Demographic shift

Diversity / 01 January 2010

You have potential jewels in your workforce who possess invaluable experience and knowledge. They are your older employees and you ignore them at your peril, writes Steve Coomber

Brace yourself for a demographic time bomb. The number of people out of work but dependent on people in work is increasing rapidly, and the comforting notion of an early retirement may soon disappear as people work to 65 and beyond.

To succeed in this new business environment, organisations will have to question preconceptions about age and work, and rise to the challenge of attracting and retaining older workers.

Older people are better at performing certain tasks than younger people: This is about experience, judgement and responsibility, and taking care. Older people are generally more reliable and they do not put customers off

Bernard Casey, principal research fellow, Warwick Institute for Employment Research

Demographics is having a profound impact on workforce structure. “You’ve got an ageing population combined with lower birth rates,” says Rachel Krys, campaign director at the Employers Forum on Age, which promotes best practice in age diversity at work. “Every year in Europe you have two million fewer younger people of working age, and another 1.5 million older people – and the older people are living longer.”

This creates a major challenge for both society and employers. “The dependency ratio – the number of people working to support the number of people not working – is becoming unsustainable,” says Krys. “In the UK we also have a real gap in savings. People have big expectations for their income in retirement and those expectations are not going to be met unless we do something quickly.”

Many employees may find the options unpalatable, a combination of paying more taxes, working longer and having lower pensions. Working longer will be a necessity for future generations and, as a result, legislative bodies have been attempting to create legal frameworks that will make it easier for older people to keep working until and beyond retirement.

“There is a great deal of alarm at the changing age profile in European countries,” says Chris Ball, CEO of The Age and Employment Network (TAEN). “That’s why the EU has embarked on a Europe-wide programme to extend working lives, which includes legislation against age discrimination and encourages employers to get rid of incentives to quit early and disincentives to continue to work.”

In the UK, the Employment Equality (Age) Regulations 2006 came into force in October 2006. The regulations aim to prevent age discrimination in recruitment and in the workplace. However, the regulations included a controversial measure to introduce a default retirement age of 65; something that Krys and Ball believe should be removed. “First, because it is an infringement of an individual’s human rights,” says Ball. “Second, because there are many people aged 65 and above, perfectly capable of doing an excellent job of work, who want and need to continue working.”

Arbitrary retirement

This default retirement age is being challenged in the courts and will be reviewed by the government in 2010. Many employers, however, support this arbitrary retirement provision, arguing that performance managing the over-65s out of the workforce would be cumbersome and undignified. This approach, at least in the developed economies of the west, and in many other societies, seems out of step with the need to keep people in the workforce for longer.

“In western economies we have a rather curious approach to older age in the workplace, where we see it as a bad thing,” says Veronica Hope Hailey, professor of strategic human resource management at Cass Business School in London. “But if, for example, you are in your seventies and working as an academic professor in India, this is not seen as a difficulty – instead you are considered to have accumulated great experience and wisdom over the years.”

Western preconceptions of age mean that older workers encounter many barriers to working beyond retirement age. Yet many of these preconceptions do not stand up to close scrutiny.

Bernard Casey, principal research fellow at the Warwick Institute for Employment Research, says: “Why do employers have difficulties with older workers? It is because they think that somehow they are less flexible, less productive, less easy to deal with, that they don't learn things and are more expensive.”

But it is difficult to justify these arguments, says Casey. Take ill health, for example. Many employers worry that older workers will take more time off work due to illness. “If you look at absence rates by age, then young people are much more frequently absent than old people,” says Casey. “Whereas, if you are old and absent you tend to be off for rather a long time. So the frequent unplanned irregular absences of younger people may be harder to plan cover for.”

Productivity gap

Some employers question the performance of older workers. “There is a real perception that older people are less productive, that performance declines in a very clear line with age, that there is a direct link between age and ability, and age and performance,” says Krys. “But I have yet to see any evidence for a direct link between age and performance. People perform differently at different points in their lives, and that is rarely to do with chronological age. It is a question of who is able to do the job.”

As Krys points out, if you need somebody to work in a warehouse or as a delivery driver, that person may have to be physically fit, drive well and be able to keep to a timetable. The right person might be a fit 60 year old, rather than an unfit 30 year old.

There are many good reasons for allowing people to work up to and beyond the default retirement age. Older people are better at performing certain tasks than younger people, says Casey: “This is about experience, judgement and responsibility, and taking care. Older people are generally more reliable and they do not put customers off.”

Experience and knowledge count for a lot, says Ball: “Older workers have been around longer and very often made mistakes in the past. They know what to avoid. Experience is valuable, we should not throw away all that knowledge crystallised in older people.”

There is evidence that older workers are often better with certain customers, something that retailers such as B&Q have discovered. “We know in some client-based or service industries that older workers have better interpersonal skills than younger workers,” says Dr Emma Parry, senior research fellow at Cranfield School of Management. “A lot of retail and service organisations with high levels of older customers like to have older workers to match their client base.”

Service with a smile

Organisations with a mix of ages in teams may also be at an advantage. Krys says: “McDonald’s did some research which showed that with just one person over 65 working in a McDonald’s restaurant alongside younger people, productivity went up and customer satisfaction rose markedly – a 20% increase.”

David Fairhurst, senior vice president and chief people officer at McDonald’s, says: “We employ over 1,000 people aged 60 and above. These employees play an important role and they make a huge impact on customer satisfaction. While the vast majority of our employees are under 30, it’s good for our people and good for our business to have a diverse range of ages in our restaurants. The right blend of youth and experience can make a real difference.”

In the future, employers will need to retain increasing numbers of older workers, many of whom may not need or even wish to work for longer. 

“A lot of the management challenges are about overcoming line manager prejudices and preconceptions,” says Krys. “It is about getting the message out about age, about looking for someone with the ability to do the job rather than someone who is a bit like the person who did the job before.”

If older workers are encouraged to think in terms of retirement at 65, and if the work is boring and repetitive, why would they want to stay? There must be pull factors to the role.

“Work has to be attractive and rewarding, and provide older people with a means of self-actualisation late in life,” says Ball. “Older people can still have ambitions. If you look at the Scandinavian approach to age management, they tend to look at the balance between the job’s demands on the one hand and the total resources of the individual on the other. They try to think in terms of redesigning work so that you remove some of the more obvious things that become a limitation on people’s working lives.”

Managers need to consider many factors that affect older people, says Parry. “For example, career management in organisations is aimed primarily at younger or middle-aged workers, and there is an assumption that older workers no longer want to contribute, that they want to wind down, and that is not necessarily the case,” she says.

Rewards and benefits may need to be adjusted to be of value to older workers. “While older workers still want to make a worthwhile contribution, their definition of career success does not necessarily revolve around things such as achievement or hierarchical progression,” says Parry. “Employers need to think about what is required in terms of career progression, as older workers may be more interested in intrinsic rewards, giving something back, and so on.”

Lifestyle must also be considered. Some people in their 60s care for grandchildren and elderly parents, for example, so employers may need to allow them to work more flexibly.

Some skills may become obsolete so there needs to be a culture of lifelong learning in organisations, and training and development delivery may need to adapt. BT, for example, partners older and younger workers in a mentoring arrangement to encourage skills and knowledge exchange.

Like it or not, organisations must get to grips with these issues because workforce ageing will be very apparent over the next 20 years.
“You are looking at a more integrated approach to recruitment, training, career development and flexible working,” says Ball. “It is about attempting to have a kind of age consciousness in the way these policies are applied in organisations.”