Under the heavy weight of the pandemic, the accelerated retirement of the baby boomer generation from businesses has had catastrophic repercussions on the workforce in general. Prior to the pandemic, the numbers were estimated to be 10,000 a day. Baby boomers currently own almost half of the privately owned businesses, 60 to 80 percent of them have stated that they don’t have a successor to take over the business after their retirement or indisposition. It has been suggested that in the past few decades, the baby boomers have been responsible for the economy’s state as it is now. Most of the industries and world leaders are sons and daughters of the baby boomer generation.
Accordingly, researchers have argued that the current wealth inequality and the subsequent global lack of talent come as a result of the single-minded decisions of this generation that refused to believe in its demise. These decisions that centered mainly on monetary gains, neglected to raise successors to continue their work and grow it. Coupled with the pandemic and its share of business closures and job losses, the future of staffing for companies that desire long-term sustainability and growth for their business will have to rely on the shift in the perspective from recruiting the best to raising the best. This upbringing is done through the implementation of continuous succession management plans that can ensure the future of businesses and jobs.
Retirement looms for baby boomers. The last boomers, circa 1964, are 58 years as of 2022. According to the latest studies, the average age of CEOs across industries is 59, other C-suite roles range in age between 55 and 60. Prior to the pandemic, the challenge of baby boomers’ retirement would have affected nearly 20 percent of the United States’ labor, coupled with the pandemic, the numbers may be higher. Baby boomers are individuals born between 1946 – 1964. In the United States alone, this group owns nearly half of all privately owned businesses which employs around 25 million people. The challenge of this group’s retirement lies in the lack of succussion plans deployed to transition the ownership of these roles, positions, and businesses to the younger generation and the possible negative implications on large-scale businesses and job losses. So, what are the implications of this exodus on the future of staffing, job loss, and inequality? What was the impact of COVID 19 on the workforce as an added layer to the critical situation? and what is the importance of succession plans and their imperative role in sustainability and growth?
The reasons behind retirement and its possible implications on the economy have been in discussion since the 1950s. Following the Amendments to the Age Discrimination in Employment Act (ADEA) in 1978, which raised the age for mandatory retirement from 65 to 70, many researchers studied the potential impact of the future retirement of the baby boomer generation in the 21st century. A research paper published in 1980, discussed the economic changes that affect the decision of retirement. It cited the strong correlation between retirement, whether forced or willing, the pension coverage, in other words, economic factors. In that era, the middle class was at its peak, however, it is not the case in the current time.
A more recent study in 2019, rediscussed the subject of wealth inequality and the wage stagnation of the world’s workforce, and the consequent impact on the competence of future skilled workers as they seek alternative routes of work. In correlation with baby boomers’ retirement, who hold nearly 20 percent of businesses, one research paper states that this group, in the United States alone, accounts for $5 trillion in sales and employs 25 million people. Combined, the retirement of baby boomers and the economic inequality poses the issue of a lack of succession plans that jeopardizes the employment of millions. As mentioned earlier, most of these business owners do not have a succession plan in place. Similarly, an article published during the pandemic criticizes the lack of succession plans amongst ten CEOs of major companies interviewed by the Financial Times, in their mitigation plans for the impacts of COVID-19, which exasperated the exodus. To highlight the severity of the situation, multiple research papers presented the critical situation of the lack of succession plans and its implications on the future of the workforce from another angle, citing the alarming low percentage of Millennials’ work engagement and the risks this percentage poses to the sustainability of business upon their accession to leadership roles.
In the mid to late 1960s, the financial stability provided through social security and pension funds offered the employees the opportunity to retire at the age of 65 as they could withdraw the full amounts of both funds. As mentioned earlier, the discrepancy in the financial capabilities between the middle classes of the 1960s, 70s, and 80s, as oppose to the current time, is what allowed the smooth transition of ownership, roles, and positions from the older generation to the next. Currently, the top one percent of the population receives 13 percent of all income and holds nearly 40 percent of all wealth, creating severe wealth inequality. This trend has been playing out for the past four decades and is attributed to the decline of the middle class. This decline particularly affects the impending baby boomers’ exit from the workforce.
In other words, the retirement of some of these owners will result in the potential liquidation or sale of the business, which not only affects the owner’s direct employees but rather the broader community will suffer as a result. When discussing wealth inequality and the wage stagnation of the world’s workforce, many researchers confirm this inequality and elaborate on the potential adverse consequences not only on the economic well-being of organizations but their health and sustainability as they pertain that the gap between the richest and the poorest is widening, specifically the gap between generations. The potential ramifications of the baby boomers' exit have created the urgent need for a more serious action to be taken in terms of succession plans, specifically at this time due to COVID-19. A study conducted in 2010 found that around 50% of companies were unable to name a successor for their CEOs. To provide an example, the study referred to the death of multiple CEOs due to COVID-19 complications without leaving a successor, which jeopardized the companies’ sustainability.
Be it on the C-suit level or as business owners, the exit of baby boomers without successors that have been trained and groomed to sustain and grow the business will impact the future of staffing across the world. Considering that succession management is an ongoing process that should be continuously implemented and developed, it can be seen how the valuation of its importance has arrived late. The pandemic, as aforementioned, has accelerated this issue as increasing numbers of businesses are being liquidated, sold, or shut down partially due to a lack of younger successors that may have ensured the survival of the company during the hard times. Similarly, in positions that have been previously occupied by the baby boomers, the financial and job market injustice made them conduct business with short-term goals, only ensuring maximum monetary gain rather than future sustainability for the organization through their successors, who as a result of these policies, have become unprepared and lack the engagement to work with the absence of long-vision predecessors and mentors.
To conclude, with the clear results that follow the baby boomers’ exit from the workforce, proactive succession plans have been demonstrated to be a key element in the sustainability of businesses that employ millions of people. The aim to improve, if not eradicate, wealth inequality may be mapped out with successful implementation of plans that ensure the development of the workforce for the transition between generations. Multiple plans have already been put into action across Fortune 500 companies and other small to medium enterprises (SMEs). However, regardless of the nature of the plan, the main change has to be in the behavior of the baby boomers and their attitude towards their succession and subsequent retirement. Only through a shift in the perspective towards social responsibility, and an elevated consciousness in relation to the future can a real impact be reaped. Succession plans are not merely a means for retirement but rather a mentoring program whereby the forefathers of the industries can pass down their accumulated knowledge to the ill-equipped next generation. It may be argued that these actions have been deployed too late, especially under the current weight of the pandemic. However, as most researchers and subsequently policymakers have concluded, it is better to initiate these plans in an effort to salvage some of the damage, rather than remain idle in the face of the catastrophic alternative.
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