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Succession Planning

The World's Aging Workforce and What Your Business Should do About It

Despite projected growth in the global population from 6.9 billion to 7.6 billion in 2020, the working-age population is expected to decline. In fact, aging will likely add 360 million older people (Baby Boomers) to the world’s pool of those not participating in the labor force.

XYZ University publishes Scary Stats each Halloween, and this latest stat just might be the scariest of 2015:

Despite projected growth in the global population from 6.9 billion to 7.6 billion in 2020, the working-age population is expected to decline. In fact, aging will likely add 360 million older people (Baby Boomers) to the world’s pool of those not participating in the labor force.

There are few exceptions to this aging trend. India’s workforce is getting younger with one-third of the country’s population under the age of 15. Other developing market economies with young labor forces include Brazil, Mexico, Africa, and Indonesia.

But the rest of the world is aging. And there’s no sugar-coating it – this aging trend will hinder the growth rate of the global labor supply. Consider this:

  • Japan already has more people exiting the workforce than there are workers prepared to enter it;
  • In the Europe, 2010 marked the first time more workers retired than joined the workforce. This labor gap is at 200,000 currently, but expected to surge to 8.3 million by 2030;
  • By the end of this decade, Russia, Canada, South Korea, and China will also have more people at retirement age than are entering the workforce.

Ladies and gentlemen, the war for talent is heating up. Way up. Get ready for a skills-scarce world.

An estimated 31% of employers worldwide find it difficult to fill positions because of talent shortages in their markets, reports the Talent Shortage Survey from Manpower. Why can’t companies find the right talent despite the growing ranks of college-educated workers?

Part of the answer has to do with the rising skill level needed in the evolving global economy.

Another element is the failure of educational systems to produce an adequate base of talent to meet these changing needs. Although educational access is growing worldwide, not enough students graduate with the skills desired by global employers.

Change is happening so fast, we’re failing to keep up. To be more accurate – America is failing to keep up.

Researchers at the Princeton-based Educational Testing Service administered a test, sponsored by the OECD, designed to measure the job skills of adults born after 1980 in 23 different countries.

When they analyzed the results by age group and nationality, the results were shockingly bad for young Americans.

According to the study, despite the fact that American Millennials (Gen Y) are now the most educated generation ever, they scored far below their international peers; 17 out of 23 in literacy, 21 out of 23 in numeracy, and 18 out of 20 in problem solving in technology-rich environments.

What does all this mean for your business?

First, it means developing strategies for hiring, retaining, and training the workers who will give your business a competitive advantage must become the priority. Take a lesson from PwC, which spends millions each year on student recruitment, identifying high potentials during their sophomore year in college and courting and mentoring them throughout the remainder of their college careers.

Second, it also likely means businesses from all industries will need to significantly step up their efforts to shape public education and training systems. Never before have education and job-specific training been so important. Businesses will have to be more proactive and intentional about building pipelines of workers with the right skills for the 21st-century global economy.

Apple recently partnered with the Thurgood Marshall College Fund, which represents and supports students attending historically black colleges and universities (HBCUs), medical schools, and law schools. As part of the collaboration, Apple is giving TMCF more than $40 million to help develop talent pipelines into the tech industry, including Apple.

Third, as management shifts to younger generations, companies will need to shift their focus onto enhancing the next generation’s skill sets—especially in regards to leadership. The Deloitte 2015 Global Human Capital Trends report surveyed and interviewed more than 3,300 business and HR leaders from 106 countries. Half the respondents rated their leadership shortfalls as “very important,” yet only 31 percent believe their leadership pipeline is “ready.”

Generation X (ages 34-50 in 2015) has been stuck in middle management for so long, many haven’t had the opportunity to utilize or gain leadership skills. Generation Y (ages 20-33) is expected to become the majority of the workforce by 2015, but this young demographic is still emerging from college and entry-level careers.

While it’s encouraging to know that younger generations are expected to significantly grow their managerial skills by 2020, the onus is on companies to give them equitable opportunities to gain the right mentors, sponsors, career experiences, and training to capitalize on this potential. Unfortunately, this is proving difficult for many organizations because Boomers remain at the helm, determined to lead and resisting the participation of younger generations.

But the stats are clear: Boomers won’t be working forever and widespread retirements are imminent. The long-predicted aging workforce crisis and skilled labor shortage is upon us. I hope that today’s leaders will do all they can to lead their companies responsibly and strategically, leaving behind companies that are well prepared to succeed and prosper for generations to come.

Scared yet? You should be. Talent is our greatest resource. Not buildings or real estate or even technology. Every organization needs talent to survive, so make talent development the priority.

Do it now before it’s too late.

Zs came of age in an era of disruption

In many ways, it’s symbolic that Generation Z is named after the last letter in the alphabet because their arrival marks the end of clearly defined roles, traditions, and experiences. After all, Gen Z is coming of age on the heels of what has been referred to as the most disruptive decade of the last century. America has become an increasingly changing and complex place.

For example:

  • ‍Zs were born into a “modern family era” in which highly involved dads help out at home, and the nuclear family model (two parents, married, with children) represent only 46% of American households.
  • ‍Zs are the first generation to be born into a world where everything physical, from people to places to pennies, has a digital equivalent.
  • From the time they were infants, Zs had access to mobile technology. As a result, their brains have been trained to absorb large amounts of information, and Zs are especially adept at shifting between skills and subject matter.
  • Zs tend to have crystal-clear memories of sitting up for the first time at six months old because they can easily and quickly reference the photos and videos their parents shared on social media or saved in the “cloud”. 

Members of this generation have undoubtedly been shaped by crisis and disruption. This generation will largely be responsible for confronting the aftermath of the Great Recession, high youth unemployment, the effects of climate change, terrorism, energy sustainability, and more. These dark events have undoubtedly made this generation more cautious and pragmatic, but they have also provided this generation with the inspiration to change the world – and their grit will likely allow them to do it.

Coming of age during disruption means that most Zs will be comfortable being the disruptors. While Millennials tend to be collaborative and innovative, this generation tends to be sincere, reflective, thick-skinned, and self-directed, and will likely approach work in much the same way.

Zs were raised to be competitive

In the era following World War II, Boomers (1946-1964) were born and eventually became the wealthiest, most prosperous generation in history. Raised to aspire for the American Dream, this very large generation moved into positions of power and influence, and served as the workforce majority for 34 years.

With the American Dream alive and well, Boomers had no reason to teach their children, mostly Millennials, about competition. Instead, they taught them to focus on academic achievement and to be team players because if everyone works hard, everyone can win.

Enter Generation X (1965-1981). In contrast Boomers, Xers came of age during a time when change and economic and political uncertainty began to take root. They have lived through four recessions, struggled with debt and economic decline most of their lives, and watched the best educated and accomplished generation of all time (Millennials) graduate during the Great Recession and become the most debt-ridden generation in history.

Gen Xers can be defined by their independence and anti-status quo approach to life, and they have taught their Gen Z children to be competitive, believing only the best can win. They have encouraged their children to be realists, finding something they are good at and aggressively pursuing it.

Xers have raised their Zs with an intense focus on competitiveness -- in academics, sports, and other activities. This approach to parenting has many implications, but one stands out in terms of business: Gen Z is likely to lead.

Millennials in the workplace created and aggressively advocated for collaborative work environments. In fact, their aversion to leadership has been so strong, some Millennials sought out companies that boasted boss-free or team-managed workplaces.

In contrast, Zs have been raised with an individualistic, realistic, and competitive nature. They have been taught the skills to successfully defy the norm. This means we’re going to see the pendulum shift away from collaborative workplaces towards a widespread demand for, and pursuit of, leadership development.

Zs are career-focused.

While Millennials have been criticized for their “delayed adulthood”, Gen Z is showing signs of “early adulthood”. Educators and parents often describe this generation as being more serious and contemplative about the world. Zs are thinking about their career paths and exposing themselves to career training at an earlier age than Millennials. It’s probable that some of this early onset of adulthood is caused by parents, who are pressuring their children to be competitive and successful and to avoid the debt that plagued both the Gen Xers and Millennials.

The numbers from our global research found 46% of Gen Z said they know what career to pursue and 51% have taken a class at school focused on their career interests. Forty percent joined an extracurricular program (team, club) based on their career interests.

Zs are seeking financial security. 

Zs have been shaped by the aftermath of the Great Recession. They watched Millennials become debt-ridden and are concerned about falling into the same trap. XYZ University’s survey results show 66% of Zs said financial stability is more important than doing work they enjoy, which is the exact opposite of Millennial survey results.  Also, 71% of survey-takers have a paying job.

Zs value leaders who are positive and trustworthy.

When presented a list of leadership traits, Zs ranked positive and trustworthy the highest. While Millennials and Gen Zs both value trust in a leader, Millennials usually cite collaboration and vision as most important. In other words, Millennials focus on the outcomes leaders inspire, whereas Zs are more likely to consider leaders’ attitudes and personalities. To Z, what leaders encourage others to do isn’t as valuable as how they make them feel.

 

Zs want to be challenged.

Both Millennials and Gen Zs place a very high value on feeling challenged and appreciated in the workplace. However, according to our survey results Millennials rank appreciation slightly higher than challenge, whereas Zs rank feeling challenged slightly higher than appreciation.

Time will tell how Zs go down in history, but we know this generation’s influence on history will be unlike any other.

 

Does your organization have what it takes to engage the next generation? Take this quiz to find out.

 

Sarah Sladek is CEO of XYZ University. Our generational intelligence can assist you with engaging and retaining young talent and members.

Sarah Sladek

Concerned about declining engagement in our nation’s membership associations, non-profits, and workplaces, Sarah Sladek founded XYZ University, the nation’s first and only generations-focused training and engagement strategy company, in 2002.

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