Aging baby boomers are exiting the workforce as they reach retirement age, and companies locally and nationally are scrambling to keep valuable institutional knowledge from leaving with them.
And while companies try to ensure key business processes are passed to younger employees, they’re also dealing with Michigan’s workforce development lag and with the trend of millennials changing jobs — and taking their newly inherited knowledge — every few years.
The numbers are eyepopping: AARP, the nonprofit advocacy group for Americans age 50 and older, has said that every day, 10,000 boomers reach the traditional retirement age of 65. That trend began in 2011 and is forecast to continue for the next 14 years.
Boomers today range in age from 51 to 69, and those working in Oakland, Wayne, Macomb and Washtenaw counties represent more than 21 percent of the local population, according to 2010 U.S. Census data.
When they retire, decades of experience go with them unless a company has plans in place so that their knowledge is inherited by Gen X and millennial employees.
“It’s one of those sleeping giants most people don’t think about. They deal with it when someone leaves,” said Andrew Pena, assistant vice president for human resources at New Mexico State University and author of several papers and articles on retaining corporate generational knowledge.
“If you don’t do something proactively today, you’re going to be stuck with employees who know basic tasks but don’t have that institutional knowledge.”
Locally, General Motors Co. has both formal and informal efforts in place to capture the institutional knowledge of its 200,000-plus employees worldwide, said Chris Oster, the Detroit automaker’s global director for talent development.
GM is launching by August an internal online mentor portal with 4,000 staffers, most of them in the finance department, Oster said. The program is both for young staffers seeking a mentor and older employees seeking to mentor someone new to the company.
The portal allows employees to create profiles to narrow their mentor/mentee search, such as by department, job or even by their university.
“We want to foster leaders to be coaches, and mentoring is one of the best ways to do that,” Oster said. “It’s really about encouraging both sides of that equation to make the connection.”
GM also has a dozen core programs and classes, run with Harvard and Stanforduniversities, intended to train young leaders to take over from older employees.
For example, employees selected to participate can earn a “mini MBA” through a six-month virtual course offered by Harvard instruction, Oster said.
“The idea is that we’re going to need to take more risks with promotions and accelerate the promotion of people,” she said.
GM expects a “bow wave” of boomers to begin leaving the company in larger numbers starting in 2017, Oster said.
To battle that, new employees across all corporate functions also participate in a two-year job track that rotates them through different jobs in their area, Oster said.
“They get a breadth of exposure in their area of the business before they specialize,” she said.
GM also devotes entire days to career development for newer employees, and they involve speakers and immersion in company culture.
Additionally, every department updates processes and training.
“All of the functions at GM have something like a learning college or learning home room,” Oster said.
On the back end, the company is increasingly hiring retirees as consultants for specialized work and to act as mentors, she said, meaning the institutional knowledge remains in the building.
“I think there’s an opportunity for us to study ways to help people to stay active with us longer,” she said.
Another Michigan company actively dealing with knowledge retention is Jackson-based CMS Energy Corp., parent of Consumers Energy Co.
The company currently has 125 employees in a formal program to accelerate career development, said Cathy Hendrian, CMS vice president of human resources.
Those staffers are being groomed as the utility’s future leaders, and that involves absorbing the institutional knowledge of older employees.
“We try to identify those people earlier in their career,” said Hendrian, adding that an additional 100 are on a watch list. Those in the program rotate jobs so they become familiar with different roles.
As a utility company, CMS cannot afford to lose knowledge as the boomers retire.
“That’s an issue out there for us, and we’re clearly thinking about it,” Hendrian said.
CMS does knowledge transfer by documenting processes, formal mentoring and job shadowing, she said. It’s done across all levels of the 7,500-employee company, from human resources to engineering, finance, information technology and government affairs.
General Motors and CMS are conducting what knowledge retention specialists say are best practices.
The business community has myriad options to stave off knowledge loss, said Kenneth Mall, managing director of Dearborn-based Educational Data Systems Inc., a workforce development, customized training and consulting firm.
“What we advise companies to do is to set a very deliberate strategy,” Mall said. “Start a knowledge loss risk assessment.”
Companies look around and “all of a sudden they’re looking at a team, and 50 to 60 percent of the team can retire,” he said.
Mall recommends that companies don’t consider the individual who may leave but the specific business knowledge that he or she possesses.
“Don’t worry about (the employee) and experience but what critical knowledge each team member has,” he said. “What you’ll find is any employee can do great things.”
The recommendations of Educational Data Systems are individualized for clients, but some basics translate across most industries and sectors.
“Sometimes it’s writing an operational manual,” Mall said. “Organize thoughts in logical format. Now you have something the next generation can go by.”
Educational Data Systems creates two- to five-minute YouTube-style videos for companies that feature someone explaining business processes, something Mall has done for manufacturing and professional service companies and utilities.
The videos can be on anything from how to create a spreadsheet to an explanation of an invoicing process or how a piece of machinery works, he said.
Another basic knowledge retention strategy is job shadowing, Mall said. The trick, he added, is creating defined objectives from the shadowing.
“What is the specific knowledge you need to transfer?” he said. “At the end of the day, there’s a specific accomplishment. It might be 10 things over a few months. You have to have measurables and identify needs.”
Educational Data Systems has local clients, but Mall could not identify any because of nondisclosure agreements.
“They don’t want you to know they have problems,” he said.
Advocates for the state’s business community are sounding warning bells about the aging workforce and the knowledge heading for the exits.
“It’s a really big problem, and a national problem. It’s more acute in Michigan because of the demographics of our state. We’re getting older than the nation as a whole,” said Doug Rothwell, president and CEO of Business Leaders for Michigan, the nonprofit, Detroit-based CEO council representing the region’s major employers.
The demographic trends mix with years of layoffs to create a perfect storm of workforce and skills shortages in the state.
“What happens is economics move faster than the workforce can keep up with the demand,” Rothwell said.
Because the state faces a glut of boomers exiting the workforce, atop a host of post-recession economic issues, Michigan’s business community and government are aware of where employment and skills gaps likely will occur in coming years, he said.
“People have a pretty good handle of where the workforce shortages will be in the state,” Rothwell said.
Business Leaders has made statewide workforce development a priority because Michigan lags behind much of the nation.
“We have lower education attainment levels; fewer people in the education pipeline completing high school, college or technical training,” Rothwell said. “The basic concern that we have is that we need all of the above.”
By 2020, about 70 percent of Michigan jobs will require an education beyond high school, Business Leaders noted in a February report on higher education.
The talent pipeline in the skilled trades and manufacturing sector has been struggling because many technical career training programs were dismantled and fewer apprenticeship programs have been available compared to decades ago, said Mall of Educational Data Systems.
As the automotive industry has recovered, so has the need for training programs, he said.
“The automakers are ramping them back up,” Mall said.
Michigan companies are seeking professional services talent, too, to replace boomers.
Among the jobs that metro Detroit and the nation as a whole are expected to see shortages of as boomers retire are management analysts, industrial engineers, financial managers, labor relations managers, postal clerks, police detectives, registered nurses, social workers and even lawyers, according to the U.S. Bureau of Labor Statistics.
“There is a huge group of older workers getting out of the labor force. They’re pulling the labor force participation rate down with them,” said Mitra Toossi, an economist in the Bureau of Labor Statistics’ Office of Occupational Statistics and Employment Projections.
“People are getting out because of retirement, old age and health issues.”
Cindy Pasky, president and CEO of Detroit-based Strategic Staffing Solutions, said her company has been pushing clients to hire military veterans to fill the gap created by retirees and for companies seeking temporary employees as they transition systems.
Veterans are disciplined and have skill sets at younger ages, she said.
“That particular talent pool is good to look at for knowledge transfer,” Pasky said. “It can shorten the time frame it takes to transfer knowledge.”
Clients of Strategic Staffing Solutions began significant talks about replacing boomers five years ago, Pasky said, and the first wave of investment to replace them began three years ago.
Still, trepidation exists on the part of employers to invest in extensive training of new workers because they tend to hop jobs, Mall said.
“A lot of companies would be very happy to invest the time and energy to train the newer folks, but they’re concerned that that person is just going to leave,” he said. “If you’re investing in your workforce and there are other reasons for them to stay, you might as well invest in your training.”
Of course, it’s not as if the boomers didn’t job hop: The average person born between 1957 and 1964 had 11.7 jobs from age 18 to age 48, and nearly half of these jobs were held from ages 18 to 24, according to data released by the U.S. Bureau of Labor Statistics in March.
And the worry about younger employees leaving after expensive training has a simple counterargument, Mall said.
“What happens if you don’t train them and they do stay?” he said. “At the end of the day, companies have to decide if they’re going to make that investment. It’s going to cost them one way or another.”