3/19/08 1:00 PM

Research: Small Firms Best at Preparing for Aging Workforce

By Bill Leonard

Recent research shows a marked difference between small and large companies when it comes to planning for ways to deal with the aging U.S. workforce. And according to one survey, small businesses appear to be ahead of the curve when planning for this major demographic shift.

In a survey of 404 small business owners released March 5, 2008, by the National Association of Professional Employer Organizations (NAPEO), 28 percent of the respondents reported that they had developed plans and strategies to transfer the knowledge and skills of their older and more experienced workers to younger employees.

NAPEO officials say the survey results are not surprising considering the impact that losing experienced talent has on small businesses, which they identified as having fewer than 500 employees.

Milan Yager, executive vice president of NAPEO, said he believes that as older workers retire the foreseeable gap in institutional knowledge and skills is forcing small business owners to be more attuned to the way the demographic shift will affect their competitive advantage.

“For a small business, losing even one seasoned knowledge worker affects them competitively,” said Yager. “These business owners want to ensure that seasoned workers convey their knowledge, or even continue working longer if possible.”

In 2008, the first members of the baby boom generation reach age 62 and can qualify for Social Security benefits. Projections show that nearly 25 million baby boomers will hit retirement age by 2013. By 2018, the numbers will continue to increase dramatically. The baby boom generation, generally defined as people born between 1946 and 1964, is the largest demographic group in the United States, with nearly 80 million people.

Other research shows that small businesses are outpacing their larger counterparts in planning for the age-based demographic shift. Slightly less than 25 percent of larger-sized employers (those with more than 2,500 employees) are making any effort to transfer knowledge from soon-to-retired employees to younger workers, according to a report released in November 2007 by the global consulting and training firm Novations Group.

Surprisingly, the Novations research revealed that only 4 percent of the respondents had adopted any formal procedures for transferring the knowledge and skills of older workers.

A similar study released by Monster Worldwide Inc. in September 2007 also found that knowledge retention does not appear to be a high priority among organizations. Approximately 20 percent of respondents to the Monster survey reported that they were developing plans for knowledge and skills transfer from older workers.

“While institutional knowledge is increasingly an organization’s most valuable asset, our study found many companies do not have the processes in place to preserve and redistribute this critical information,” said Jesse Harriott, vice president of research for Monster Worldwide.

Businesses responding to the NAPEO survey reported that their workforces are growing older. In the most recent survey, 21 percent of the respondents reported that at least 5 percent of their employees were ages 60 through 64. In a similar survey conducted in 2007, less than 16 percent of the respondents reported that at least 5 percent of their workers were in that age group.

The NAPEO study found that an increasing number of businesses said that their older workers were planning to delay retirement—37 percent of the respondents compared to 18 percent in 2007. Only 4 percent reported that some workers planned to retire before age 65 as compared to 8 percent of respondents in 2007.

Bill Leonard is senior writer for SHRM Online.

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