Preparing for a Mass Departure - Employees
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Preparing for a Mass Departure

By Mary Sedor

Article Date: 04-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.

Retiring baby boomers will leave a great void in the workforce. Before your company's most knowledgeable and experienced employees set sail for retirement, plan now how you'll protect those intangible assets and begin raising up your future leaders.

In 2007, Kathleen Casey-Kirschling made national headlines when she became the first of the baby boomer generation to file for Social Security benefits.

Following swiftly behind her into retirement are the other 80 million Americans who comprise this age cohort, which is the group of people born between the years of 1946-1964. Nearly 10,000 people per day will become eligible to retire until 2030, when the eldest of the baby boomers reach retirement age, according to the Social Security Administration (SSA).

With only 46 million Gen Xers behind them, and a fraction of the Millennials in the workforce, the mass exodus of the baby boomers from the workforce is expected to create a gap of an estimated 30 million people.

“As the baby boom generation of corporate leaders and experts approaches retirement, businesses in the U.S., Canada, and many European nations face the loss of experience and knowledge on an unprecedented scale,” writes Diane Piktialis, mature workforce program leader at The Conference Board. Piktialis is the co-author of The Conference Board’s July 2008 report titled Bridging the Gaps: How to Transfer Knowledge in Today’s Multigenerational Workplace.

Due to the recent downturn in the economy and subsequent reductions in 401(k) retirement accounts, it appears as if massive retirement movement has been delayed. The American Association of Retired Persons (AARP) recently reported that 70 percent of baby boomers intend to keep working into their 70s and 80s.

“Since 401(k)s have eroded, people aren’t in a big rush to retire now,” said Bill Sitter, owner of executive search firm Jordan-Sitter Associates. “They thought they’d be on a bass boat somewhere by this time, and now they are looking at retirement and thinking they can’t live on Social Security. If they can stay, they’ll stay.”

This delay in the workforce shift gives dealers time to start making succession plans and the opportunity to tap into the knowledge base of their key retirement-age employees.

“As the old adage goes, people don’t plan to fail, they fail to plan,” said Bob Murray, general manager, tax and employment solutions for ADP Dealer Services in Hoffman Estates, Ill. “Don’t become too complacent in believing that people are going to defer retirement. What dealers should be doing now is begin the assessment process in determining their risk exposure to loss from retirement, and begin to discuss strategies on how to address it.”

Complete an Employee Audit
The first step equipment dealers should take is to complete a company-wide audit, recommends Murray.

When completing the audit, Murray recommends dealers ask themselves:

  • What are my company demographics?
  • What are my retirement policies? Do they encourage or discourage early retirement?
  • What do I need to do to capture key intellectual property before it goes out the door?
  • Who has this key knowledge, and are they the sole owners of it?
  • What positions do I have and who is in what role? Can these people continue to do this job as they become older?
  • Do I run the risk of having a very young and very old employee base? What needs to be considered to accommodate/retain both?
  • How do I plan to recruit talent? What do I have to offer to attract and retain talent?
Dealers should be checking in with their retirement-age employees to gauge their interest in staying and estimated date of departure, said Sitter.

“It’s not smart today to assume that everyone is going to work to age 65,” said Sitter. “Dealers ought to know which employees are thinking about stepping out in 18 months and checking in with employees now that the stock market is going the wrong way. Most people who have been with a dealership for, say, 20 years or more don’t want to leave the company in the lurch.”

Once a dealer has identified the employees who will be retiring, the next step is to develop a succession plan to fill those gaps, either with internal candidates or by creating a strategy to build bench strength through recruitment, said Murray.

Identify the Skill Set
The workforce shift will require employers to find replacements for multiple retirements – some perhaps even simultaneously – and address the monumental task of staying competitive in the midst of losing the collective knowledge and experience of their workforce. When creating the succession plan, dealers must consider the required skill set for the position and dealership needs, says Sitter.

“The parts manager you hired 35 years ago who worked his way up to vice president of parts had to pick up a lot of skill sets along the way,” said Sitter. “All of the technology and financial skill sets that are required today, these guys didn’t have. Dealers will need to hire people to fill those spots who have an aptitude to acquire the basic skill set, but who can also perform as a business manager.”

For example, service managers in the past were promoted for being a good service mechanic, said Sitter. The problem with that, he says, is that they never had much training in terms of how to run the service business.

“With service being such a big part of the dealer business, dealers need business people with a service orientation to run the service department,” he said. “As dealers replace boomers, they need to look at how they can get their people fast-tracked into management and recruit from other sources.”

As dealers think about the jobs that their retirement-age people will be leaving, Sitter recommends projecting beyond what a new hire will do today and instead, planning for what his or her future role in the company will be as well. Sitter calls this approach “thinking two deep.”

“When you make a hire, it’s great to fill a branch manager position with a really good branch manager, but dealers need to think about at least one more job for that person,” said Sitter. “Unless you’re bringing in someone who is in the late stages of his or her career to fill a specific need, dealers need to find out that candidate’s aspirations. As dealers are filling spots – and they should always look inside first – think about whether the candidate has the potential to be a senior officer.”

This kind of strategy doesn’t have to add extra expense, notes Sitter.

“When that candidate comes back to the boss in five years and says they want to move to a different job, hopefully that dealer has provided the employee with the opportunities and training they need,” he said.
In addition, Sitter says dealers should avoid trying to find an exact or duplicate replacement for the person retiring. Instead, it can be an opportunity to rethink that person’s job responsibilities and either add or remove items to best suit the needs of the dealership.

“Don’t dust off a 10-year-old job description,” said Sitter. “Over time, jobs change. I encourage dealers to keep an organizational chart in flux. The easiest time to change it is when someone moves or leaves.”

Prevent Knowledge Loss
One of the biggest losses that comes with retiring employees is the possible loss of that employee’s key company knowledge – about customers, equipment and processes. To prevent this kind of loss, Murray recommends dealers review their current systems. Dealerships that have older legacy systems that only the seasoned employees know how to operate should consider making a transition now, before their employees retire.

Several options are also available for dealers to ease the transition of the retiring employee, giving the company time to gather as much key knowledge as possible, explains Murray. These include:

  • Keeping the employee on part time as a consultant
  • Implementing a defined contribution pension that will pay out more to the employee the longer (s)he works
  • Implementing a phased retirement program, which is essentially a transition period of fewer hours and responsibility
  • Offering a deferred option retirement plan (DROP). These are similar to an optional form of benefit available through some defined benefit pension plans, but it is administratively more complex. A DROP provides for the tax deferral of retirement benefits while an eligible worker continues employment, limiting access to those benefits until he or she terminates employment.
Training in Tough Times
While the economy is down, continuing to foster the education and growth of a dealership’s future management team remains important.

“If you don’t, you run the risk of losing one of your brightest stars,” warned Sitter.

There are many inexpensive options for dealers to develop their future leaders. One option is sending managers to training programs, such as those offered by The AED Foundation, says Sitter. Even community college courses and other professional courses can be a low-cost way for dealers to enrich the knowledge of their younger employees. And AED’s new “Test Drive” business simulation experience for dealer managers is another alternative to traditional management training programs.

Committing to leadership development and training says to younger employees, “Yes, we’re going through a tough time right now, but we’re planning on being here in the upcycle, and we want to sharpen our skills for it,” said Sitter.

Another inexpensive option is setting up a reading program – identify employees to fast track for management, and ask them to read the latest management books, said Sitter. Check in quarterly to discuss the management principles they’ve learned.

Dealers could also create a mentoring type program in which dealers identify four or five fast-track employees and get them involved in projects outside their normal realm of responsibility, said Sitter.
“See how they do,” he said. “They have to be willing to go back to school, do online courses, take other assignments and such – they shouldn’t expect you to hand it to them.”

Management Pipeline in Action
After a key general manager retired earlier than expected, Quinn Co., a Caterpillar dealership based in
City of Industry, Calif., implemented a program designed to identify high-potential performers for the management track.

“If you lose anyone in a key management position it hurts,” said Steve Nunez, director of human resources for Quinn Co. “After we lost a key manager it motivated us to move more quickly to implement our Talent Management Program. We realized that you have to have some back-up plans in place, and you have to have bench strength. Going out and searching for a replacement can take months.”
Quinn Co. implemented their Talent Management Program last year, which identifies the key strengths and development needs of the company’s future leaders, explains Nunez.

“We identify a high potential performer as a leader in the organization whom we feel could take on more responsibility,” said Nunez. “While we don’t call it a succession plan or promised succession, we acknowledge that they have high potential talent and complete a development plan for them.”
The idea for the Talent Management Program came from a key manager meeting.

“We found that our lack of succession planning was a real concern for our group of about 50 managers,” he said.

The Talent Management Program covers all dealership departments, generally from senior middle management, he said. Quinn Co. created the program in house, providing the company with a significant cost savings.

“Our committee members did their own research, brought it back to the team and we came up with our own program based on the benchmarking of different companies,” said Nunez. “We keep track of everything on spreadsheets and in PowerPoint.”

The program has two components: A leadership assessment and a performance rating. In the leadership assessment, employees are rated on five competencies and given a score of one to four, with four being an excellent leader. This assessment also includes a rating based on the results of an annual employee survey. The employee’s manager also completes the performance rating on a scale of one to four.

Once an individual is identified as a high-potential performer, he or she begins various development activities.

“We cross train them and expose them to different parts of the business and give them projects and assignments they aren’t used to,” he said. “We’re still going through the learning curve but we believe we’re headed in the right direction.”

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Article Categories:  Workforce  »  Management