The population used to be shaped like a pyramid: lots of young people, a medium number of middle aged, and a few old folks. But the demographic geometry has changed radically in just the last few decades in many parts of the world — and will shift further over the decades ahead in still others. We now have diamond- or rectangular-shaped populations in many countries and will at some point have inverted pyramids — the old will outnumber the young.
The United Nations' most recent study on demographic trends confirms these changes and puts to rest any assumption that the pyramid-shape will return. The former ratio of old-to-young already no longer exists in many countries and, much of the world will soon follow. Yet many of our talent management practices today are derived from this old idea.
A combination of lower birth rates and longer life expectancies has conspired to create new geometric shapes. These two major demographic shifts are so significant that Peter Drucker predicted that historians, looking back at the 20th Century, will view the demographic changes as the most important events of the century (more so than technology, industrialization, globalization and so on).
The first is substantially lower birth or fertility rates. Rates are falling below replacement level of 2.1 children per woman, stabilizing at about 1.85 children per woman in many parts of the world. Western Europe, the U.S., China and Japan are all under replacement levels today. China fell from 5.8 children per woman in 1950 to 2.3 in 1980 (before the start of the One Child policy). Africa fell from about 5 children per woman in 1950 to just over 4 by 2000. Children have shifted on the "great balance sheet of life" — from assets in an agrarian society to liabilities in an industrial society — and people are choosing to have fewer.
The second big change is longer life expectancies. Human life expectancy averaged about 35 years for most of the last 1000 years of man's history on earth, but has more than doubled to 75-80 years today. We are experiencing, for the first time, a new life stage: people have never before had a period of non-child-rearing, healthy, active adulthood. In China, the number 20-24 year olds and 65+ year old is about equal today; in just 20 years, by 2030, the old will outnumber the young by 150 million.
For companies, the new geometry requires rethinking many aspects of our organizations. Many of today's organizational designs and talent management practices are based on the idea that the population, and specifically the workforce, is shaped like a pyramid. As we prepare for a workforce in which older workers outnumber the young, we need to redesign many of our standard approaches.
Here's an initial list of practices that are derived from the old assumption of a population pyramid, along with the questions you should begin asking:
- Mandatory retirement — Will there be enough young people to replace those who leave? For many skill sets, the answer is increasingly "no." How can you make your workplace more attractive to older workers, to encourage talented employees to stay on longer?
- Linear careers — Do people always want to take on "more?" Career paths today assume that taking on more responsibility is the only logical move. One way to make your organization more attractive to older workers is to offer options to do less. Many people would like to stay active, but few want to work as hard at age 70 as they did at age 50. How can you create bell-shaped-curve career options that allow people to decelerate toward the end of their work lives?
- Headcount-based metrics — Are your metrics limiting your ability to tap the widest possible pool of talent? Are you able to job-share and use part-time and cyclic workers?
- Recruiting initiatives aimed primarily at young hires — If your business model depends on an influx of young talent, recognize that you're going to be challenged to hire a disproportionate share of the available hires. Are you really good at recruiting? If you can use talent at multiple levels, make sure your recruiting investments are geared to seek out people of all ages, from a variety of sources?
- Career paths that always move "up." Promotion has become a standard expectation — a primary form of reward and the key source of variety. It's how we get to do new things and make more money. This won't be a feasible approach in the new geometry. How can you give people variety without moving them up? How should you provide additional compensation opportunities? Is it appropriate to pay for breadth (people who can fill multiple roles)?
- Prestige-based titles — Titles can lock organizations in to an "always up" career path design. People are reluctant to take on a different role, if the title associated with it isn't as prestigious as the one they currently hold. How can you begin to move toward task-based (Leader of xyz Initiative), rather than prestige-based (Vice President) titles?
This blog first appeared on Harvard Business Review on 3/14/2012.