Today, people 55 years and older account for about 25% of the total U.S. labor force. Meanwhile, millennials occupy the largest percentage of the workforce at 35%. Younger generations will increasingly outnumber their business forebears as baby boomers continue to retire in droves.
A 2018 survey by risk management and insurance brokerage firm Willis Towers Watson found that some 75% of organizations expect to face significant or moderate challenges due to expected retirements.
Some of these challenges include losing a breadth of industry expertise and talent possessed by older employees and effectively training younger hires who may have missed out on the chance to acquire critical skills from older employees. According to the survey:
- 80% of respondents view older employees as crucial to their success.
- Employers are concerned with the expected loss of talent. In fact, over half (54%) believe the loss of talent due to retiring workers will be more significant than other labor market risks over the next five years.
- Additionally, 50% expect difficulty finding workers with similar knowledge and skills over the next five years.
- 48% worry about the loss of organization-specific knowledge.
Seeing as widespread generational upheaval is already well underway, it’s critical that leaders approach succession planning as a forward-looking, long-term strategy. Failing to act quickly is likely to result in a widened talent gap and a greater loss of institutional knowledge that leaves organizations scrambling to achieve topline results.
Further, a lack of preparation can create a cultural rift across generations within a single workforce, leaving older employees feeling disconnected from and unable to communicate effectively or collaborate with incoming millennial and Gen Z. In turn, a lack of cultural cohesion diminishes morale, levels of employee engagement, and accountability for delivering on results, threatening to put the organization at financial risk.
On the other hand, skillful succession planning future-proofs a company, ensuring that it is able to maintain — and even maximize — its competitive advantage in the midst of a labor upheaval and changing market conditions.
Follow these steps to develop and execute an effective succession planning strategy that prioritizes the effective transfer of knowledge and the preservation of a unified culture:
1. Make Succession Planning a Key Strategic Priority
Many organizational leaders are stuck in the mindset of short-term thinking, trying to keep up with the rapidly evolving landscape of modern business rather than thinking two, five, or even ten years ahead. Unfortunately, this thinking inhibits effective generational succession planning.
As such, the first step in effective succession planning in light of high baby boomer retirement rates is establishing succession planning as a key strategic priority. Key strategic priorities are the means of achieving Key Results — the three to five meaningful, measurable, and memorable results that an organization must achieve each year.
As a key strategic priority, succession planning must be approached as a well-strategized organization-wide initiative. Identify the critical roles that will be undergoing a transition — and the unique skill sets and competencies required to succeed in these roles — well in advance, and proactively facilitate the effective transfer of knowledge from baby boomer to millennial employees.
2. Cultivate a Cohesive Multigenerational Workforce
Baby boomers are retiring at a rapid rate, but they haven’t yet exited the workforce wholly. As such, leaders must prepare to manage an organization in which baby boomers, Gen Xers, millennials, and Gen Zers all occupy important roles across the organization.
For this reason, it’s important that organizations prepare for turnover by easing generational tensions, building cohesive teams whose members are united by a shared commitment to achieving Key Results.
“Generational differences” are given a great deal of airtime in the media and among cultural pundits, but differences themselves do not inherently undermine organizational success. Rather, it is the treatment of difference that causes a fractious company culture and hinders everything from team morale to efficient workflows.
Consider, for example, that employees working for highly diverse and inclusive organizations are 80% more likely to report that their organization is high-performing. In turn, these organizations report 101% higher employee engagement levels than those with low-rated diversity and inclusivity levels.
This data reveals that, in an inclusive environment, generational diversity can yield greater employee engagement, higher overall performance, and better business outcomes for the organization.
The solution for cultural tensions that arise between members of different organizations, then, is not homogenizing the workforce but making it inclusive — training teams to accept and celebrate the differences between individuals and the breadth of unique strengths each team member brings. Only by fostering an inclusive environment can leaders empower team members to align around shared Key Results and achieve them by leveraging their unique strengths.
3. Produce Generational Inclusivity
In order to produce and sustain generational inclusivity, leaders must foster a workplace culture of honest communication, open and productive feedback, and mutual respect. To do so, however, requires a deep understanding of the ways in which a flourishing company culture actually takes hold.
First of all, leaders must understand workplace culture for what it is: the implicit or explicit set of acceptable behaviors and commonly held beliefs within an organization. These unspoken standards guide employees as they make daily decisions about how to execute work and interact with their colleagues.
In order to foster a culture in which diversity and inclusion are beliefs embodied by every employee — and ensure Key Results are being reached — leaders must tap into employees’ mindsets. According to the long-proven wisdom of The Results Pyramid, experiences shape one’s beliefs. In turn, beliefs inform actions, and actions generate results — whether those be Key Results or unintended consequences.
Essentially, The Results Pyramid illuminates how outcomes, both good and bad, derive from culture — the beliefs and behavioral norms that guide employees’ decisions.
In the case of generational succession planning, leaders have a clear vision of desired results: seamless generational succession that guarantees business success. With a little reverse engineering, leaders can ascertain that the actions needed to achieve this result involve effective knowledge transfer and cohesive teamwork between generations. The beliefs that would naturally motivate this behavior include the belief that inclusivity and diversity enable greater collective success by bringing to the table a bevy of unique skill sets and perspectives. Finally, leaders can recognize that employees only develop these beliefs through meaningful experiences, such as executing on a successful business project with the help of an integrated, multigenerational team.
As such, leaders are responsible for facilitating meaningful experiences for employees that will cultivate beliefs that promote the desired result of effective succession planning.
In attempting to create new, meaningful experiences for employees, leaders must remain aware of the negative effects of belief bias, which, according to the American Psychological Association, is “the tendency to be influenced by one’s knowledge about the world in evaluating conclusions and to accept them as true because they are believable rather than because they are logically valid.” The phenomenon of belief bias explains the root cause of negative beliefs — which are, more often than not, previous negative experiences. A negative experience in the past may have shaped employee beliefs such as “If I train the next generation of employees, I may be replaced by them.”
In order to overturn deeply-rooted belief biases, leaders need to give members of their organization reason to form a new belief.
One way to do so effectively is by actively modeling inclusivity — an important belief that leaders should cultivate in employees in order to establish intergenerational harmony. Perhaps a leader asks an employee of a different generation to lead a meeting or share their perspective. In this way, leaders create experiences that cultivate an inclusive culture by inspiring beliefs such as: “diversity is a strength that is valued at this organization,” “I have much to learn from other generations,” and “I can contribute to desired results by being myself, accepting others as they are, and working together with team members, regardless of their age or rank.”
Preparing Your Organization for the Next Phase
As baby boomers age, organizations must be prepared to execute a generational succession plan that successfully answers two central questions: how to manage a multigenerational workforce and how to prepare for the expected retirement of remaining baby boomers.
Today, many baby boomers are working beyond traditional retirement age — 39.2 percent of workers 55 and older are still employed, the highest proportion of this demographic to continue working since 1961 — meaning baby boomer employees come into daily contact with the millenials who now outnumber them in the workforce.
At the same time, 10,000 baby boomers retire every day, costing many organizations a great deal of their institutional memory as they swiftly lose employees who have acquired knowledge, experience, and specialized skills over the decades.
In order to mitigate the potentially disruptive effects of an increasingly multigenerational workforce coinciding with rapid generational turnover, organizations must craft a succession planning strategy with organizational longevity top-of-mind.
By establishing succession planning as a key strategic priority, leaders ensure that their organization plans for demographic change, rather than waiting to address impending upheaval until it has already destabilized the company. At the same time, they align multigenerational teams around clearly defined Key Results. Finally, cultivating a culture of inclusivity facilitates greater team cohesion and develops a culture of shared values and beliefs that drives the organization toward its Key Results.