Special Report November 17, 2009, 1:49PM EST

How Companies are Managing 'Unretirement'

Leading companies are preparing for the demographic fallout of the Great Recession

SPECIAL REPORT

Managing the Unretired

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In the talent wars. be careful what you wish for. Until very recently many of our client organizations were looking for ways to forestall the expected wave of baby boomer retirements and hold on to their experienced talent a bit longer. Now, with many employees' retirement savings and home values decimated by the market meltdown and continuing uncertainty about full economic recovery, companies are wondering when—or if—their boomer workforces will sail off into the sunset.

In a recent Towers Perrin survey of about 500 human resources and benefits executives, 59% indicated that employees are postponing retirement, and roughly 40% thought employees have been depleting their retirement assets, either via loans or reduced contributions to savings plans. In view of these trends, some employers have begun to focus on the issues they will face in trying to manage a growing cadre of the "unretired."

These issues hold important business as well as social implications. In a study Towers Perrin conducted for AARP, we found that an aging workforce poses both opportunities and potential challenges for companies. On the cost side, our analysis confirmed that a rising percentage of older workers in the workforce tends to raise company costs for programs such as health insurance, paid time off, and traditional pension plans. But the offsetting advantages of lower turnover/replacement costs and a more experienced and engaged workforce can often outweigh the added benefit costs. Moreover, in a knowledge-based economy, older workers can remain highly productive well past the age when those in earlier generations typically retired.

multigenerational benefits

The trend toward postponing retirement had been under way even before the recent turmoil in the financial and housing markets convinced many older workers that they can't afford to retire anytime soon. A survey of employees in the G7 countries we conducted as part of another study for AARP shows that many employees have a new view of retirement that includes continuing to work in some capacity after exiting their primary careers. Better health and longer life spans are clearly part of the story. But many older employees also want to continue to work later in life to stay active, connected, and engaged. They're motivated by the social dimensions of work as much as the financial considerations.

Of course, from an employer's perspective, there's a big difference between a sharp, active worker in the traditional "retirement zone" (ages 55-65) who wants to work for continuing growth and fulfillment and an older, less engaged person who feels compelled to work primarily to make ends meet. The former can boost company productivity by leveraging his or her knowhow and mentoring younger workers, while the latter may undermine organizational effectiveness with negativity and "presenteeism."

Managing these unretired workers across the age and motivational spectrum requires a thorough understanding of people's needs and concerns and the right kinds of HR programs to balance their needs with those of the organization. For the first time, many organizations already have, or will soon have, four generations working side by side. Organizations we work with vary widely in their level of preparedness to manage this challenge. Some are just beginning to consider the issues and possible approaches, while others are already highly proactive in devising new strategies to harness and harmonize the multigenerational workforce.

While specific strategies and program elements will vary from organization to organization to address unique business and talent issues, all employers seeking to maximize the performance of an increasingly intergenerational workforce should pay close attention to the following issues:

• Provide meaningful learning and development programs.

Our research with employees of all ages underscores the importance of meaningful training and career-development opportunities in keeping employees engaged and motivated.