Experience v. Youth

Speaking to a friend about retirement she told me that she had a few more years to go. She wanted to get her financial foundation a little sounder before making the decision. She went on to say that she recently received a retirement assessment package from her employer outlining her current and future pension options. The package was personally addressed and written as a response to her inquiry. The thing was, she hadn’t made an inquiry. As time went by she heard from other employees similar to her age and seniority who had also received their “requested” retirement materials. When it came to hiring and promotions of late there appeared to be a bias towards younger people. Was the company sending a message with the retirement package mailings?

It is not unheard of. Some corporations feel older employees are more expensive due to their salary and benefits. Younger, newer hires do cost companies less money. They can be hired for a substantially less salary and are willing to accept it. Many companies are eliminating pension programs, instead, offering new employees 401(k) matches and other savings programs. Saving the company money in the long term. Companies embracing a youth movement are looking for new ideas from employees who are more familiar with current technology. 

Targeted “retirements”

In March 2018, ProPublica, an independent non-profit newsroom, published a report claiming that IBM systematically laid off 20,000 employees age 40 and over between 2013 and 2017. Up into the 1980s, IBM was the technology giant. As the technology rapidly changed over the next twenty years and companies like Apple challenged IBM, they were faced with a massive and aging workforce. To compete, IBM felt that they needed to reduce their workforce and begin hiring younger, more tech-savvy employees.

ProPublica’s investigation revealed, in part, that IBM devised performance point-rating systems that favored younger employees with fewer years on the job. Older employees were rated as their skills being out of date. These employees were offered retirement packages or were relocated to an office across the country with the ultimatum to move or retire.

The Older Workers Benefit Protection Act (OWBPA) was passed by Congress in 1990. The OWBPA prevents employers from discriminating in benefits based on age, firing only older workers when cutting staff, or demanding that older workers waive rights and without taking safeguards into consideration. However, the burden of proof is on the employee to show that the company let them go based solely on age. Without records, overt acts, or documentation this can be difficult for an individual employee to prove. In the IBM case, the corporation went so far as to have employees who accepted packages to sign agreements that they would not take part in any future class actions.

But what about experience? 

Is it worth pushing out experienced workers to make room for youth? Does cost cutting make up for the loss of institutional knowledge? Older employees have a lot to offer. They’ve been with the company through thick and thin. They are able to mentor younger employees in systems and procedures. Historically, older employees are dedicated to doing the best possible job and are often the ones who find and correct errors. Errors that could cost the company lots of money if overlooked. While a new set of eyes is always welcome, past experience can sometimes save hours of work that will eventually end up at the same conclusion.

Savings?

Cutting bloated salaries and benefits might sound good but the overall cost of turnover may not justify it. Jack Altman, CEO of Lattice, posted an article in the Huffington Post in January 2017, How much does employee turnover really cost? Altman cites research by the Center for American Progress who determined that the average economic cost to a company of turning over a highly skilled job is 213% of the cost of one year’s compensation for that role. He uses the following example, ”If you are a 150 person company with 11% annual turnover, and you spend $25k on per person on hiring, $10k on each of turnover and development, and lose $50k of productivity opportunity cost on average when refilling a role, then your annual cost of turnover would be about $1.57 million.”

Altman summarized by saying that companies should analyze four major areas:

·       Cost of hiring

·       Cost of onboarding and training

·       Cost of learning and development

·       Cost of time with an unfilled role

He also provided this link to Calculate the Cost of Employee Turnover for yourself. 

The quick decision to cut costs through salary and benefits should be closely examined. There are not always textbook answers to everyday issues. You need veterans of your business to lead and show the way.