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Assessing the impact of an aging workforce across global organizations
30 April 2008Presentation titlePage 2 Today’s discussion ► Assessing the aging world and aging workforce ► Ernst & Young’s study: 2007 Aging U.S. Workforce Survey: Challenges and Responses – An Ongoing Review ► Survey methodology ► Common themes ► Key findings ► Putting the pieces together ► Facing key issues on a global level ► Talent management and succession planning ► Retirement ► Discussion: Understanding your global workforce ► Moving forward
30 April 2008Presentation titlePage 3 An aging world – 2000 Source: U.S. Census Bureau Under 5% 5% to 12.4% 12.5% to 20% Above 20% Percent of Population Age 60+:
30 April 2008Presentation titlePage 4 An aging world – 2025 Source: U.S. Census Bureau Under 5% 5% to 12.4% 12.5% to 20% Above 20% Percent of Population Age 60+:
30 April 2008Presentation titlePage 5 Assessing the global aging workforce ► How we got here… ► Declining global fertility rate over the past 4 decades ► Significant population declines in developed countries ► Population surpluses in less developed countries with unskilled and uneducated labor ► US Baby Boomer generation starting to retire ► 43% of today’s workforce will be eligible to retire by 2018 ► World’s population today 1 in 10 over 60…1 in 5 in 2050
30 April 2008Presentation titlePage 6 Understanding financial implications of aging workforce ► By 2030, four Federal programs will consume all U.S. tax revenue without any spending: ► Retirement of Federal employees, Medicaid, Medicare, and Social Security (MW) ► By 2050, Medicare and Social Security will be 21% of GDP (4.3% in 2000) (CBO) ► Global Economies facing impending financial challenges in areas of talent management, retirement, healthcare and compensation costs ► Source: Ernst & Young LLP’s 2007 Aging U.S. Workforce Survey: Challenges and Responses – An Ongoing Review
30 April 2008Presentation titlePage 7 E&Y’s 2007 Aging Workforce Study ► Follow-up to Ernst & Young’s 2006 aging workforce study ► Surveyed Human Resources (HR) executives from Fortune 1000 companies ► Focused on financial and operational issues of the aging workforce
30 April 2008Presentation titlePage 8 Common themes ► The aging workforce is a critical business risk, not just an HR risk, impacting all key business risk areas ► Organizations have been primarily reactive when it comes to managing the challenges brought on by this changing demographic ► Company-wide accountability exists when meeting the challenges of an aging workforce (Boards, C-suite executives, HR executives) ► Organizations that understand these concepts and start acting now will significantly benefit financially and non-financially in the future
30 April 2008Presentation titlePage 9 Key findings ► Potential loss of intellectual capital is imminent among survey respondents ► 62% of respondents forecast retiring employees will cause a talent gap in critical functions ► Middle management will be where organizations feel the gap the most ► Employees are seeking opportunities to reduce work schedules as they age, but do not necessarily stop work completely ► Re-careering ► Flexible work arrangements ► Changing employers
30 April 2008Presentation titlePage 10 Key findings ► 40% of surveyed employers desire for senior management to stay at least 2 years beyond their normal retirement age but with no formal program to address this issue ► Few employers have formal programs established to retain older workers ► Rules and administrative requirements for phased retirement programs are so complex many organizations do not view them as a viable option ► Only 9% of respondents allowed employees to receive pension benefits while still working for the organization
30 April 2008Presentation titlePage 11 Putting the pieces together ► Aging population will lead to businesses competing more for younger workers ► 37% of surveyed organizations considering changes to benefits and compensation packages to attract and retain older workers ► 20% considering increasing compensation ► 29% considering a phased retirement program ► 33% considering implementing more “Baby Boomer Benefits” such as financial education, retirement planning and long-term care benefits ► Employers must gain clear understanding of workforce demographics and employee needs to attract new and retain key employees
30 April 2008Presentation titlePage 12 Facing talent management on a global level ► Global executives see HR risk as being among the top business risks facing an organization today ► Talent management is the #1 HR risk overall ► Source: Ernst & Young LLP’s 2008 Global HR Risk Survey ► Effective global talent management programs are effective enterprise risk management programs ► Developing the right person, with the right skills and competencies, in the right job and the right time. ► Alignment to company business strategy ► Identification of positions, skills, competencies, experiences, etc. to drive business strategy ► Understanding of global and local country resources (needs and supply) ► Established performance metrics and expected returns (financial and nonfinancial) developed and monitored ► Previous financial analysis conducted ► Legal and regulatory issues addressed and monitored ► Communications and change management processes put in place
30 April 2008Presentation titlePage 13 “Must Haves” for talent management and succession planning ► Follow steps to ensure effective talent and succession planning program is put in place ► Be strategic, not reactive ► Connect talent management to business strategy ► Understand employee demographics, needs, issues ► Focus on middle management ► Understand issues that drive retention and facilitate transition of traditional employment ► Ensure you have effective, comprehensive governance with clear accountability and measurement ► Effective talent management is at the core of enterprise risk management
30 April 2008Presentation titlePage 14 Facing retirement programming on a global level Retirement is no longer the main event—it is a process Employers must help employees bridge the gap between their final years on the job and the start of retirement ► For two years in a row, more than 60% of executives admit retirement will cause a “brain drain” or talent gap ► Source: Ernst & Young LLP’s 2007 Aging U.S. Workforce Survey: Challenges and Responses – An Ongoing Review ► Components of an effective retirement program that meets the needs of aging employees must consist of plans which allow employees to be “phased” into the retirement process ► Employers do not appear to be implementing programs that will help bridge employees into this next phase of their life ► Absence of phased retirement plans and enticing compensation options may lead to lack of desire to stay within a corporation at high level- positions
30 April 2008Presentation titlePage 15 “Must Haves” for developing global retirement programs ► Follow steps to ensure effective retirement programs are put in place that meet the needs of your employee demographics ► Once again, be strategic, not reactive ► Connect retirement programs to the business strategy ► Align with talent management plans to ensure the effective transfer of knowledge across levels ► Increase dialogue across company divisions ► This will help to foster an understanding of the technical issues surrounding an aging workforce and how retirement is seen among this demographic ► Understand employee demographics, needs, issues ► Review anticipated retirement projections within own company
30 April 2008Presentation titlePage 16 Discussion: Understanding Your Global Workforce ► What pressures are you feeling from the operational, financial, strategic and compliance areas of your organization? ► If you could change one item in your current retirement program, what would that be and what impact do you think it would have on the organization? ► How well do you know your employee demographics (i.e. % retiring in the next 5-10 years) and what do you do with that information?
30 April 2008Presentation titlePage 17 Moving forward in your organization ► Identify the human capital needs of your organization in 5 to 10 years ► Project population shifts with current workforce and culture and identify gaps ► Assess the needs and interests of the older workers ► Assess the ability to employ older workers in a variety of positions ► Assess the organization’s talent management and employee development programs and processes ► Perform cost analyses of retaining older workers vs. attracting new workers
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