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Corporate America remains unprepared for looming Boomer Brain Drain...Survey shows employers not ready to face an Aging Workforce

NEW YORK, Oct. 22 /PRNewswire/ -- Many employers in the United States remain unprepared for the looming brain drain stemming from the aging of the "baby boomer" generation, leaving themselves open to economic and productivity challenges if strategic plans are not put in place over the next five years, according to a new report by Ernst & Young LLP.

As follow-up to Ernst & Young LLP's 2006 report, "The Aging of the U.S. Workforce: Employer Challenges and Responses," this latest edition was developed utilizing the results of a survey conducted among human resource (HR) executives from Fortune 1000 companies. The survey's purpose was to benchmark changes in corporate attitudes and examine key operational issues as the workforce ages. The resulting report, "2007 Aging U.S. Workforce Survey: Challenges and Responses - An Ongoing Review," confirms that a gap in strategy exists across organizations when preparing for and developing programs to meet the demands of this population as it nears retirement.

Survey findings suggest employers may be experiencing a disconnect with this demographic in areas such as succession planning and employee benefits programs. For example, 41 percent of respondents say middle management level employees will be most affected by the brain drain; however, of those with formal succession-planning programs in place, 75 percent are focused on monitoring senior management only.

The absence of deliberate planning appears linked to increasing costs in recruitment and retention efforts. Fifty-two percent acknowledge they have seen increased costs related to hiring new staff, while 43 percent admit to seeing an increase in training and development needs. Results indicate a more proactive approach is needed to prevent serious financial and productivity issues from arising in the future.

"This is an issue that goes well beyond HR risk - it's a critical business risk," said Bill Leisy, Principal, Americas Markets and Services Leader, Performance & Reward Practice. "When you consider how many employees will be retiring in the next few years, it's clear that an aging workforce will impact the entire organization. Finding a way to solve this will be a shared responsibility across the company."

Key Findings

Despite limited resources, escalating responsibilities and increased regulatory demands, HR executives are able to tackle many of the challenges that come with an aging workforce. However, a gap still remains between the issues being reviewed closely by HR executives and the plans currently in place to address these areas, as evident in key findings:

  --  The goal of employee compensation packages is to retain key

      talent; although 44 percent say it would be desirable to have

      senior management stay beyond the normal retirement age, 60

      percent say current programs are "neutral" in terms of encouraging

      or discouraging retirement at a certain age.

  --  Also, only 29 percent are considering phased retirement programs (with

      only 9 percent having such programs in place).

  --  When it comes to keeping employees on board, 39 percent agree health

      care is the main driver in one's decision to retire - but more than

      half are considering increasing employee co-pays (54 percent) which

      could lead to the loss of talent.

  --  Additionally, 58 percent either have not, or do not know if their

      company has analyzed their benefit plans and conducted a compliance

      review to gauge whether employees are receiving accurate benefit

      amounts.

  Planning Partnerships for Future Success

"Losing experienced employees to something as natural as retirement leaves companies wide open to a wisdom withdrawal," said William J. Arnone, Principal, Employee Financial Services. "To stop this from occurring, companies need to develop programs that ease this process for all employees, not just the ones leaving. Retirement is no longer the main event - it's a process."

According to the report, employers may also benefit from helping HR executives comprehend how certain regulations will impact their benefits and compensation programs. Results show that 77 percent of HR executives are responsible for identifying the financial risks associated with their aging workforce. However, 54 percent say they are neither making nor considering changes to their benefits and compensation programs in light of potential financial risks.

"A greater level of coordination between HR executives, the C-suite and the board of directors on both regulatory and operational issues as they pertain to the aging workforce is necessary to avoid serious financial consequences," said Christopher Lipski, Principal, HR Risk Service Line Leader, Performance & Reward Practice. "From a regulatory standpoint, a strong partnership needs to exist within a company so that both employers and employees can face these challenges together and move forward strategically."

Approaching the Challenges of the Aging Workforce

Findings in the report suggest when it comes to meeting the challenges of this demographic, employers must break down organizational silos and work together to form a coordinated approach that will protect the health of the company for years to come. "The issue of an aging workforce is a critical business risk that affects entire organizations. It is both bigger and more complex than one department can handle," said Leisy. "Therefore, the HR executives, C-suite executives, board of directors and employees must work together to address this impending challenge."

About Ernst & Young

Ernst & Young, a global leader in professional services, is committed to enhancing the public's trust in professional services firms and in the quality of financial reporting. Its 114,000 people in 140 countries pursue the highest levels of integrity, quality, and professionalism in providing a range of sophisticated services centered on our core competencies of auditing, accounting, tax, and transactions. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, a U.K. company limited by guarantee, each of which is a separate legal entity. Ernst & Young Global Limited does not provide services to clients. Ernst & Young LLP, a Delaware limited liability partnership, is a U.S. client-serving member firm of Ernst & Young Global Limited.

About the Survey

Survey findings are based on responses from a sampling of senior human resources/human capital executives from Fortune 1000 companies in a variety of industry sectors. Greenwald and Associates conducted the survey electronically and via telephone interviews from May 14 to June 25, 2007.