All told, the tool yields very specific hiring numbers, business unit by business unit, for a range of scenarios.

Corning Inc., meanwhile, takes a high-level view that looks at likely needs across general categories of jobs, divided into strategic, core, and noncore segments, over the next three to five years. The diversified manufacturing company has about 25,000 employees and $5.8 billion in revenue. The analysis is based largely on input from line executives, rather than external data, and yields general investment goals rather than quantitative hiring figures.

Either approach can work, says Young, but what’s critical is to slice and dice the data in meaningful ways. Rather than look at the average age of a workforce, for example, CFOs should consider average ages within specific roles, facilities, or geographies, along with historical retirement patterns, to pinpoint exactly where problems may lie. Through such cuts, Dow Chemical discovered that older U.S. employees are staying on longer than projected, in part because many delayed starting a family and are just now facing college costs.

While it may be comforting to know that what demographics taketh away it also giveth (the 2008 class of high-school graduates was the largest ever, at 3.3 million, a figure expected to dip slightly and then return to that record level within10 years), companies should focus lesson supply and demand and more on the challenges of developing multiple generations of employees simultaneously. Young and old are both likely to depart sooner rather than later, the latter to retire and the former to exercise their “nimbleness.” As O’Flynn says, “We have to work harder to make [younger employees] comfortable and keep them motivated.” In short, crisis or no, talent will command a premium for many years to come.

Alix Stuart is a senior writer at CFO.

Help Wanted

Some job categories will be heavily affected by employee departures between 2006 and 2016.*

1.9 million: Retail salespersons

1.2 million: Customer-service representatives

523,000: Truck drivers, heavy & tractor trailer

497,000: Executive secretaries & administrative assistants

450,000: Accountants & auditors

*Total job openings due to growth and net replacements

Source: U.S. Bureau of Labor Statistics

More than half of workers age 65 and older who work now do so full time.

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