FEW Australian companies are prepared to deal with the ageing of the workforce and many have yet to formally considered the impact on their businesses, according to a global HR consulting firm
FEW Australian companies are prepared to deal with the ageing of the workforce and many have yet to formally consider the impact on their businesses, according to a global HR consulting firm.
As a result, companies could only discover they have a problem when it is too late to do much about it, and end up trailing their competitors.
Speaking at a recent conference on the ageing population, Richard Block, head of Hewitt Associates’ retirement and financial management practice, said companies would not be able to turn a blind eye to the ageing workforce ever, because its impact would become more and more evident.
However, Block said there was no reason why organisations could not cope with trends in the ageing workforce.
“The most important thing is to understand the likely impact on their business. It isn’t possible to generalise; the impact will be different depending on the nature of the company,” he said.
“We believe that HR professionals have a lot to contribute to their organisations, in terms of ensuring that HR policies support an employee mix that is in line with the business objectives.
“By undertaking a project to understand the effect on their company, HR professionals can properly consider what actions need to be taken.”
Block said that the case to take action could be overwhelming for some companies; nonetheless the case needed to be made and would likely involve expense, time and effort. Furthermore, a proper analysis of the problem would be helpful in making the case.
“It is possible to quantify, in financial terms, the potential cost/benefit to the business, through a modelling exercise,” he said.
“Creating such a model also has other benefits, in terms of being useful in evaluating any future proposed changes to HR policies.”
A recent Productivity Commission study found that ageing pressures are about to accelerate as the baby boomer generation retires, while raising labour force participation can partly offset ageing’s impacts.
“The ageing of our population is a long-term phenomenon. But its effects will be felt sooner than many imagine,”said Productivity Commission chairman Gary Banks.
With the workforce shrinking as a proportion of the population, per capita GDP growth will fall to as low as 1.25 per cent per year in the 2020s, about half the rate in 2003–04.
Furthermore, the study found people aged over 55 years have significantly lower labour force participation rates than younger people. As more people move into older age groups, overall participation rates are projected to drop from around 63.5 per cent in 2003–04 to 56.3 per cent by 2044–45.
“Business is changing more rapidly than ever before. Many companies plan where they want their business to be in a few years’ time,” said Block.
“In doing this, they try to anticipate technological and economic changes, but in our experience they rarely model their workforce to see whether the mix of employees will be appropriate for meeting their business objectives.”
Such modelling could show a mismatch between the workforce profile that would naturally result from a continuation of current HR policies and the profile that most naturally fit with where the company wished to be in future, Block said.
Success in business was increasingly not just about having the right number of employees, he said, but about having the right employees.
People currently started work doing the more routine jobs, and as they gained experience, they moved onto more responsible roles.
“If the workforce is ageing, roles of a given level of responsibility will inevitably need to be held by people who are later in their careers than currently.
“This has cost implications, particularly if the company has a compensation policy that results in a drift upwards in pay as people age, irrespective of increasing responsibility.
“It is also likely to impact negatively on staff engagement (the emotional and intellectual connection an employee has with their organisation).”
