It is commonly known and understood that we have a growing population of baby boomers in Australia.
Couple this with an older retirement age and a gap for this generation to have accumulated superannuation - and the result is an older workforce.
There’s a lot to celebrate with an ageing workforce. Accumulated knowledge, corporate history, experience and loyalty – all excellent and deserved traits. However we must also be aware of the risks to our businesses as a result of this trend.
But let’s start with a question: Have you ever wondered why it has taken so long for man to get back on the moon?
One contributing factor is that NASA jettisoned many of its older experts for cost cutting and then discovered that the actual blueprints for the Saturn Five rocket booster (used to launch the Lunar Landing Module) had been lost.
One NASA Manager confessed – “If we want to go to the moon again, we will be starting from scratch because all of that knowledge has disappeared. It would take as least as long and cost at least as much to go back.”
Closer to home and lower to the ground, a mining company in WA was facing an exodus of older employees. At a workshop with the managers, it was identified that the most critical component of the operation was the 25km long conveyor belt that delivered the bauxite to the refinery. This belt is changed nearly every five years and takes around 3-5 days to complete.
A stockpile is maintained at the refinery that stored 10 days worth of ore in the event of a catastrophic failure of the conveyor belt. One such event was 20 years ago, when the wrong hardener was used in the splicing operation during the replacement of a new belt. At full speed, and fully laden, every join in the belt pulled apart causing massive damage that took weeks to fix. The refinery had to shut down costing the company millions of dollars.
The only person who had knowledge to ensure this could not happen again was leaving in 3 months - and was taking the vital information with him. It had never been documented how to prevent this from occurring again. Needless to say a knowledge transfer process was undertaken.
Australia's older workforce
- Within the next ten years there will be close to 4 million Australians either retired or near retirement age.
- In WA today, there are over 300 000 people in the workforce over the age of 50 years - this is around 23% of the workforce.
Although the Federal Government is encouraging employees to work longer, the reality is that many physically will not be able to and many others will choose not to. A study done by the recruiting firm Ranstad Group of 10,000 people, indicated their ideal retirement age to be 57 and that most were negative about working full time beyond the age of 62.
So this means that on average 15% of ?employees over 55 years will leave in 3 to 5 years and 23% of ?over 50 years will leave in 5 to 10 years.
Average time before retiring (Based on 1200 interviews)
50-54 - 7 to 10 years
55-59 - 3 to 5 years
60-64 - 1 to 2 years
65-69 - Within 12 months
70+ - Within 12 months
The 4 major risks from an ageing workforce
1. Occupational Health and Safety – modifying workplaces and understanding mental health and wellbeing
One of the implications of retaining older workers for longer is the need to ensure safe and appropriate workplaces. As the workforce ages, employers will have to review suitability of roles against the physical environment and the risks to older employees health and safety as they gradually lose strength, flexibility, reaction time, sight and hearing.
2. Workers’ Compensation
Influenced by the above, there is no doubt that the ageing workforce will impact on the frequency of serious claims. Worksafe Australia, in their latest release of statistics, reported older employees have a higher frequency rate? of serious claims in the majority of occupations. Companies will need to analyse the risk and identify ways of preventing claims if they are to avoid potentially higher workers compensation premiums.
3. Cost of Succession Planning
The cost of recruiting is calculated at any where from 40% to 400% of the salary, depending on criticality of role. If you do not know who is leaving and when, your recruitment is going to be highly reactive and expensive. If, on the other hand, you undertake succession planning throughout all bands of your older employees, not just the leadership team, you will create more time, job sharing and will reduce your costs from recruitment
4. Risk from Knowledge Loss to Profit, Safety, Productivity, Growth. Reputation and Brand
If baby boomer employees leave the business without you knowing what they know, the company runs the risk of losing critical knowledge. This is the unseen, accumulated organisational wisdom that has helped the business over many years. It is not just technical know how at risk, but the know when, know why and the know who that helps mitigate risks on a daily basis.
When do you need to act?
If you have more than 15% of your workforce who are over 55 years of age, then you need to address these issues now.
Here are some of the questions you might care to consider.
Do you know how many of your employees are over 55?
Do you know what their retirement intentions are and what they want from their late working life years?
Do you know how to manage the OH&S risks associated with your older employees?
Do you know how to keep motivation high and people engaged in this age group?
What do your over 55’s know about your business that you don’t?
Do you know how to map, capture and retain knowledge?
What will it cost to replace these employees?
How Austral Can Help You ProActively Manage Your Workforce
In conjunction with Andrew Kikeros of Life Time Wise, Austral Risk Services has developed several unique packages to address this specific risk to organisations. Through his work, Andrew has been able to reduce corporate risk and the impact of an ageing workforce on profit, safety, timeliness, productivity and reputation.
Our tailored solution to your ageing workforce risks include the following broad strategies:
• Review your employee data to determine likely attrition over the next five years
• Develop a workforce plan to mitigate high recruitment costs across all roles
• Assess your worksite’s suitability for ageing workforce and work practices Review workers’ compensation performance and future work safe plans
• Determine the impact of pre-retirement stress on the mental well-being of your older workers
• Identify the risk of critical and important knowledge loss from retiring employees and devise strategies to capture, transfer and reuse this information
We work with you to produce and implement a robust plan that ensures your business is protected against the loss of productivity and any other risks associated with an unplanned ageing workforce.
Andrew’s clients have included Western Power, Alcoa WA, Austral Bricks, Austal Ships and ARG (Aurizon).