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September 5, 2000
Implications of An Ageing Population, 2000 Fulbright Symposium, B. Michael Baltzell
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THE CHANGING FUTURE PROFILES OF THE WORKFORCE IN INTERNATIONAL ORGANISATIONS
By
B. MICHAEL BALTZELL
PRESIDENT, ALCOA WORLD ALUMINA AUSTRALIA
2000 FULBRIGHT SYMPOSIUM
Perth, Western Australia
5 September 2000
Changing Workforce Profiles
We might blame Bismark.
111 years ago, when he set up Germany's first pension scheme, he fixed the retirement age at 70 — then soon lowered it to 65.
It became an unshakeable belief that 65 is the natural retirement age. People all over the world believe it. Indeed, it still sounds plausible.
But if you lived to 65 in Bismark's Germany, you were lucky. You were rare. And you were indeed old.
This year, 12 percent of the Australian population is already older than 65 — that’s 2.3 million people.
That is predicted to grow to 16 percent in about 15 years. Within thirty years, the over-65s will make up a quarter of the population.
Every business enterprise, from an international aluminium producer to a university, has to adjust to these facts.
That adjustment will be confused by a cocktail of myths (like the one about 65 being the natural retirement age). I'll come to the myths in a minute, because it seems to me they're a key part of the problem.
OECD and some other countries
First let me summarise some global developments, from a slightly different perspective than we’ve heard from Dr Kalache.
From within a global organisation, we’re keenly aware that this demographic whiplash will strike almost any country you name.
Worldwide, Alcoa and the companies like us face a profound and unprecedented shift in the population age-distribution. We operate in many of the 75 plus countries where the fertility level is below replacement levels.
Many are far below: Portugal, Spain, Greece and Italy are committing national suicide, with a birth rate of about one child per woman.
Even Japan's low rate is higher than that at 1.4 But because you need 2.1 to stay level, on present trends Japan’s 225 million population will be down to 50 million by about the middle of this century!
Italy and others are dropping even faster. They're experiencing a kind of negative compound interest in population, which is like falling off a cliff.
In Australia, the rate is 1.7 births per woman. That's higher than Japan's 1.4, but still below the replacement rate.
What it means for the age distribution in the workforce is simply staggering: these days in Australia we get 170,000 new entrants to the workforce per year.
In 20 years, that will drop so sharply that in the whole decade from 2020 to 2030, there will be only 125,000 new entrants.
I’ll repeat that: 125,000 new entrants in a whole decade, compared to 170,000 new entrants last year.
Something has to give. The size of the population will not shrink with anything like the same speed, because we’re all living longer. Each employee, if companies like mine can find them, will have to be resourced, and educated, to become ever more productive.
The myths
On top of this irresistible demographic lava-flow, there floats a crust of myth.
The myths differ a bit from country to country. But the OCED countries seem to share a similar core of them:
- Retired people don't need to work, because they have savings, superannuation and access to social security.
- Retired people don't have family responsibilities.
- Retired people don't want to work - they want early retirement.
- Anyway, older people are less productive than younger people; they are more likely to be sick, and many are heading into a state of dementia, depression or disability.
- Men and women age the same way, but somehow women hit their working peak at about 35, much earlier than men, so the myths are applied to them much earlier in their paid working lives.
- Let’s look at any one of those myths. Let’s look at them through the eyes of a large industrial organisation that is seriously concerned about the availability, skills, productivity and retention of its future workforce.
I might interject at this point, a real example of our concern. Over the past year I’ve attended the retirement celebrations of three of Alcoa’s most senior Australian executives. They took with them over 100 years of experience with the company, going back almost to its beginnings.
Like most older people, they weren’t frail. They weren’t losing their faculties. They were at the peak of their experience.
Most people stay physically fit, well into later life. They can carry out their daily tasks, and go on playing an active part in the community. Only a minority, and the very old, grow so disabled that they need daily help.
Ageism
Myths like those propel "ageism" — the up-to-date word for prejudice against older workers. The myths make ageism into a perpetual-motion machine. Even the older workers start to believe it!
In one multinational I know about, everyone has to retire by 62. An Australian CEO there, still brimming with energy and acumen was 'too old' at 62 to continue.
Down-sizings didn't help either. In the 80s and early 90s, it was mainly the older workers who were asked to leave.
Result: many of the people in key management positions are now relatively young, and they seem to prefer employing people their age, or younger. They may even fear the greater knowledge or expertise of older people.
There has been a tonne of research about workplace ageism.
Studies from Australia, the UK and other European countries all show similar trends: a tendency to exclude workers over 50 from training opportunities, and the outcomes from management decisions about the employability of older workers (often in absolute contradiction to the company's written policy).
Employers' attitudes to their existing older workers is interestingly mixed: the older workers are well regarded for loyalty, productivity and reliability, but marked down for being over-cautious, unable to adjust to new technology, inflexible, and prone to uneasy relations with younger managers.
A Drake survey of 500 Australian executives found that age discrimination is rampant in many of our workplaces.
More than 60% of the executives said they prefer to employ people in their 30s. Only one in five sought out workers aged 40 or more.
The Canberra Times remarked: "Such overt ageism is not only discriminatory and unfair; it is also unsustainable."
Ageism is unsustainable
It is certainly unsustainable. In time, ageism will be flattened by those irresistible demographic facts. Those in industry who think ahead of the problem will be best placed to handle the outcomes.
The Australian Government has already sounded some wake-up calls.
They have abolished 65 as the compulsory retirement age in the public service and for statutory office holders. They've launched a National Strategy for an Ageing Population, and funded an Australian Employer's Convention to help promote age balance in the workplace.
We can expect more urgent warnings and louder campaigns, until we all finally hear it.
We are already hearing it from some renowned management gurus like Peter Drucker.
He stresses that because of the nature of most work in the 21st century, the firms that understand early that they should use the knowledge and talent of workers they already employ — or can poach — will develop significant competitive advantage.
They will avoid skills shortages, maximise their recruitment potential, and help promote diversity in their company.
A company with diverse ages – a mixture of youth and maturity – can respond best to rapidly changing circumstances. Indeed, some employers have already understood the benefits of adjusting the age range of their employees to better reflect the age composition of their customers.
The looming human-resource issue for managers will be to consistently recruit and retain qualified people at a time when the labour market is threatened by an exodus of baby boomers.
Two years ago, the leading edge of those baby boomers began turning 50. The rebellious students of ’68, the hippies of the Woodstock generation are now grizzling grey.
For a global organisation like Alcoa, which is growing rapidly, this challenge is even steeper.
Ten years ago, Alcoa had 61,000 employees in 152 operating locations spread across 20 countries. Today, it has 140,000 employees in more than 300 locations in 36 countries.
What companies can do
Here are some measures that some large companies are taking, or they're considering:
1. Create conditions that let employees manage their own careers and ageing.
This means an awareness campaign — a continuing one — as well as concrete measures to make sure that age isn't a bar to training. Employees need to get used to lifetime learning.
Rather than defining a career as unbroken service with a definite beginning and end, jobs may evolve in a more organic way.
There could be periods of intense work, interrupted by pauses for sabbaticals, maternity leaves, personal health problems and eldercare.
Starting at age 50 or so, there may be a 'bridge'' period —ranging from 5 to 20 years — when an employee slowly takes his foot off the accelerator and slows from full-time work to full retirement.
People close to retirement and no longer competing for the next gold star may choose to move from Manager to Mentor.
We already do this on a de facto basis, by frequently recruiting back our retirees as consultants, because we find we can’t do without them.
One word about eldercare: some companies are taking that on for their employees, just as some companies offer childcare centres. For example, IBM and American Express have set up eldercare centres.
2. Deal with older workers' problems in reporting to younger managers
Many older workers will inevitably be subordinates, but they can't be treated the same way you treat 30-year-olds. And conflict is likely when part-time older workers sit next to younger workers who'll continue working at night, after all the older people have left.
Ed Michaels, a director at McKinsey & Co, said: ''We're going to have to have new models of how people work together, based much more on merit and less on seniority. 58 year-olds are going to have to be comfortable working in teams with 28 year-olds where [the younger people] are the team leaders."
Peter Drucker suggests that a new management style must be developed that treats older workers more as volunteers than as employees.
3. Design jobs that compensate for physical decline
There are many ways of doing that. For example, by eliminating heavy lifting or strenuous twisting movements, providing the best lighting and the right seating, altering workstations to avoid too much bending and reaching.
We have an edge in an industrial company like Alcoa. Our focus on diversity is increasingly bringing women into the production areas of our mines, refineries and smelters. This means we have to redesign equipment and tasks to match the different physiology of females, and that has the bonus of extending the time in which males can do the same jobs.
4. Manage the succession in the company
Succession planning needs to be ramped up to make sure qualified managers are in place when others retire. I've seen examples of very systematic efforts to publicise leadership requirements, identify a pool of candidates, develop leadership in those candidates, and then select leaders from among them.
We’re working on that in Alcoa as a real and urgent challenge, to improve what we do now, because otherwise we won’t be able to handle the changes ahead.
What some companies are doing
Here are some snapshots that show how some companies are already adjusting.
Deloitte's best senior partners — generally over 50 — are given a chance to create their "dream job." If they would like to spend 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 OK too.
Chevron has taken some energetic measures. All operating units must carry out a demographic analysis each year to pinpoint where talent shortages will hit first. And to build skills, they are lowering the age at which their people are sent to executive programs.
Volvo has responded to the ageing of its workforce with a program to change the attitudes of its employees about internal mobility. The initiative includes allocating money to individuals for personal development programs.
A Dutch construction company (Hazenberg Construction) tries to anticipate problems of ageing at work. It includes periodic health checks. An employee may be recommended to switch from carpentry to a supervisory position, or mentoring younger operational staff in less arduous renovation projects. This lets the younger employee work with the older one, with the heavy work done by the younger person and the older worker giving training.
A large family food production company in Finland (Ruoka-Saarioinen Oy) has invested in a project aimed at adding one or two years to an employee’s working life with the company. The working environment has been improved, including new ergonomic equipment. Workers have pauses for exercises and fitness programs, and losing weight has become popular.
A large aluminium manufacturing company in Greece (Hellas Can) encourages older workers to participate in all its training programs, including training in information technology.
A medium-sized Swedish company (RAPID) that employs skilled metal workers has focused on recruiting a small number of older workers to ensure an age-mixed workforce and to avoid shortages of skilled labour.
90 and still working
How long can some exceptional people keep working? We all know examples, some among our own relatives. And there are those world-famous ones:
I've quoted thoughts from Peter Drucker in this talk. His latest book is "Management Challenges for the 21st Century." He is 90.
John Glenn rocketed back into space at 77.
Alistair Cooke has been broadcasting weekly for the BBC for 50 years. He is 90.
I'll finish with Bismark. He was already 74 when he declared Germany's first official retirement age. Bismark lived ten more years — to 84 — at a time when the life expectancy was about 35 years. He weighed 18 stone, was racked perpetually by insomnia, toothaches and stomach troubles. And his declared chief ambition was to smoke 100,000 cigars.
When Kaiser William 11 (who was 31 at the time) decided to take over and infamously "dropped the pilot," Bismark was 75. Germany went rapidly down hill.
Think of him, when someone says 65 is too old to work.
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