Leading Older Workers: Capturing the value opportunity…

Episode #242 Leading Older Workers: Capturing the value opportunity…

The Aging Population

There’s no doubt about it, people are working longer into their lives. Data from the Bureau of Labor Statistics in the US show that between 1980 and 2019, the number of octogenarians in the workforce grew from 110,000 to almost 734,000. We can only speculate on the drivers of this change, but it stems from the fact that advances in medical science enable us to live healthier for longer. As longevity rates increase, there’s a lot more distance between standard retirement age and when the final curtain comes down.

Although remaining functionally capable for longer provides options, it also creates a few problems. Now it appears that people who work for longer benefit from that. Data from the Centre for Retirement Research at Boston College show that healthy people with lower mortality tend to work longer, or maybe it shows that healthy people who tend to work longer have lower mortality. It’s not clear from the correlation which is the case.

But we do know a couple of things: working longer is associated with lower mortality, depression and diabetes risk for both men and women. And we also know that delayed retirement reduces the five-year mortality rate for men, ages 62 to 65, by 32% relative to non-workers. So this is all pretty positive for working longer.

Let’s step back and have a look at the big picture, though. Global life expectancy has increased massively. In 1960, life expectancy for a man was 51. Today it’s 72. Now this is huge! And for those of you who aren’t aware of the drivers, we can thank globalization for a large part of this increase. But birth rates have fallen during that same period in the developed world from 5.0 children per woman to 2.4 children per woman. As I mentioned earlier, we’re dealing with an aging population in the developed world, with countries like Japan and the UK most severely impacted.

In the US, the population is aging too. 50 years ago, the median age was 27.5 years old. Now, of course, the median is the point at which exactly half the population is younger and half the population is older. So 50 years ago, 27.5. Today, it’s 38 years old. That’s an increase of over 10 years. By 2050, it’s projected to be over 43 years old.

This has some critical implications for the working age population, which largely determines how productive and prosperous a country’s going to be. Of course, there are other key factors around technology, innovation, and capital flows, but working-age population is still a key driver.

Working age demographics are usually viewed through the lens that says, 15 to 64 year-olds are your working age population. Anyone under 15 is considered to be a child or adolescent dependent, and anyone over 65 is considered to be a retiree dependent.

Dependency ratios are described in reference to how many people are in the working population. So to illustrate this:

• If you had 100 people who were aged between 15 and 65, and 50 people aged over 65, then the aged dependency ratio would be 50%;

• If, for the same 100 working aged people, you had, say, 30 children under the age of 15, the child dependency rate would be 30%.

The key insight here is that the younger dependents are largely on their way to becoming part of the working population. The old age dependents are not.

The Social Impact

The percentage of society that retirees represent is increasing. In the US, for example, 50 years ago, the over 65s represented just 16% of the working population. Today, that’s grown to almost 26%, and it continues to rise. So it’s some pretty serious sh!t right there.

The mix of dependent types is also really different between what are considered wealthy countries and developing countries. In wealthy countries, birth rates are much lower, and the old age dependency group is growing rather rapidly.

The demographics are wildly different. For example, in Japan, over 65s represent about 51% of the working population, and under 15s represent only 20% of the working population. But look how vastly different the situation is in Nigeria: the over 65s account for merely 5- 6% of the working population, whereas the under fifteens represent as much as 80-85% of the working population. It’s a completely different proposition.

I’ve mentioned the looming social issues that wealthy countries are facing. There are increasingly fewer people of working age. This means there’s a shrinking tax base. At the same time, medical science is keeping people alive for even longer. So there’s an increasing number of non-working people to support.

Governments seem to be relatively unfazed by this, most likely because they see it as a longer term issue that doesn’t really hit the radar compared to other pressing issues that they’re dealing with (and, probably compared to their election cycles–but maybe that’s just a little too cynical of me).

But when I was researching this episode and trying to find evidence of any governments that might have been taking policy action to try to manage these impacts, I couldn’t really find much happening.

Having said that, it may well be left to business to find a way to remedy some of the flow-on effects of the aging population… which says to me that we’d better get a handle on how to extend people’s desire and capacity to work longer.

Is This Sustainable?

Funding retirement isn’t a 10 year proposition anymore. By the time Gen Ys are considering retirement, it’s probable that the average life expectancy is going to be up around a 100. If we don’t rethink the current model, it’s going to create some pretty tricky social problems.

Imagine a lifespan where you spend your first, say, 20 years getting educated, then you work for 45 years, and you retire and live to a 100. All of a sudden we have a life where you’re going to work for 45% of it, and not work for 55% of it. That doesn’t sound particularly sustainable to me, for all sorts of reasons.

Because of our social construct, I think older workers are generally undervalued. They suffer pigeon-holing and prejudice in a similar way to that which women and minorities have in the past (and almost certainly still do to this day).

But whenever I think about a resource that’s undervalued by the market, I think of one of my favorite books: Moneyball. Written by Michael Lewis almost 20 years ago, its subtitle is The Art of Winning an Unfair Game. Moneyball uses Major League Baseball as the setting for what is, in my view, one of the more insightful books on business strategy.

It follows the world of Billy Beane, GM of the Oakland Athletics baseball team. In Major League Baseball, there are no salary caps. Some teams have huge amounts of money to spend and others, well, they just don’t. But they all have to compete against each other on what’s supposed to be a level playing field.

For example, the big money teams in the league, like the New York Yankees, the Philadelphia Phillies, and the LA Dodgers would typically have 26-man roster payrolls of around $200 million per annum. But the poorest teams in the league, like the Tampa Bay Rays and the Oakland As, would typically have a 26-man roster payroll of around $50 million per annum. That’s only a quarter of the money the richest teams spend. And because every team plays 162 games in the regular season, when we talk about results, there’s genuinely nowhere to hide.

So, without the money to spend on big name stars, Billy Beane set out to find another way to compete. He turned to statistics and redefined how value was perceived. He stopped listening to the conventional wisdom of the team scouts whose job it was to find and secure the talent.

That conventional wisdom said, The value comes from big, square-jawed, athletic hitters who can put the ball out of the park… guys who can run a hundred metres in 11 seconds… and guys who can throw so accurately that they put the ball on a dime from 75 yards away.

But Billy Beane redefined what value was. With the little help from Bill James and Paul DePodesta, the statistical geniuses at the forefront of this movement, Beane worked out what really creates value: the frequency with which a player can get onto first base. The data showed that it didn’t really matter whether you got there by hitting a line drive into the outfield, or by being given a free walk by an errant pitcher who couldn’t find the strike zone.

This insight revolutionized how teams today look at the problem of recruiting talent. Beane was able to make the Oakland A’s competitive again by signing a whole bunch of players that he could buy relatively cheaply, because they were undervalued in the player market. And that, to me, is the essence of strategy.

The Untapped Source of Value

“So, what on earth does this have to do with leading older workers?” I hear you ask. Well, older workers are generally undervalued in the job market. The negatives that we perceive (lack of drive, ailing mental acuity, and their perceived lack of desire to work hard), seem to very much outweigh the positives (their years of experience, lower levels of competitiveness, and greater focus on purpose and impact).

As a leader, if you can see the incredible potential for value that older workers offer, and find a way to tap into that, you can unlock some real value that your competitors haven’t yet discovered.

I really believe that in the coming years, the concept of older workers is going to be normalized. Of course, many will decide to continue to work independently. I’m 60 years old now and I still have boundless energy. At this stage, there’s no reason in my mind why I can’t do another 10 years at absolute full throttle in this business before I even consider slowing down. Imagine the impact that can have on the world of leadership.

There are going to be many others out there thinking just like me. So if you do decide to brave the elements and unlock the potential value of older workers, I want to give you a few rules of thumb that are going to help you to approach the task with confidence, while also making sure that you can extract maximum value from them.

My Top Six Tips For Leading Older Workers

1. Deal with your own issues first

I hear from many leaders who struggle with having the confidence to lead people who are older or more experienced than they are, and this can become a source of insecurity. But remember, you are in the leadership role for a reason, and the people who report to you are where they are for a reason as well. You need to just do your best to become completely blind to any identifying characteristics such as age, sex, ethnicity, and sexual orientation.

Every individual is completely different. And if you approach the challenge simply from the perspective of trying to get the most out of each individual, it’s going to help you to be more circumspect, which in turn will grow your confidence. Work on your leadership skills and work hard to bring out the best in others, whoever they are.

2. Understand the value that older workers bring

Don’t be intimidated by what older workers bring to the table: value it, embrace it, and use it. Just as you’d employ a deep expert in any given field, you’d expect them to know more than you. That’s what you’re paying them for. You don’t have to know everything yourself. As a leader, your job is to work out how to liberate the expertise and talent of those around you. If you can do that, you’ll have a much better chance of bringing out the value that lives in the experience and wisdom of your older workers, and use it to fuel team performance.

3. Define a role that fits their capability and personal drivers

As the sun sets on people’s careers, they’re often happy to take a step back from the ruthless nature of corporate ladder climbing and occupy a slightly different space. Many former high-powered executives transition to board of director roles, for example. They still want recognition and they want a seat at the table, but they’re less driven by financial incentives. Almost all of them want respect and status.

So, tap into this. They quite often prefer part-time roles, and this can work well for everyone. More flexible working arrangements are now commonplace, and it will enable you to tap into the value of older workers with a clear expectation that they aren’t seeking the sort of career progression that you or your younger peers may be after.

4. Set a consistent standard (but don’t expect the same things)

You want everyone on your team to meet the minimum acceptable standard. Not everyone is going to be a high-powered, driven, ambitious star, but everyone has to meet a certain standard in terms of both their behavior and their performance. Don’t let that standard slip because you may feel as though you have to make concessions for older workers. The standard is the standard.

Having said that, it’s useful to recognize the differences just as you would with, say, a working mother– afford some flexibility. Think about this to get the most value from older workers and craft their role description around that.

5. Make sure someone benefits from their wisdom every day

The greatest value that older workers bring is the years of accumulated experience and judgment: but just be careful not to be fooled here. There’s a massive difference between 30 years’ experience, and one year’s experience repeated 30 times over!

For the most part though, older workers have experience in ways that only come with miles on the speedo. They’ve lived through different business cycles… they’ve encountered most problems that seem new to you more than once… they’ve watched business practices, markets, and technologies evolve so they understand the impact of history on future trends… and typically, they’re also much more relaxed. They’ve got a better perspective on what any incident or event might mean in the scheme of things… they’re generally more resilient and relaxed than their younger counterparts.

These are the things you should be looking to capitalize on. So, make sure you do whatever you can to liberate these positives from your older workers.

6. Use them as a source of guidance for your own growth and development

Older people love to think that they have something of significance to contribute, and this is most keenly demonstrated in their willingness and desire to mentor younger and less experienced workers. For you, this can often provide fertile ground for speeding your own personal development.

Imagine if you could turn an older worker into a trusted advisor, someone who’s accumulated wisdom you could tap into at any time. Of course, to do so, you’d need to have the confidence in your own skills to make this happen. So go back to tip one and keep working your way through this progression of tips until you feel as though you found a way to capture the value of your older workers.

Just wrapping this all up, it’s clear that the world of work is changing. The challenge of productively harnessing the potential of older workers is going to become more pressing in the coming years. Imagine if you could capture the opportunity that this inevitable societal trend presents right now. By the time the rest of the world wakes up from its slumber, you may well have found a way to unlock competitive advantage.

As Moneyball taught us, there’s great opportunity to be found in places that the rest of the world undervalues, and now you know how to get after it.