New research explores how prepared organizations are for the upcoming mass retirement of baby boomers.
By Larry Basinait
HRO Today’s new research report, The Great Succession, examines how the Peak 65 phenomenon will impact succession planning and retention starting in 2024. It dives deeper into the level of concern about the issue, as well as where organizations currently are in planning for its impact.
Peak 65 is a term used to describe when more Americans will turn age 65 than at any other time in history, which will occur in 2024. The result of this will be an unprecedented number of worker retirements.
One of the areas most impacted by Peak 65 is succession planning, as it addresses who will fill essential roles that are vacated. Succession planning is the process of identifying the critical positions within the organization and developing action plans for high potential individuals to assume those positions. It is a comprehensive plan that addresses future staffing requirements to ensure a pipeline of talent is available to execute organizational strategies and goals.
Beginning in 2024 and continuing through its projected peak in 2050, Peak 65’s imprint on organizations will reflect a significant loss of a skilled, knowledgeable workforce unless organizations devise plans of action to replace those retiring employees with qualified successors. In early 2023, CRI and HRO Today conducted a survey among HR leaders to gauge the level of awareness and preparedness organizations have regarding Peak 65’s consequences as well as the ancillary issues affecting the current hiring climate.
This study revealed eight key findings about organizations and Peak 65.
1. Awareness of Peak 65 among HR leaders is low. While the majority (72%) have any level of familiarity with Peak 65, only 39% have any degree of high awareness of it, suggesting that it’s a topic with limited recognition.
2. Concern over the implication of Peak 65 is also low. Only 41% consider themselves extremely or moderately concerned about Peak 65. However, as familiarity with the issue rises, so too does concern about its implications. Among those most familiar with Peak 65, 55% are extremely or moderately concerned about it versus 27% of those with little or no awareness of it.
3. HR executives see many challenges presented by Peak 65. The most frequently cited challenge is finding enough qualified workers, as indicated by 71% of respondents. The second most commonly indicated challenge is the knowledge drain, which 62% face. Tenured workers have experience and institutional knowledge that is difficult to replace in the short term.
4. Organizations are not yet ready for Peak 65. Over one-quarter (29%) are not currently making plans or having meaningful discussions about how to address it. Only 4% have either completed plans or implemented them, despite the impact being felt in less than one year. Most (52%) are in early stages of discussion about how to address Peak 65.
5. The area most in need of preparation is training and development programs. Succession planning was selected similarly for senior leadership (50%) and all levels of management (48%). Succession planning can help identify employees with unique abilities and skills that can help them move up to higher executive roles.
6. Among those that have taken steps to prepare for Peak 65, the most common is identifying specific workers likely to retire. For many organizations, this means workers who are eligible or likely to retire within five years. It is not only identifying the workers likely to retire in the near term, but also which are in critical roles. Organizations are then asking themselves if there are employees in the organization that can step up into expanded roles.
7. Organizations are frequently not addressing known deficiencies. Succession planning for senior leadership is a need for 50% of organizations, yet only 14% have taken any steps to address it. The gap between the need and action is 36%, the largest of any area examined. Training and development programs are the area most commonly in need (52%), yet only about one half (28%) have taken steps to address the programs. There is also a significant gap between areas in need and steps taken for expansion of the talent pool and succession planning for all levels of management.
8. A significant portion of organizations will not be ready for Peak 65 in three years. While 87% are concerned about it, none that are concerned are already prepared to meet the challenge. Further, 25% will be fully prepared to meet the challenge in three years, while 34% admit their preparations will not be complete.