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Brain Drain


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Brain Drain

Older executives are set to leave the workplace in droves. Keeping these senior stars on the job will require more flexible management. Are you ready?

Even amid today's lavish signing bonuses and perk-laden employment contracts, it's a sweet deal. Work anywhere in the world doing whatever you want whenever you want to. No, this is not the latest lure to attract Silicon Valley hotshots or Wall Street dealmeisters. It's Deloitte Consulting's bid to retain a group that until recently was being rushed out the door by Corporate America: executives over 50. Deloitte's Senior Leaders Program, an innovative plan aimed at its best senior partners, begins next June.

What's behind Deloitte's move? Simple demographics. In order to serve its far-flung clients, the consulting firm must maintain a standing army of highly skilled partners ready to fly to any city in the world at any time. But over the next five years, the number of Deloitte partners over 50 will double, to about 230--more than a quarter of the current total. In a grueling profession that attracts people with high pay and pensions that vest at 50, Deloitte knew that unless it moved fast, many of those partners would head straight for the exits. To fight back, it's letting a select group of its brightest stars restructure their jobs almost any way they want, perhaps downshifting from full-time to part-time, or from consulting to mentoring. "We looked at the demographic risk of losing significant partners," says Douglas M. McCracken, Deloitte Consulting's managing director for the Americas. "The firm was vulnerable. We've been dealing with it."

Deloitte is facing a crisis that plenty of other companies are about to hit head on: an age-related brain drain. With the leading edge of the baby-boom generation nearing retirement and with a bull market that has left many rich enough to bail out early, Corporate America is heading for a massive talent crunch. Add to that what is already an acute shortage of smart managers, and we're looking at an epic struggle in the making. "There's a knowledge problem in organizations," says William C. Byham, president and chief executive of human-resources consultant Development Dimensions International. "All the history is going out the door."GOODWILL MINISTERS. Already, other companies are moving decisively to hang on to their most experienced workers. Instead of severing contact when their top performers reach retirement age, they're finding ways to keep them engaged--and their own talent pool stocked. Companies such as Chevron, Prudential Insurance, and Monsanto are tailoring consulting contracts and part-time assignments to accommodate older workers. Some of those seniors are transferring wisdom and skills to younger colleagues. Others have been brought out of retirement to fill critical skill gaps temporarily or to circle the globe as ministers of corporate goodwill.

As more companies tap into this crucial resource, they'll be forced to grapple with a host of management issues, from lingering ageism to intergenerational conflict. They'll have to create productive work teams made up of people of all ages, ambitions, and schedules. And as more people work past traditional retirement age, they will have to decide when an older worker is still vital and when he's punching the clock. Most of all, they'll have to find new ways to inspire their silver-haired stars. "If companies continue to require that working for them is an all-or-nothing proposition," says Dennis R. Coleman, a principal at PricewaterhouseCoopers, "they will find people reaching 55 and going to work for competitors who are offering flexible employment opportunities."

What companies won't be able to do is simply avoid the issue. Plummeting birthrates have corresponded with the rise of the knowledge-based economy, which demands more and more white-collar workers. Between 1998 and 2010, the number of managerial jobs will rise by 21%, according to Development Dimensions International, while the number of people between 35 and 50 will fall by 5%. Already, the median age of the U.S. workforce is nearly 40, up from 34.9 in 1979. Even with productivity gains and immigration, there won't be enough people to meet the demand. "The pressure is building," says Ken Dychtwald, president and CEO of Age Wave, a business-development firm focusing on the over-50 set. "It's almost like geological plates, but it's demographic plates." The graying of America, he says, will alter everything from office furniture to the meaning of work itself.

Yet while some companies are learning to spin silver into gold, others are ignoring the shifts under way. "Most companies are not in enough pain yet," says Coleman. Indeed, until recently most companies thought there were too many people at the water cooler, not too few. The past decade has seen wave after wave of downsizing. And as high-tech businesses have begun to lead the economy, respect for wisdom has been squashed by the notion that the less history you know, the better. The 25-year-old director of development has become the norm at many Internet companies; the 55-year-old manager, a novelty.

In fact, until now, the workplace has been downright hostile for many older workers. Those downsizings hit this generation while they were in their prime working years, causing layoffs and career disruptions. Pink slips turned longtime loyalty into bitterness. And the culturewide emphasis on youth has only exacerbated the rampant ageism. "Older people in this culture have been discriminated against aggressively and continuously in the workforce," says Dychtwald.SHORTHANDED. Yet thanks to the 17-year-old bull market, an awful lot of older managers don't have to put up with mistreatment. With their stock options and 401(k)s soaring in value, they're apt to walk away if conditions aren't ideal. Back in 1970, 83% of the men between 55 and 64 were still working, but only 66% of that group will be working in 2000, according to Douglas H. Powell, founder of consulting firm Powell & Wagner Associates.

One company that has a headstart on the issue is Chevron Corp. It recognized it had a problem three years ago. Falling oil prices had forced a series of downsizings, and a lot of the buyout packages went to Chevron's most experienced managers. It didn't hurt at first, says Barry D. Leskin, Chevron's general manager for learning and development. "We had so many within that band that we were able to downsize and still retain the expertise we needed," he says. "Now you see some cracks in that system."

To make sure it's not caught shorthanded, Chevron has taken several steps. First, all operating units must conduct a demographic analysis each year to pinpoint where talent shortages will hit first. Succession planning is being ramped up to make sure qualified managers are in place when others retire. And to build skills, Leskin is lowering the age at which people are sent to executive programs.

Just as important, Chevron is working hard to hang on to valued senior managers, such as Jesse B. Krider. On Aug. 13, Krider, 63, retired after a distinguished career as a chemical engineer and executive. That same day, he boarded a plane for Chennai, India, where he spent a week as a consultant for Chevron, offering technical advice and assistance to the Cuddalore refinery. Next he'll go to the Persian Gulf. "He brings 30 to 40 years of detailed technical expertise and experience that we just can't replace right now," says James N. Sullivan, Chevron's vice-chairman. Chevron plans to keep Krider on as a consultant as long as possible, and that suits him fine. "I don't want to play golf all the time, for God's sake," he says, "and I feel a strong, strong allegiance to Chevron."

Krider started preparing for his new role as part-time global adviser long before his retirement date. Three years earlier, Chevron had asked him to make a job switch, from overseeing domestic technology and operations to training younger execs. Besides filling a need for Chevron, it gave Krider a shot at something new. "If I had not gone into teaching and mentoring and helping others," says Krider, "there's a good chance that I would have retired earlier."

The moral of the story? Flexibility pays. As some companies have learned through their experiences with working mothers and others, retention means meeting your most valued employees' needs. It's as true for the silver set as for any group. "It makes sense to think of [employees] as customers," says Lynn M. Martin, 59, former U.S. Labor Secretary under President George Bush and currently an adviser to Deloitte & Touche. "Companies that are going to need [these people] are talking about being customer- and market-friendly. Now they'll have to ask employees what they want."MENTOR TRACK. Indeed, the rise of a senior workforce may turn notions of what constitutes a job upside down. Rather than defining a career as years of unbroken service with a discrete beginning and end, jobs may continue to evolve toward a more organic form, with periods of intense work punctuated by pauses for sabbaticals, maternity leaves, elder care, and personal health problems. Starting at age 50 or so, there may be a "bridge" period that could last from 5 years to 20, in which an employee slowly takes his foot off the gas pedal and moves from full-time work to full retirement. Those nearing retirement and no longer competing for the next gold star may decide they want a change--for example, moving from manager to mentor, as Krider did.

Deloitte is hoping that its Senior Leaders Program will make that kind of transition a lot easier. The constant travel and long hours required of a management consultant at a top-tier firm make early burnout an occupational hazard. With no middle ground, the firm risked losing its best to early retirement.

That's what almost happened to Daniel G. Gruber, now 52, a top consultant who had run himself into the ground. After 23 years at Deloitte, including several in which he traveled constantly, he decided to quit. His pension had vested, and the travel had worn him out. "I just couldn't see a way out of it and still do the type of job they needed," says Gruber. After conferring with McCracken and Deloitte CEO Pat A. Loconto, Gruber agreed to stick around on a three-day-a-week basis, starting in June, 1997. While part-timers are common in other industries, the idea of a male consultant in his prime cutting back was radical. But more than two years later, Gruber is still going strong--and both he and Deloitte are reenergized. "I'm doing the best consulting of my life," he says. "[Part-time work] is an effective retention tool, and a wonderful transition to retirement."DREAM JOBS. Learning in part from Gruber's experiences, McCracken and former senior partner Alexander R. Aird went on to create the Senior Leaders Program. If successful, it may be a model for other companies struggling to hang on to aging talent. Starting next June, several of Deloitte's best senior partners--generally over 50--will be given a chance to create their dream job. If they would like to focus half their time mentoring younger consultants and half with top clients, they can do that. If they want to run an office in Singapore, or head up a research project for the World Economic Forum in Davos, Switzerland, that's fine, too. "We want to bring these people into a process that says the opportunities for doing different and exciting things are within," says Aird, who himself might be used as a model. Although retired last year at 62--Deloitte's mandatory retirement age--he still works under contract as a senior adviser. "I'm a young, vigorous, and useful man, you see," he jokes.

Experiences like these show just how arbitrary mandatory retirement ages can be--and how much talent can be wasted. Otto von Bismarck chose 70 (later changed to 65) when he set up the first social security system in Germany some 100 years ago, in part because most people didn't live that long. Although a mandatory age has been outlawed for the rank and file, many corporate-governance experts have seized on age 70 as the point when directors should step down, with CEOs signing off at 65. While many execs remain vital beyond that age, the experts had reason to push for limits. Companies, like people, need rejuvenation, and some board slots had become sinecures for directors who did more snoozing than managing. Still, a lot of wisdom is being thrown out with that bathwater.

John K. Castle, 58, chairman of leveraged-buyout firm Castle Harlan Inc. and a former head of Donaldson, Lufkin & Jenrette Inc., thinks he has found a way to gain good governance and still tap into a rich vein of executive talent. Castle targets just-retired CEOs and directors to serve on the boards of the companies he buys. "We smile on those over 70," he says. "There's a treasure trove of talent being overlooked." Castle looks for people with experience in the businesses he runs, such as retired Admiral James L. Holloway III, 77, formerly the chief of U.S. naval operations, who sits on the board of Castle's Statia Terminals Group, a petroleum-storage company. Castle tapped Albert V. Casey, 79, ex-head of AMR Corp., parent of American Airlines, to sit on two of Castle's boards--Worldwide Flight Services Inc., an airline-operations outsourcer, and, until it was sold, MAG Aerospace Industries Inc., a maker of airline sanitation systems.

This approach gives Castle an edge. He says he attracts folks who wouldn't have signed on in busier days. For retired execs, serving on Castle Harlan boards has another appeal--a limited time period. As an LBO shop, Castle sells off most companies after three to seven years so directors can move to another project. "That's attractive," says Frank Jungers, 74, former head of what is now Saudi Arabian Oil Co., who sits on Statia's board.

Shorter terms also make it easier to ease out executives who have lost their edge. Indeed, as companies employ older managers, they will have to deal with the sticky situation of an employee who can no longer contribute effectively. "The problem you have," says Thomas J. Neff, U.S. chairman of executive search firm Spencer Stuart, "is how do you decide which 70-year-old is worth keeping and which isn't?" Companies will also have to do better at succession planning. Older workers are generally intensely loyal, but illness and other problems can cause quick departures.PRECIOUS ASSET. Oddly enough, one of the most experience-hungry industries has been the youth-centric computer-technology business. Older executives may not know Java or SAP, but they have something else the technology world can use--business experience. Many have been recruited as board members in Silicon Valley startups. Says Neff: "It's an enormous opportunity for smaller companies to tap into what is pretty much a wasted corporate resource." Roger M. Kenny, managing partner of Boardroom Consultants, a corporate-governance consulting firm, thinks the ideal model for new companies is "someone with maturity who can mentor a youngish CEO."

Enter John M. Lillie, former CEO of APL Ltd. and Lucky Stores Inc. and now president of investment firm Sequoia Associates. Lillie, 62, has found a new role as a mentor to companies both old and young. He sits on 13 boards, including three Valley startups--Branders.com, Instill Corp., and NONSTOP Solutions--and gives "counsel on the bumps you hit as you grow." Lillie, who says he loves his role, has an interest in recruitment and usually interviews people for key positions himself. "I think we'll see more of this type of activity for senior executives as we move into another phase of life--and I purposely don't say retirement," he says.

Already, a Lillie-like role is emerging in Silicon Valley for executives who have cashed out and have finished coping with the daily grind of work. "You're not expected to retire and go play golf," says Anthony W. Scott, managing director of the technology and E-business practice for A.T. Kearney Executive Search. "You're expected to get back in the game." Scott thinks this role could be modified for other types of companies.

It's already happening. Now cutting a swath through Corporate America is octogenarian Walter B. Wriston, who ran Citicorp from 1967 to 1984. Ring his New York office, and he picks up the phone himself. "Yes, the dummy's still working," he laughs. Wriston serves on seven boards, including biotech companies Icos Corp. and Vion Pharmaceuticals Inc. "When you've been there and done that," he says, "you may have some useful experience for companies that are very young."

Whatever the industry, there are business problems to be solved, and that's where experience can be golden. Yet technical challenges aren't off-limits, either. Surveys show that those over 55 are among the heaviest computer users and spend more time online than any other group. Sonia Brock, 62, the Webmaster at the Canada Ontario Business Service Center, is an example. Brock started as a secretary and taught herself Web design. Now she also has a Web business of her own. "That's the thing about computers," says Brock. "It doesn't matter how old you are."

Aging techies often seem as ready to learn the latest gizmos as kids fresh out of school. ThirdAge.com, a portal aimed at boomers and above, pulls more than 1 million visitors per month and has signed up some 10,000 folks for courses in online technology, says Mary S. Furlong, CEO of parent company ThirdAge Media Inc. in San Francisco. Furlong practices what she preaches: About one-fourth of her company's employees are both tech-savvy and over 50.

Sometimes it is precisely the older technology that seniors were reared on that makes them valuable. At General Electric Information Services, the E-commerce arm of the giant multinational, the eight-year-old Golden Opportunity program brings in retired engineers and specialists to help customers operating older systems.LOYALTY. Other companies have also tapped older workers on a temporary basis to ease labor shortages. Monsanto Co. brings back retirees as temps or part-timers to fill gaps and save money. Last year alone, says Liz Thien, Monsanto's strategic sourcing manager, the Retiree Resource Corps saved Monsanto some $600,000, primarily in overhead from agency fees. The Corps also helps Monsanto transfer its technical knowledge to younger people. James L. Ogilvie, 69, worked for 29 years as a research chemist. An expert on federal regulations, he now works part-time in quality assurance, making sure that research reports meet government standards. "I get to work with a lot of real young people, new products, and new ideas," Ogilvie says. "I don't have an ax to grind. I'm just trying to get them through the process."

Many retirees come back to work not for the money but because they want to contribute. Their enthusiasm and loyalty is another advantage for talent-starved companies. That's what The Prudential Insurance Company of America has learned. Along with a temp service staffed by retirees, it also launched Retirees Offering Community Service, a group of some 200 volunteers who meet monthly to organize projects such as food distribution and reading fairs. Heading the Minneapolis crew is Howard L. Agee, 74, an ex-marketing manager who helped start the program. "I wasn't ready to wrap my arms around my money and die," he says. Last year, Pru, with 60,000-plus employees, derived 10% of its total volunteer hours from the program, a big boost for a company that relies on community relationships.

But dealing with older workers presents challenges to the managers they report to. Although technically they may be subordinates, seniors cannot be treated the same way you treat 30-year-olds. Conflict is even more likely to flare up when you have part-timers working next to younger workers still burning the midnight oil. "We're going to have to have new models of how people work together, based much more on merit and less on seniority," says Ed Michaels, a director at McKinsey & Co. "Fifty-eight-year-olds are going to have to be comfortable working in teams with 28-year-olds where [the younger people] are the team leaders." It goes both ways: Peter F. Drucker, the 90-year-old author of Management Challenges for the 21st Century, thinks a new management style must be developed that treats older workers more as volunteers than as employees.

To make it all work, companies will have to face the problem of ageism, still a common aspect of many workplaces. The message boards at ThirdAge.com are filled with frustrated over-50 folks who can't get hired. But the masses of aging baby boomers may have something to say about that--with a megaphone, says Dychtwald. "We are a belligerent, self-centered, and loudmouthed group," he says. "[Age-related] litigation will go through the roof."

As the coming crush of elder workers transforms the workplace, the effects may be radical. Greater flexibility may become the norm at all stages of a career. Indeed, such things as bridge jobs may one day look tame. "At some point in time," says Edward F. Ryan, managing director of Executive Interim Management, which places CEOs and other high-level execs in short- and medium-term projects, "there will be a core of employees, and everyone else will be on a contractual basis." That's enough to give even the youngest manager a shock of gray hair.By Jennifer Reingold in New York, with Diane Brady in Greenwich, Conn.Return to top


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