As well are all painfully aware...
This trend is most likely going to impact smaller privately held companies even harder given that many are also owned and lead by baby boomers and typically have much smaller work forces from which to groom knowledgeable replacements for retiring experienced workers.
Recently MiddleMarketGrowth.com published an enlightening piece that examines this movement in great detail. This is how they described the current employment trend:
Despite the doom and gloom of recent economic news, the middle market continues to outpace large-cap companies and global corporations in business growth, M&A and workforce expansion.
Most middle-market business leaders are well aware of the “war for talent” that exists today. Attracting and developing talent has been and will continue to be the No. 1 constraint on growth for midsize companies. The bad news is that this war is expected to intensify over the next five to 10 years due to significant changes in the workforce. On the bright side, however, small and midsize companies have an opportunity to compete—and win—against large corporations.
The “significant changes in the workforce” mentioned above revolve around two interrelated issues. One, I have already mentioned: the ongoing retirement of talented baby boomers. A corollary issue impacting this trend is that the next age cadre that should replace this group are GenXers. Unfortunately, this group is much smaller than the baby boomer generation, which means that millennials will be taking up the slack.
The good news, according to MiddleMarketGrowth.com, is that millennials make up “the largest generational U.S. workforce in history. Born between the early 1980s and the early 2000s, this group has already surpassed the two older generations in workforce size. According to the Pew Research Center, millennials accounted for more than 53.5 million employees in 2015.”
The bad news? Well, they are millennials. OK, so much has been made over the years about this younger generation and its ills. The reality is every generation has been characterized by its elders as having its own set of negative issues.
The fact is: You most likely will need to recruit a set of millennials to replace your key aging baby boomers eventually. Rather than bemoan that fact, the good folks at MiddleMarketGrowth.com (the brilliant article was actually penned by Dan Hawkins, a seasoned business executive and former chief human resources officer and founder of Summit Leadership Partners) provided great advice for how to, instead of fighting this trend, actually position your company to find the best and brightest replacements possible.
Hawkins offers these practical suggestions for business leaders to accomplish this:
- Assess (or develop) your talent needs and create plans to address future talent gaps. Balance this with the workforce shifts expected over the next five to 10 years.
- Focus on creating challenging job experiences rather than wasting time on devising elaborate career paths for younger workers—employees no longer place much value on planned, structured development programs.
- When planning for development, focus on opportunities where an employee can expand his or her skills and interact with senior employees and leaders. Place more value on breadth over depth.
- Tap into the knowledge base of baby boomers before they retire. Facilitate mentorship between older and younger employees to capture and transfer skills and experience.
- Create a work environment that allows for individuality, inclusion and flexibility to balance work and life demands.
- Have succession plans not only for your leadership roles but also for your most critical positions. Identify the jobs that have the greatest impact on your mission or strategy, and look at how and where you can develop or hire talent.
- Find ways to tie your firm’s purpose, vision and mission to something bigger in society. Corporate and social responsibility initiatives are highly valued by millennials.
- Finally, ensure that all leaders in your company understand and are accountable for being talent managers—they must feel responsible for the development, exposure and engagement of their people. This is not HR’s job.
Back in early 2014 we published a piece that examined the need for business owners to expand their marketing focus beyond just the traditional one, which for decades has been on baby boomers. From a business development standpoint, the reality is as maligned as they are, millennials are going to drive our economy starting in the early 2020s and for the next thirty years. Companies need to adjust their marketing and sales for this new reality to survive.
The same is true for the hiring, mentoring, and retaining of millennials as employees. The bullet points above have some GREAT ideas that I have taken the liberty to highlight. I am looking at this issue of baby boomer retirement/millennial hiring from a buyer’s perspective. If you are a buyer, one of the most important due diligence itemsyou examine is a target’s employee base, talent pool, and HR policies. If you as a buyer encounter a company comprised of aging baby boomers in all key positions with no bullpen of talent developed, you are going to be very concerned.
The great news is that with a new focus on what drives these younger folks, what truly motivates them, you can create a “buyer ready” business that can thrive even as you face the retirement of your key, long-term folks (and even yourself).
One of the most important issues to understand is that unlike baby boomers, millennial employees care more about seeing how their work fits into a bigger picture, a higher calling if you will. Therefore you need to create positions that help them see that.
But even more importantly, as Mr. Hawkins so clearly points out, you have to tap into the institutional knowledge of your baby boomers long before they retire, and if possible, create mentoring programs so that they can transfer their years of experience prior to retiring (or worse yet, exiting this mortal plane in an untimely fashion).
Now for the Hard Part
This could be a huge challenge as you are faced with helping Bob, who has worked in your shop for 40 years, transfer all that unwritten experience to someone in his/her 30s with tattoos and piercings. I only am half-jesting here. The point is if you own a privately held company and you have key baby boomers heading to retirement in the next few years, you need to be very proactive and get ahead of this curve.
If you don’t, it may impact your ability to find a buyer for your business. Or at least close an optimal deal. I recall meeting with a client a few years ago when we were valuing his company. We were discussing factors driving his success and he said to me, “You want to meet why this company is successful?” He took me to his shop floor an introduced me to his key employee, a grizzled veteran of ages, who had started working the CNC machines in his shop while still in high school. The owner was justifiably proud that this fellow had been with the company, doing the same job for nearly five decades. Unfortunately, I had to help him see the situation as a buyer would. With no backup trained, no mentoring in place, and no production manuals in existence, this situation would be seen as a potential risk.
Bottom line: As much as you may not like the idea, your key folks will be retiring. Even more anathema to you is the idea that a millennial may be the person you need to hire and develop. As soon as you get over this and plan for the future, the better off your company will look to buyers coming in to view it.
Or course this is just one issue you will face when you enter the market looking for buyers for your business. The good news is that Generational Equity, a middle-market M&A consulting firm, has helped hundreds of clients navigate these waters and successfully find buyers for their businesses.
No matter what you do, even if you are not planning to sell for 10 years, begin to groom replacements for your aging baby boomers. For many of you, your businesses continuity will depend on it.
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