Thirty years ago, visionaries Barney Olmsted and Suzanne Smith published what became the bible of the movement toward more flexible ways of working: Creating a Flexible Workplace. It laid out chapter and verse the menu of what became the common flex options marking today’s workplaces — from ubiquitous flextime to now suddenly near-universal work from home options. Less common alternatives, and unevenly available over the years, have been compressed workweeks, regular part-time work, and job sharing.
The lone orphan in the litter turned out to be phased and partial retirement — a virtually nonexistent practice among major employers to this day.
There are many ways to explain this stubborn fact. One is an attitude expressed to me by a senior executive explaining his opposition: “As part-time for old people, this is just a double loser.”
Whatever role such biases might play, one hopes that true leaders charged with recruiting, developing, and retaining superior talent can get past them and assess the multiple benefits and genuine challenges involved in mining the wisdom, contributions, and commitment of mature knowledge-based workers. And with the global economy in unprecedented flux, continuing this senseless waste of talent may be unwise at best.
The defining characteristic of the knowledge economy is just that — knowledge. Among the major assets of companies as diverse as financial services, pharmaceuticals, technology, and high-end manufacturing are the minds of those who sustain and innovate complex systems. Companies depend on seemingly irreplaceable talent to invent, innovate, and re-imagine at record pace — from the biochemists of Big Pharma and the software designers of Silicon Valley to the risk engineers of major insurers and the architects of global money transfer systems.
The sudden or unplanned departure of these critical knowledge workers can have a crippling impact on core processes. If there were reasonable redundancy, solid succession plans, or robust knowledge transfer in place, random departures might not be a problem.
But few companies can claim to meet any of these standards, and the peril is compounded by a deadly, if unspoken fact of professional life: There is little incentive in these organizations to share knowledge freely since a monopoly on vital information offers one of the few forms of job security, especially in businesses that are inclined to export seemingly expensive 55+ talent at an accountant’s whim.
A well-designed phased retirement strategy can offer employers a blend of retention, knowledge transfer, mentoring, and succession planning that cannot be achieved in any other way. It offers a range of benefits to employees that encourage participation. For instance, remaining at work meets many peoples’ desire to continue contributing, while earning income and retirement plan contributions. It allows for healthy easing into retirement rather than facing an unhealthy sudden break, which studies show can shorten life by several years.
With such clear potential for mutual benefit, what explains the severe under-utilization of older workers?
The Real Challenges
Any discussion of phased retirement is marked by strongly held assumptions, persistent myths, and some actual design issues that must and can be overcome. The good news is that a recent thorough Government Accountability Office review of phased retirement programs in the U.S. found that all perceived challenges had been successfully overcome by a range of companies. A brief summary of the common concerns and responses follows.
Pensions. Integrating these programs with existing pension systems was a major challenge when most companies had defined benefit plans. Today’s defined contribution plans (401(k)s, etc.) are not a barrier. But the myth and fear of pension problems persist. Benefits people in particular need to get over it.
Discrimination risk. Potential exposure to age discrimination complaints and lawsuits raises the antennae of corporate attorneys and other risk managers. These matters are not to be taken lightly, but competent design based on compelling experience can eliminate this risk. Lawyers need to suppress their knee-jerk reactions, learn from the success of others and do the hard design work.
Open floodgates. As with the introduction of any flexible option, employers fear that everyone will want to do it — and in this case, especially people you really don’t want to keep around. But “everyone” never steps forward to try any risky new thing. And effective proposal and screening processes have enabled modest, well-managed flexibility for decades. The same can happen with this option, as well.
Excess costs. In cost-cutting environments, the fear is often that these programs will add expense. Ironically, reduced schedules lead to reduced costs of highly salaried professionals. Benefit outlays can be absorbed or prorated. Work redesign processes can eliminate low value work and actually yield greater output per employee than original regimens. The real excess costs come from creating an ongoing stream of “regretted leavers.”
Hoarding and loafing. Suspicion of the level of commitment of soon-to-depart employees leads to a concern that aging workers will coast through their final years, avoiding challenging and high-value work in favor of the easy path. And while they might promise to engage in knowledge transfer and mentoring, such good intentions may or may not materialize. Strong performance planning and consistent monitoring can reduce these risks.
Manager and employee skepticism. No matter how compelling phased retirement might be to the employer, employees have to step forward, and managers have to make it work with actual pre-retirees. Contemplating managing a part-time professional with considerable seniority can appear daunting to an already over-burdened manager, especially if one had been looking forward to that colleague’s departure. Furthermore, employees who express an interest in this option may feel that they are marking themselves for layoffs should business turn south. Strong program design and leadership support can address these concrete challenges. Ignoring them is dangerous.
Phased and partial retirement initiatives are neither impossible nor for the faint of heart. Building a successful program starts with a detailed analysis of the cohort of long-tenured employees who are nearing retirement age and possess valuable knowledge. Confidential third-party interviews and design/focus groups can legally obtain such information and also test various programs models to see which options might attract the greatest support from managers and pre-retirees.
In the end, these arrangements are far more challenging than flextime or work from home, but equally doable and valuable.