Business Without The Boomers
America’s labor force is getting old, and quickly. Nearly 40 percent of workers are age 45 or older, up 10 percent in just 10 years. Over the next decade, Baby Boomers will begin retiring in droves, significantly reducing the size of distributors’ staffs and taking with them a wealth of accumulated knowledge.
Retirement is nothing new, of course, but never has it been at this magnitude.
How industries will deal with losing a large cadre of seasoned veterans in a relatively short period of time is yet to be seen. The change could be the kiss of death for businesses that are unprepared, but those companies ready for the challenge could come out winners.
“When you talk to Baby Boomers, what concerns them is that they don’t have any bench strength,” says Bruce Merrifield, president of Merrifield Consulting Group in Chapel Hill, N.C. “As industries consolidate and mature, it is more important that they attract and retain the next generation of people to pass things on to.”
There were 76 million people born in America between 1946 and 1964. Known as Baby Boomers, the largest generation is now 83 million strong (thanks to immigration) and next year its oldest members will turn 62 and become eligible for Social Security benefits.
Traditionally, most people retire in their early to mid-60s. If Baby Boomers follow suit, tens of millions of people will leave the work force in the next five years. The good news is there’s little chance all these employees will decide to retire at this time. Nearly half of all Boomers plan to work past retirement because they need the money, according to a survey by Allstate Financial.
Half of households headed by 50-to-59-year-olds have $10,000 or less in their 401(k) accounts. And 90 percent of Boomers admit they haven’t done a great deal of retirement planning, according to a recent survey by Money magazine.
“Baby Boomers have vastly under-saved and we’re going to live a longer life so we don’t really have a choice but to work,” Merrifield says.
Money isn’t the only barrier to retirement. Many Boomers are simply too work-obsessed to leave. A 2004 Citigroup survey found that 70 percent of Boomers said they want to continue working, even if they don’t need to do so for financial reasons. Another study found that 8 in 10 Boomers expect to work, at least part time, even after they retire.
“Even 10 years ago, most were retiring by 65. Now they are working until 67 or 70,” says Kristi Parnell, vice president of human resources for WAXIE Sanitary Supply in San Diego. “This is a huge part of what defines them and it’s hard to let go of a 30- or 40-year career.”
Whatever the reasons for it, this phased retirement will help businesses cope with losing such a large generation of workers. It buys companies extra time to fill the talent gap with new employees and to prepare the next generations to take over where Boomers will leave off. But smart business owners will still start the planning process now.
Pass It On
The only thing more staggering than the sheer number of people set to retire in the coming decades is the knowledge they will take with them. After three- or four-decade careers, Baby Boomers hold the institutional memory of their companies.
“After being around that long, you have reputation and thousands of contacts,” says Jon Scoles, managing director of Scoles Floorshine Industries in Farmingdale, N.J. Nearly half of his company’s 20 employees are Boomers.
“This is my 37th year. I don’t know everything, but I know a lot,” he continues. “When people have technical questions, they come to me and if I don’t have the answer, I can get it quickly because I know people in the industry I can go to. The hardest part of our industry is training people. There’s just so much to know.”
Transferring knowledge from one generation to the next is a challenge. When businesses begin the task of capturing that information, however, they must be careful to consider what is valuable and what is dysfunctional. Learn from veterans’ rich history, but don’t get caught up in a “we’ve-always-done-it-that-way” rut.
No one should appreciate the struggle of tradition vs. progress more than Baby Boomers. When they took over for their parents, Boomers kept the best of what existed and then added to it with advancements in technology and increased opportunities for women and minorities.
“The pattern is that as you get older you get stuck in your ways and as the next generation comes on, they have an opportunity to introduce change to the business,” says Craig E. Aronoff, PhD., co-founder and principal of The Family Business Consulting Group Inc.in Marietta, Ga.
As Boomers exit the jan/san business, they should pass along historical knowledge about the industry and, perhaps more importantly, excellent customer service skills that are lost on many members of Generations X and Y. In turn, younger generations must further diversify the workforce and introduce new technology and
consolidation in response to an increasingly global economy.
“[History and innovation] are mutually inclusive,” says George Abiaad, president of Royal Paper Corp. in Santa Fe Springs, Calif. “Proven institutional knowledge is like the foundation that every sound building needs, but upcoming engineers and architects are constantly tweaking and creating new models that stand tall on the classical foundations.”
Make A Plan
Capturing and passing on the knowledge of exiting employees requires thoughtful planning. Don’t wait until a Baby Boomer is walking out the door to ask him everything he knows. Use the next few years before mass retirements happen to institute informal and formal information-sharing programs.
This is especially important for family-owned businesses, 70 percent of which don’t make it to a second generation. If owners plan to be among the successful 30 percent, it’s critical to begin transferring power to the next generation as early as possible.
“If you’re not planning now for the next 20 years, you’re going to miss out,” says Don Kellermeyer, chairman and CEO of Kellermeyer Co. in Bowling Green, Ohio. “A lot of presidents run their businesses so tight to their vests, but you can’t grow a business if you are trying to do it all yourself. You have to place responsibility in other people. Soon there will be a shortage of quality people so you have to start now replacing people.”
Handing a company off from one generation to the next should be a 5- to 10-year process that starts with succession planning. At its most basic, a succession plan outlines who will take over for whom. To be of real use, however, it must include much more.
“Succession is not just saying, ‘You take over,’” Aronoff says. “It’s training and development and sharing the knowledge and wisdom that’s required for success.”
After identifying one or more people who will eventually move into every key position, ask current leaders to become coaches. They need to analyze what it took for them to be successful and then spend time downloading that information to their successors.
This can be done informally, as happened when a salesperson of 37 years retired from Scoles Floorshine last year. In the six months before his departure, the company devoted part of each of its regular sales meetings to letting him share his selling secrets.
These casual sessions can be complemented with a formal mentoring program in which a veteran is paired with a younger associate to pass on product knowledge, customer service skills, and more.
“We have Boomers who have been here many years and interns who are very young and we like to mix the two groups,” says Donna Genet, director of human resources at Dade Paper in Miami.
Mentors should also get their mentees involved in customer meetings, vendor negotiations and industry events.
Learn To Let Go
To adequately prepare upcoming leaders, mentoring must be more than a series of lectures. The next generation needs to be allowed to take the driver’s seat, under the quiet supervision of a Boomer.
It’s a balancing act,” says Parnell. “We need the younger generation to step into these positions before they have the title, but also respect what has come before them.”
A succession plan will help a company cope with retirements, but it also serves a more practical purpose.
“Frankly, if anybody here got hit by a car we have back ups to virtually every job,” Kellermeyer says.
A phased retirement plan is also a good way to keep your company’s future leaders happy now. Unlike fiercely loyal Baby Boomers, Generations X and Y will quickly jump ship if their wants aren’t met. Younger workers are known for their impatience — they want it all and they want it now.
“Older workers have worked at one company for 40 to 50 years and were totally dedicated,” says Linda Silverman, president of Maintex in City of Industry, Calif. “Today younger workers see corporations that sometimes do not value worker’s contributions, but think only of shareholders’ investment returns and this attitude does not breed loyalty.”
With so many Boomers set to leave the industry and far fewer members of the next generation to fill the gap, it’s more important than ever to hold on to younger employees. After all, finding and training new employees is a long and expensive process that can have a frighteningly low success rate. In the last five years, Scoles Floorshine has gone through four new salespeople.
“The grass is always greener and they don’t have patience,” Scoles says. “It’s a challenge for smaller companies because there isn’t much room to move up the ladder quickly.”
The best way to beat the odds is to give members of Generations X and Y heaps of responsibility. While owners may not be able to hand them an elevated title until someone retires, they can begin to phase them into many duties of their future position now.
“If we have found a really talented individual that we believe is going to be a vice president or officer someday, we don’t want to lose them,” Parnell says. “One of the things we’ve tried very hard to do is have our managers let go of some of the meaty stuff, the decision making. If you can’t do the title, then make sure they are challenged.”
Starting the retirement transition early also encourages innovation. Owners shouldn’t let the company fall behind because they waited for stuck-in-their-ways veterans to depart before allowing the next generations to introduce new ideas.
At Scoles Floorshine, a recently hired customer service rep was given a long leash to try new things. A technology whiz, the young employee quickly introduced several changes that made the company more efficient.
“You have to let them experiment,” Scoles says. “Give them an opportunity to use their brains instead of just dumping your ideas on them.”
To keep a company moving forward, Baby Boomers need to get comfortable with the idea of retirement. As many as 80 percent of distributors will “semi-retire,” which means they will continue to have a hand in the business indefinitely. With proper succession planning, this arrangement can work well. When the roles are left unclear, however, it can be a sticky situation.
“About a third of family business owners either plan not to retire or to semi-retire,” says Aronoff. “That changes the dynamics of the business. It can make it unclear who is the boss and it can put off innovation.”
Make It Happen
As with nearly anything in this industry, planning is the key to a smooth transition from one generation to the next. Unfortunately, too many business owners get too wrapped up in the day-to-day issues to appropriately plan for the future.
Set aside time now to begin the transfer process. Be sure to get every generation of worker in your company involved in the process. Keeping the lines of communication open will help everyone involved feel more comfortable about their future.
“Both generations need to do some thinking about the position of the other generation,” Aronoff says. “The younger generation lacks compassion for where the older generation finds itself, and the older generation is cutting off its nose to spite its face by getting in the way of progress and the perfectly able generation who are ready and able to lead the business.”
Becky Mollenkamp is a freelancer based in Des Moines, Iowa. She is a frequent contributor to SM.
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