THE COMING TIDAL WAVE
In Spite Of The Fiscal Cliff
Everyone is talking about the looming Fiscal Cliff. It’s an issue, yet there is another threat that has gone unnoticed by the mainstream media. An appropriate metaphor would be that of a Demographic Tsunami.
The U.S. Bureau of Labor Statistics predicts a slowdown in the labor force growth and productivity in 2015-16. Why? Because of the 70 million-plus Baby Boomers that will be retiring.1 Couple this with the fact that by 2015 47% of the workforce will be made up of Millennials, those born between 1983 and 2001.
Millennials are, and will be, entering a workplace that is at odds with what they value because it was designed around Baby Boomers expectations. If the workplace cultural clash does not adapt to the work style of Millennials the results will be far less than desirable. Millennials might not be that difficult to attract, but they also do not have a need to stay very long. Retention has and will continue to be a large problem in legacy organizations.
Why is retention of this new workforce generation important? There are several reasons, one of which is the enormous cost associated with turnover. The average turnover cost of an entry-level employee is 50% of their annual salary. So if the salary is $50,000, each turnover costs the organization $25,000.
If the company employs 10,000 people and there is a 10% turnover (which is not and will not be uncommon with current conditions), the company loses $25 million to the bottom line. Therefore it would be very cost productive for organizations to understand how to ready themselves for the shifting workforce.
The Builder generation (1925-1945), rarely switched jobs. Boomers (1946-1964), have an aversion to switching jobs although it happens from time to time. But to the contrary, Millennials move fast. If they are not challenged in a job they move on.
Boomers are loyal to employers. Millennials are loyal to people. This makes their relationship to their managers and peers important. If their relationship with their manager is less than satisfactory, they have no problem leaving their employer. As a result, there is a high level of turnover that will result if the challenge and the relationship falter. The ripple quickly makes its way to the bottom line.
Add to this the need Millennials have for work-life balance. If Boomer employees insist on their work ethic of 50-70 hours a week, the turnover rate will soar. Boomers have added one month per year to the workweek compared to their previous generation, the Builders. This is a social-work norm that will not pass muster with the new generation. They have an existential angst to the Boomer’s dedicated approach to work and life. Organizations and managers that do not adjust to this are setting themselves up for greater turnover.
Red Tree Leadership2 points out that Millennials are more likely to job hop. Some estimates show turnover rates for Millennials are nearly 2-3 times that of older workers. They report that in 2011 one large wholesaler’s workforce shifted to 50% Millennials. They issued 40,000 W-2’s that year. But they only had 16,000 employees! The turnover ratio for Millennial employees was three times higher than other employees.
So what should we do? Organizations should ask some very simple questions. Rather than vilify an emerging generation, ask, what are the attracters and connectors to this new generation? What are the myriad of contributions Millennials bring to the workplace? Where can the organization flex? It is not uncommon for them to discover better ways of approaching a task that improves productivity. The flexibility might be in a certain process, or a work schedule, or in the way managers motivate their team.
Another question is, are we “milking” all the fun out of our work environment? Millennials love to have fun. And is that really a bad idea to include in our work-life? It doesn’t cost anything and studies show it can lead to increased productivity.
We have discovered in our research and training that great managers use these and other skills as great attracters and connectors.
[In the next article I’ll talk about the major knowledge transfer that must take place that is not written down. The threat is known as Brain Drain.]
1 The U.S. Economy To 2016: Slower Growth As Boomers Are Set To Retire. Monthly Labor Review.
2 Redtree Leadership & Development. Powerful Solutions For Today’s Changing Business World.
(Mick Ukleja is the co-author of the book Managing the Millennials: Discover the Core Competencies for Managing Today’s Workforce)
We have partnered with Red Tree Leadership to deliver training in Managing The Millennials.