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Closing the Talent Gap

Ad hoc approaches will fall short when the workforce crisis strikes.

Fortnightly Magazine - August 2008

risk to a company, but the real value lies in a more granular analysis.

Many retirement decisions are driven largely by factors specific to a company location or function. In the generation business, for example, employees at different locations may be offered site-specific retirement packages. In labor-intensive businesses, an employee’s functional area often dictates the physical prerequisites for the job. In such cases, projecting retirements for a particular business function and location can highlight real differences in trends. To accomplish this, historic retirement rates for a particular location and functional area are applied to projected populations of retirement-eligible employees, also broken out by location and function ( see Figure 2 ).

Though this analysis might not capture all the factors contributing to an individual’s retirement decision, it allows executives to more precisely understand retirement trends and pinpoint specific threats. For example, though the company-wide retirement rate might be high, the problem could be limited to a few functional areas and locations. And some utilities might find exempt status significantly affects retirement trends.

Utilities can use the insight generated from a disaggregated retirement analysis to develop workforce strategies dealing with talent loss in the most critical areas and geographies.

Historic rates, while a good barometer, might not indicate the full extent of the retirement threat. Utilities typically see only 20 to 30 percent of their eligible workforce actually retire. Of course, the eligible population that elects to continue working cannot postpone retirement indefinitely, and thus represents an inherent risk that needs to be managed and understood.

In particular, changes in pension and retirement plans could significantly impact these trends, potentially advancing retirements. In addition, efforts to understand what causes employees to stay beyond retirement age allow companies to target the proper “bridge-to-retirement” programs.

Attrition and Transfers

Employees leave utilities for a variety of reasons. Understanding which areas are most in danger of losing talent can help utilities develop effective retention strategies. Again, a look at historic attrition rates can provide valuable insight. These rates, typically taken as a percentage of the total headcount, can be applied to workforce levels in future years to project expected losses through attrition.

As with retirements, attrition rates can vary significantly with certain segments of the workforce. The younger hires tend to be more mobile and they want to explore other career opportunities, and thus exhibit higher rates of attrition than employees with significant tenure—which can have an even bigger impact when companies start closing the workforce gaps with younger talent. Certain geographies or business functions are more prone to attrition loss than others, depending in part on the number of jobs available in the market that require similar skill sets. Areas with employee satisfaction issues also can lead to higher attrition if those issues aren’t addressed. Therefore, effective analyses of historic attrition rates segment the employee base in ways that highlight these differences.

Historical attrition analysis is not enough, however. Successfully managing attrition risk requires both a quantitative and qualitative assessment of attrition drivers, such as exit surveys, as well as benchmarking the results of such surveys