(Silver) Tsunami Warning

Ask any human resources professional what their biggest concern is and you’re likely to hear something related to attracting and retaining a skilled workforce, as well as the impact of aging on workforce availability. Finding people with the needed skills to do increasingly complex and technical work is a challenge at all times.

It’s become even more challenging in recent years as baby boomers are hitting retirement age and riding off into the sunset – around 10,000 per day, to be exact. This so-called “silver tsunami” is creating a widening gap between available skilled workers and available jobs. For example, by 2025 approximately 3.5 million manufacturing jobs will need to be filled, but a lack of skilled workers may leave as many as 2 million of them unfilled.

And it’s not just the manufacturing sector that will feel the impact. Government service, medical and healthcare, and—just as important—small business ownership will all feel the pinch as the workforce sheds these employees.

Of equal concern to the loss of labor force participants is the anticipated loss of both institutional knowledge and the loss of small businesses due to lack of succession planning. This is jarring because both types of loss are avoidable.

Available statistics show that more than half of all small business owners do not have a succession plan for their business. Whether the plan is to sell the business, pass it on to a child or other relative, or transition it into an employee-owned enterprise, developing a succession plan is an essential component of owning a business. Without a plan, the odds are high that a small business will simply fold upon the owner’s retirement.

From a public policy standpoint, finding ways to encourage baby boomers who own small businesses to create succession plans will be important. Community leaders and elected officials must be mindful of the potential impacts of small business loss on the broader neighborhood or municipality economy and plan accordingly.

It is noteworthy that about one-third of baby boomers who are looking to sell their small business are having difficulty finding a buyer; those who do sell are often acquired by out-of-area buyers who are looking to consolidate ownership and grow personal wealth. Such goals do not bode well for the existing employees of these small businesses, nor for the neighborhoods in which these small businesses exist.

It will be critical to lean on a variety of small business resources for assistance in creating succession plans. Entities such as the Small Business Administration, the Small Business Development Center, and the business mentoring group SCORE will play vital roles in our communities in terms of helping to fill the gap and assist baby boomers in developing plans to transition their small businesses to new leadership effectively.

For baby boomers who are leaving the workforce and are not small business owners, it will be necessary for their employers to ensure that there is a process for transferring the vast stores of institutional knowledge that these employees possess so that it can be utilized by younger generations. Effective knowledge management will be a key predictor of business or organizational success—those who have and utilize techniques to ensure such knowledge does not leave with retiring employees will have a competitive advantage over those who do not.

Businesses must implement effective strategies to avoid the “brain drain” of employee retirement—using communities of practice to increase the number of subject matter experts, documenting key procedures and information, and encouraging regular mentoring by more-skilled employees. This will require the use of different skill sets and new processes, along with a commitment to sustaining such actions, even if they are difficult or challenging to implement initially.

The silver tsunami isn’t a far-off concept. It’s here and it’s already starting to impact businesses of all sizes. For those businesses that are not prepared, the effects can be costly, even devastating. But for businesses that take steps to manage knowledge effectively and plan for leadership succession, the negative impacts can be minimal. 

How is your business preparing? Leave a comment or question below.