Baby Boomer Brain Drain
Chris Labrecque, who is 56, worries what will happen when he retires in nine years.
“The average age in my industry is much higher than that of other industries,” says Labrecque, chief customer officer at Paytient. “We are going to have an issue, as younger folks are not replacing older folks aging out. We haven’t created the mentorship to have a knowledge transition from one generation to the next.”
Indeed, labor force data from the Pew Research Center shows more baby boomers—the generation born between 1946 and 1964—are retiring than in previous years. In the third quarter of 2020, according to Pew, roughly 28.6 million people retired from the labor force, a 12.6% increase from the 25.4 million who retired during the same quarter in 2019.
Bill Stoller, CEO of Express Employment Professionals, a staffing agency based in Tempe, Arizona, says the size of the baby boomer cohort, combined with relatively low birth rates, means fewer workers will be available to replace retirees. “Demands on businesses aren’t going to ease up any time soon, and they will be forced to reckon with the knowledge loss one way or another,” Stoller says.
Express Employment Professionals conducted the 2021 Harris poll titled “Boomer and Blue-Collar Refresh.” The survey showed transferring knowledge sooner rather than later stems brain drain. Older workers who fail to pass on their knowledge leave younger workers scrambling to learn a job on their own, something 47% of respondents experienced, according to the survey.
“Brain drain is important because organizations have structured programs and processes based on the needs and values of baby boomers,” says Bea Bourne, a business professor and the senior lead for diversity, equity and inclusion at Purdue University Global. “But demographics have changed, as a large percentage of them have reached retirement. In 2022, many of the 76 million baby boomers reached age 65, and the entire cohort reached 58 years of age or older.”
Bourne says the issue affects all industries, from tech to education, from healthcare to retail and much more. “Nearly 80% of family-owned businesses are not prepared for what happens when current management steps down,” she says. “In the next few years, the top 500 companies in the world will lose a significant number of their top executives to retirement.”
What Is Brain Drain?
Bourne defines “brain drain” as the “departure of highly experienced, trained, educated or intelligent people from a particular job or industry for better pay, living conditions or lifestyle, such as retirement.” She says this loss includes subjective and informal “tacit knowledge,” gained through personal and professional living experience, and unwritten “tribal knowledge,” such as product or service information that exists in the minds of only a few employees.
Labrecque, former president of the employee benefits group at Insurance Office of America, says he thinks the phenomenon precedes the boomers’ generation. “Brain drain has been occurring since the beginning of work,” he says. “It’s been exacerbated by the current environment and the insurance industry. Our business was built like a 100-year-old hospital. It’s not intuitive, and it’s difficult to navigate.”
Labrecque sees brain drain posing a threat not only to routine tasks, like filing claims and negotiating rates, but to the soft skills that nurture and build relationships and businesses. “We are facing a situation now in the insurance industry where a lot of skills are held in one generation and not transferring to the next,” he says. “That’s going to be detrimental if we don’t address it like yesterday.”
Bourne agrees. She says the failure to transfer knowledge causes gaps in quality, productivity, customer service and relationships. “Think about how dire this could be if these employees hold valuable, tribal information that no one else knows and is not in writing,” she says.
According to the Society for Human Resource Management, 58% of organizations do have succession plans, whether formal or informal. A formal process, according to the society, standardizes “key pieces” throughout an organization. An informal process, meanwhile, “occurs in an unplanned and ad hoc manner.”
Stoller says businesses that fail to anticipate the retirement of long-term employees risk losing institutional knowledge. “A brain drain is the failure to plan for business continuity when employees depart—specifically, knowledge as it relates to the company and its processes,” he says.
Meanwhile, Stoller contends that today’s competitive labor market makes a bad situation worse. “In the 2018 survey, the average length of service was 39 years,” he says. “With longevity comes possession of institutional knowledge. This knowledge is gained from shared experiences and seasons of business, which is hard to experience in a short period of employment or if senior workers retire without sharing it.”
Labrecque notes the importance to clients of a consistent, stable presence.
“If I’m a benefits manager, I’m looking for an organization with a contingency plan to ensure, if something happens tomorrow or months from now, I’m not stuck,” he says.
The Society for Human Resource Management practice guide underscores this point, stating succession planning lays the foundation that prevents “staffing surprises.”
“Organizational survival in a globally competitive environment depends, in part, on having identified and developed replacements for key positions,” it says. “This is the essence of succession planning.”
Bourne calls succession planning “critical,” regardless of the organization. “It’s based on two undeniable principles,” she says. “No one is indispensable, and change happens.
“There are several steps businesses can take to prepare for knowledge transfer, including job rotation, one-on-one meetings, job shadowing, action learning, cross training, 360-degree feedback, stretch assignments, coaching and mentoring. Additionally, organizations should build a collaborative content editor, aka Wiki, and standard process and procedure manuals. Online resources should be updated regularly to prevent valuable company knowledge from being only in the mind of a valuable employee who may leave after two weeks’ notice.”
Bourne says a company’s culture, when negatively perceived, can stymie succession and recruitment efforts. Perhaps most importantly, she says, businesses need to develop “a deep pipeline of potential leaders for future management and upper-level positions. Career ambitions and loyalties of millennials and Gen Z are different from previous generations, and Gen X employees shouldn’t be overlooked.”
Stoller says, “Each company has different approaches to reduce knowledge loss, including mentorship, job shadowing and frequent training. This depends on workforce size and resources, but a good place to start is documentation. With such frequent turnover, documentation is the best resource for continuity. Although the tendency is to live in the present, the reality is senior leadership and other employees feel reassured about the future of the company and their position when a succession plan is in place and documented. Then, mentorship and other intentional efforts can be implemented to prevent a hiccup in job duties due to retiring employees,” Stoller says.
He describes time as “the common dominator” for failing to plan. “This includes the lack of time to facilitate the process due to customer demand and the unwillingness, whether conscious or not, to accept the swift passage of time toward the retirement of older workers,” he says.
Labrecque believes short-sightedness also contributes to poor succession planning. “Some businesses are focused on what they’re doing,” he says. “Others have distractions because they’re growing so fast by acquisition. That energy is focused on acclimating new organizations into their organization. Do they have the energy and capacity to think about what this looks like over the next 15 to 20 years?”
Labrecque suggests company leaders create a ladder of succession for new hires. “The military does a good job of this with [enlisted] ranking, E-1, 2, 3. It provides younger folks a sense of belonging and what their track looks like,” he says. “I don’t think that’s been done very well in the insurance industry, which is why we need to change the way we interact and prepare our team.”
Stoller agrees. “While training new hires may seem like a time-intensive effort now, employers will be faced with educating workers with or without a tenured expert nearby,” he says.
According to the Society for Human Resource Management, “Scrimping on the talent development part of succession planning might save a few dollars in the short term but puts the organization at risk for long-term failure.”
Passing The Torch
According to the Express/Harris survey, 73% of employees consider the sharing of knowledge to be “absolutely essential or very important” in their ability to do their job. “The vast majority”—84%—“believe it’s a big loss when older employees retire without passing along years of knowledge to younger employees,” the survey found.
Bourne says older workers want to share their acquired expertise, but barriers, including decentralized human resources and a fragmented organization structure, often prevent this. “Senior leaders are met by increasing demands, making it challenging to dedicate the time and effort to develop the next level of leaders to replace baby boomers,” she says. “Very few companies have established initiatives to capture and transfer corporate knowledge. Many do not have comprehensive succession plans. Few train managers to identify critical knowledge or set up formal processes to pass on experience to successors.
“Succession planning is more than selecting the next CEO or department head. It’s a process that identifies and provides mentoring to future leaders throughout the organization. Formal and informal cross-generational mentorships can do this.”
Labrecque welcomes such approaches in the insurance industry. He cites his favorite football team, the New York Giants, and their “next man up” approach. “You practice and work out as if you’re starting in the game,” he says. “When the person in front of you goes out, you step in.” Labrecque would like to see the insurance industry adopt a similar approach. “We need to make sure we’re spending time mentoring and training those around us,” he says, “and there’s not only a transfer of knowledge but a contingency plan.”
Bourne thinks technology can help organizations with their succession planning. “In today’s workplace, with remote workers and global operations, technology can foster effective mentoring,” she says. Video meetings and knowledge-sharing portals can facilitate sponsorship, mentoring and reverse mentoring.
“Reverse mentoring pairs a younger, junior employee in the mentor’s role with an older, senior colleague as mentee,” Bourne says. “The purpose is knowledge sharing, with the mentee focused on learning from the mentor’s updated subject or technological expertise and generational perspective.”
Bourne credits the late Jack Welch, the CEO of General Electric, with introducing the concept of reverse mentoring in the late 1990s. “It’s a way to encourage learning and facilitate cross-generational relationships that focuses on leadership development and knowledge sharing of both generations,” she says.
Labrecque thinks personal learning styles dictate the mode of knowledge transfer. “Some people learn by sitting in a conference room and being taught, others by doing a ride-along to see how things are done. Still others learn by reading a manual,” he says. “Everyone’s different. There’s no magic bullet. It’s doing an assessment of your organization and being deliberate about how you transfer knowledge and on what platform.”
To stem the baby boom brain drain, HR Team, an outsourcing firm in Columbia, Maryland, recommends organizations retain older workers as long as possible. According to the firm, longevity and “new cultural norms” combine to push back retirement and keep employees in the workforce longer.
Labrecque endorses this idea. “Retaining folks who are retiring to support the organization does two things: it retains their intellect and helps with a smooth transition,” he says. “It also respects the time they put in the organization and gives them something to get up and face every day. My grandfather went to the office every day until he was 95. He always felt he had something to keep him connected. In his words, ‘It’s having something to get up and do that doesn’t involve golf.’”
Stoller feels the labor shortage leaves little choice but to retain older workers. “Baby boomers are a valuable labor source at a time when every avenue should be considered for talent,” he says. “In our surveys, we found a lot of retirees want to keep working in some capacity, which is why semi-retirement or a consultant role is perfect for companies and employees.”
HR Team emphasizes flexibility as the key to keeping older workers longer. The firm also recommends job-sharing, part-time schedules, flex time, telecommuting, phased retirement and consulting.
Benefits managers should assess their pre-retirement workforce to determine generational shifts before brain drain occurs, Bourne says. She advises leaders to go beyond the C-suite to include “all key positions.”
There are other important points, according to Bourne.
- Understand the generational diversity of your workforce.
- Develop a succession management plan that identifies and trains successors at all managerial levels.
- Consider leadership training, mentoring and phased retirement.
“A good starting point is performing a skills-gap assessment,” Bourne says. “Leaders should create specific development action plans. Consider the skills needed in the next one to three years. Integrate them with the overall corporate and leadership strategy. Determine all potential human resource risks in the near and distant future.”