A Balanced Scorecard for Managing the Aging Workforce

Abstract

In most industrialized countries, organizational science and practical management have fully accepted the challenge of dealing with the aging of the available labor pool. The demographic data on companies’ workforces have made it clear that the average age within their organizations is continuously increasing. Simultaneously, they find it more difficult to attract capable and younger replacements, whether for blue or white collar positions across all industries. The average age is not, as such, a cause for company concern. The related challenges and problems that could arise in the long term do, however, need to be taken seriously. Empirical studies have proven that, first, there is a tendency towards a growing number of constrained workers and employees who are less flexible in terms of their employment if a company’s personnel are of a higher average age. Second, such aworkforce’s number of sick days (but not the number of illnesses) increases due to their requiring a longer convalescent period. Third, employees who retire could be taking important knowledge with them— especially if the timely transfer of knowledge to the next generation (if available) has been ignored. The detailed issues and challenges arising from an agingworkforce are very specific, depending largely on the business environment, the industry, and the organizational culture. However, these issues and challenges’ potential effects on organizations’ overall strategic performance, especially in terms of cost structure and, thus, financial performance, are obvious. An organization that has to bemanagedwhile many of its employees are on extended sick leave or finds that important key employees have taken their unique know-howwith themwhen retiringwill struggle in a competitive business environment. Facing and acknowledging the above problems, eight global corporations headquartered in Germany and Switzerland (Daimler AG, Deutsche Bahn AG, Deutsche Bank AG, EnBW AG, Lonza Inc., Mars Inc., Otto Group, and Volkswagen AG) formed a joint network. This network is aimed at addressing and mastering the mutual challenges arising from the aging workforce and developing appropriate strategic tools with which these organizations can maintain their performance. All the participating companies recognize that there is an ongoing and active debate with regard to their demographic situation. Moreover, they realize that a systematic and concerted effort should be made to develop strategies as a tool to protect their demographic fitness and to improve their competitive and innovative abilities on the long term. In the words of Martina Klug of EnBW AG: ‘‘Participating in the network enabled us to deduce pragmatic approaches based on science and to share experiences with other companies that also have to deal with this issue.’’ Michael Adolf Picard, personnel director at the Otto Group, agrees: ‘‘In our opinion, it is critical that the demographic change is taken seriously and that we act at an early stage. On the other hand, it is important to avoid wild actionism (acting for the sake of acting) and panic. In my opinion, the recent demographic development is not a revolution but an evolution, which allows a targeted reaction.’’ Carla Berg, Mars University’s talent manager, states: ‘‘The better we prepare ourselves at an early stage, themore successful we will be in the future.’’ It is therefore clear that a model is required with which an aging workforce’s performance in respect of organizational competitiveness and innovativeness can bemeasured,monitoredandadjustedbypayingspecific attentiontoproductivityandcreativitymeasures.Based on the insights gained from the data collected in the relevant companies’ numerous moderated joint sessions, this article will introduce such a model. However, we start off by first introducing our data collection approach via a needs assessment and analysis of the participating companies; thereafter, we discuss the five organizational action fields that are relevant to the issue, and ultimately introduce a balanced scorecard for managing the aging workforce.