As more of the baby boom generation retires, many U.S. companies are facing a potentially significant loss of talent and institutional knowledge. While the impact of this undeniable trend will vary from industry to industry, companies ahead of the curve are already looking for ways to avoid the brain drain by encouraging today’s workers over 50 to stay longer.
Ten years ago, consulting firm Towers Perrin (now Towers Watson) conducted a prescient study for the AARP that refutes many of the myths about older workers. The analysis showed that replacing an experienced worker of any age can cost 50% or more of the individual’s salary in turnover-related costs and the cost is even higher in jobs requiring the specialized skills and extensive experience often possessed by employees over 50.
The research concluded that the benefits of a stable workforce and avoiding turnover cost can exceed the incremental compensation and benefit costs for mature workers. The report suggested that to support decision-making, organizations should evaluate the real costs of employing older workers based on actual data, including the costs of hiring, benefits and getting new employees up to speed.
Michelin’s returning retiree program
One company that understands the economics of attracting and keeping older workers is Michelin North America. Ron Olds, who retired at age 64 after 37 years of service, is participating in the company’s returning retiree program that has been operating for over a decade.
When Olds left the company, he was the vice president of sales for North and South America for Michelin’s Aircraft Tires. Fifteen months later, he was re-hired on a part-time contract to help the government relations team prepare aircraft tire contract bids for the U.S. navy and air force.
“I didn’t seek re-employment. I was asked by the Michelin Aircraft Tires management team if I would be interested in serving on a military strategic task force. That sounded interesting so I gladly accepted the offer,” says Olds.
He works about 40 hours/month and is paid on an hourly rate comparable to his pro-rated former salary. He doesn’t get health benefits, but continues to contribute to the company’s 401(k) plan. Olds says although he doesn’t need the money, he accepted the position because he has a passion for aviation and his company knowledge allows him to make a continuing contribution.
For him, the key to making the arrangement work is to remember he’s no longer the VP who gets to define company strategy. “My job now is solely to support the team,” he says. “I have to be subordinate to current management.”
Michelin’s chief human resources officer David Stafford says the company has about 22,500 employees in North America and roughly 19,000 in the U.S. “About 36% of the U.S. workforce is age 50 or older and about 9% are over age 60,” he says.
“We ask every employee as part of their off-boarding interview if they are interested in returning to work in some capacity after they retire,” Stafford explains. “Then we make these names available to our business units so they can contact these people if they have short-term project work.” He says about 250 people (over 1% of the Michelin workforce) are active in the returning retiree program, which is available at corporate headquarters as well as at the company’s manufacturing sites.
Nevertheless, Stafford says, “we have to watch and make sure that our businesses don’t start to use our returning retirees as a kind of full-time employee for extended periods. After all, a retiree can decide he has had enough at any time and we have to ensure there are younger people in the pipeline.”
Internships for older workers
Retirees returning to full- or part-time work is not a new story. Twenty-seven percent of retirees surveyed by the Employee Benefit Research Institute’s 2014 Retirement Confidence Survey said they have actually worked for pay in retirement. Ninety percent of this group indicated that they continue to work to stay active and involved. However, 81% of the people with a post-retirement job said they need the money in order to make ends meet.
The EBRI data also revealed that one reason many retirees have not saved enough to retire comfortably is that they left the workforce earlier than expected due to unforeseen circumstances such as a health problem, a downsizing or care requirements of a family member. And when older employees try to get another job they often have a difficult time even getting a foot in the door.
That’s why Carol Fishman Cohen founded iRelaunch, a comprehensive resource for career re-entry information and services for individuals, employers, professional associations and universities. While the company typically targets people who have been on career breaks for child care, elder care or due to illness, she says they also work with older people who are on unintentional career breaks because they retired early or lost their job for other reasons.
iRelaunch’s CEO Fishman Cohen is perhaps best known for the paid internship programs for older workers she has helped client companies develop which have been documented in a series of Harvard Business Review articles. “The idea is that to the extent the employer views hiring someone returning from career break or who might be older as a risky proposition, by bringing them on in a short-term, nonbinding work arrangement, the employer has the opportunity to evaluate the person, based on an actual work sample, before having to make a permanent hiring decision,” she says.
Also see: Non-profits want job-seeking boomers
In her article The 40-Year-Old Intern Goes to Wall Street, she reports on how in the space of only a few months Credit Suisse, Goldman Sachs, J.P. Morgan, MetLife, Morgan Stanley, and the Onramp Fellowship for Lawyers implemented paid internships for mature workers. Statistics later collected from this group reveals that depending on the program, between 50%-90% of these internships were converted into full-time positions.
Second careers at NIH
The National Institutes of Health in Bethesda, Maryland, actively recruits older workers looking for a second career. NIH is an agency of the U.S. Department of Health and Human Services and one of the world’s foremost medical research centers. Over half of NIH employees are over age 50 with 17% over 60 and 3% age 71 and above.
“Medical science researchers don’t even begin to reach their stride until their mid-30s or later because of the extensive training that is required to be effective,” says Valerie Gill, director of NIH’s client services division. “Therefore having individuals with experience in the scientific arena over 50 who can build on their previous research and discoveries is critical to the success of our organization.”
Gill also believes older workers bring a sense of stability. “Most of them are finally able to do exactly what they want to do. Having that kind of passion and commitment to our organization is a fabulous thing.”
To find these mature workers, NIH looks for people who are seeking “a second career.” The military is one obvious source of talent. “We go to Transition Assistance Centers and participate in a career fair called Corporate Gray. We also have a lot of relationships in universities and retiring academics often are willing to spend time with us,” she says.
FCCI Insurance Group, with headquarters in Sarasota, Florida, does not specifically seek out the older demographic when they are hiring, but they view mature workers as a valuable component of their “blended” workforce.
Executive vice president and chief human resources officer Lisa Krause says that 44% of the company’s 743 employees are over 50 and the average tenure of these older employees is 12 years. “At FCCI we are always looking for the very best people of any age who are aligned to our corporate culture and have the skills to do the job,” she says. “Our seasoned workers are very giving of their expertise and knowledge to teach others in our diverse workforce and that’s very important to us.”
She notes that the take-up rate by older workers is high for benefit programs like work-at-home arrangements, access to fitness centers and wellness coaches. There are also opportunities for employees and retirees to work part-time or on temporary assignments. “One of our retirees worked with University of Southern Florida to develop a minor in risk and insurance as part of the business degree. This will help the sustainability and viability of our organization into the future,” she says.
While there are definitely cases at FCCI where younger supervisors manage older employees, Krause says, “Honestly, we have not found it to be an issue or that it creates a conflict in the workplace.”
Also see: Implementing a DIY fix to the skills gap
Wharton professor Peter Cappelli views companies like Michelin, NIH and FCCI as the wave of the future. “Whether we like it or not, the whole lifetime career model is pretty much dead and with it the requirement of mandatory retirement and the prohibition on experienced hires,” says Cappelli in his book Managing the Older Worker. “What has taken the place of the old approach is a new model of a much more open, just-in-time labor market that seems to be ideally suited to the interests and abilities of older workers.”
Sheryl Smolkin is a lawyer and freelance writer based in Toronto.
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