Dramatic workforce trends require planning now: through the confluence of four critical dynamics--20 years of downsizing, the changed employer/employee contract, fewer younger workers and an aging/retiring population--much of the workforce is shrinking, making the landscape for employers vastly different for the foreseeable future.

The just-beginning-to-retire Baby Boomers--the largest prospective generation of retirees in history--will be walking out the door, taking with them bulging Rolodexes and years of organizational knowledge and know-how. And while the problem of replacing that organizational memory won't be the 78 million Boomers' responsibility to fix, the onus will fall on companies that haven't addressed it.

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Demographic and economic trends are converging to cause dramatic shifts in the workforce, reports The Conference Board. As the recovering economy is generating renewed expectations for corporate growth, satisfying those expectations will require skilled talent. At the same time, the composition of the entire global workforce is changing. Organizations that will prosper in this new environment are those that are successful in creating a sustainable pipeline of qualified leadership and those that extract and transfer key knowledge, before the throngs of Boomers shut the door behind them.

Yet, a recent survey by consulting firm Accenture finds that at least 45 percent of respondent organizations are failing to capture critical workforce knowledge and experience from employees facing retirement, and fewer are transferring that knowledge to newer employees. These organizations simply do not have formal workforce planning processes and/or tools in place to capture their workplace knowledge. Over one quarter (26 percent) of respondents believe that, upon retirement, their organization will just let them go, without any transfer of knowledge. These findings are based on Accenture's survey in March of more than 500 full-time workers between 40 and 50 years of age.

It's been known for some time that workforce demographics are indeed changing. As more employees become available for retirement, fewer younger workers are entering the labor force. This means potentially large gaps in mission-critical skills and staggering replacement costs for recruiting, training and lost productivity, notes Watson Wyatt, a Chicago-based human-capital consulting firm.

Just what are those critical issues that require attention, how are organizations being affected and what are they doing? Moreover, what can they do to stem the tide of knowledge loss as the wave of Baby Boom retirees starts to swell?

"With more than 25 percent of the current working-U.S. population reaching retirement by 2010, companies must undertake workforce development and training initiatives to capture knowledge and minimize its loss," says Kathy Battistoni, a partner in Accenture's Human Performance Global Service line. Additionally, she says, organizations must support these initiatives with technology that can help capture critical information and distribute it directly to employees' desktops.

In prior years, Battistoni explains, when somebody retired, a company would open up a job search and fill the position. Now, executives looking at their pool of resources to fill in, don't see a one-for-one from a numbers standpoint, indicating a shortage of resources to replace the approaching retirement bubble. At the same time, it's also causing companies to consider whether they need to fill positions on a one-for-one basis.

This is partly due to the impending worker shortage, but also because smart companies are looking at where their businesses are headed and rightly asking, "What do I need?" rather than just assume a one-for-one replacement.

Another aspect is that the work-force in the wings is different and grew up in a different era, explains Battistoni. With different life experiences, this newer generation looks and thinks differently about its jobs and careers. Individuals think about the skills they're learning and experiences they're getting, and don't define "loyalty" in the same way that the Baby Boom generation does. Boomers often spent careers with one, two or a few companies. It's not unusual for the new generation of employees to have several careers, and not just work with several companies.

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Additionally, Battistoni comments on the differences in approach and attitude between Boomers and younger workers. Having spent a lot of time with only one or two organizations, Boomers have a different, broader perspective on the organization, combined with their history and knowledge and networks--social and professional. "When they retire, that's likely to go with them," she says, adding that "organizations are, and should be, worried about the skills that are walking out the door."

So, how is Corporate America doing in responding to this confluence of dynamics (the aging of America's workforce, the changed employment contract between employees and employers, fewer young workers to replenish departing ones and the forfeiture of senior talent)? Joe Colosimo of Denver-based consulting firm Colosimo & Associates believes they're not doing nearly enough.

"They want it both ways," Colosimo argues, referring to employers wanting workers as "free agents" along with "loyalty," and he warns "the landscape for employers will be different for the foreseeable future." Indeed, he says, a prosperous economy well be a double-edged sword. "It will give organizations more resources to move forward with recruitment and development initiatives, while stirring more turnover."

To address these dynamics, Colosimo believes "organizations must first raise the priority for talent-depth initiatives to unprecedented levels and face the challenge of free agency with a renewed commitment to their employees, recruit with conviction and regularity, and reverse their perspective of senior and experienced workers into one that cherishes their continuing value, and finds innovative means to retain them."

Battistoni believes companies are aware of the problem. Indeed, she opines that "five years ago, this awareness didn't run as broad as it is today." However, she laments that what they're doing about it is far less consistent. But "a lot of companies are starting to ask the right questions," and she considers this the starting point (or step one) for understanding a company's workforce against the backdrop of its strategic plan.

On retirees coming back or willing to come back, the Accenture survey finds few companies taking them back. But, Battistoni believes that over the next few years, different staffing models will emerge, perhaps supplementing the new workforce with retirees who've returned on a contract basis. "This is going to start collect some steam and energy on its own," she says, as more and more companies are almost "plotting who's where, and where they're at in their career lifecycle." In a sense, it's like managing the recruiting pipeline in reverse, as companies assess individual retirement dates and consider future needs.

This means managing the retirement pipeline and supplementing it with a set of programs on the back end, with recruiting being one and succession planning another. She notes that companies are doing internships and buddy programs, and they're developing a formal checklist of what needs to be transferred to whom by when. There is also a slew of emerging technologies that help in knowledge capture and making it available for multiple people to access and add to.

For example, technology can observe how people move around their desktops and navigate through their various work tools and can start to be advisory, or it can identify individuals that get tapped frequently, or documents, or internal Web sites or portal pages, and can track hits to those pages or documents. Culling through such data helps identify popular portals and sites and "go-to people" in the organization.

While some of this is already happening, the trend is likely to accelerate as companies begin to face the new realities. Battistoni believes that many in organizations are "hunkered down, mapping out their current workforce profile and plotting their retirement pipeline." She comments that inquires to her firm about how to tackle the problem tells her that many, now having their facts on the table, understand the magnitude of the problem and are ready for what she labels "step two," developing a plan, strategy and approach.

The components of step two include knowledge management, succession planning, recruiting and development and training, internally and externally. This is followed by step three, measuring progress against the plan. "Companies don't want to wake up three years from now and find that their plan was well and good, but with gaps in their workforce, have to concede that the plan failed."

Filling the C-suite pipeline of retirees is also a challenge facing Corporate America. Battistoni says that in this area "there is not a lot of comfort." C-level executives are noting that they themselves are part of this impending retirement wave, and many are not finding adequate answers to questions relating to filling the pipeline with leaders.

However, Battistoni is optimistic. "I think that they're getting better at it because they don't have answers that make them comfortable [with] those questions." She says she sees succession planning emerging as a top-of-mind issue for the leadership of organizations.

So when it comes to staffing, transferring critical organizational knowledge and the exodus of retirees, it sounds like a classic case of failing to plan is planning to fail. Battistoni agrees that this is an apt analogy. She believes companies are acknowledging the impending changes, and there is a change of attitude that they can't just let the transition occur haphazardly. "Companies are doing something they've never had to do at this level before--actually plan that migration and that transition of people, of knowledge, of information and networks. And that's new and different for people."

Colosimo says what's needed is an "unprecedented philosophical and operational approach to recruit experienced people, to develop internal initiatives to prepare the workforce to assume more senior positions and to seek methods of review that assure organizations they have the talent they need."

Finally, he warns, "If organizations think they are short of talent in this unprecedented condition, it may already be too late for them to recover from this new and different storm."

RELATED ARTICLE: J & J: 'Quality of People Is Key to Growth'

One C-level executive who doesn't seem concerned with the Baby Boom retiree problem is Robert J. Darretta, the CFO of healthcare giant Johnson & Johnson Co. Inc. The reason for his seeming nonchalance is that at J & J, there is ongoing workforce development, through a variety of techniques. "You don't want knowledge to simply reside with the individual; you want knowledge to reside with the organization," he says.

So, at J & J, procedures are documented--committing certain knowledge and best practices to operating procedures rather than simply leaving them to the know-how of an individual. "We make sure that knowledge is a consequence of the way we do things," he says.

Darretta describes the J & J organization as one with fewer specialists--who stay in specific jobs for very long periods of time--but one where most of the functions are filled by generalists, who occupy a position for two or three years and then move on to other opportunities within the company. In this way, he says, "there are many people within the organization who are familiar with the requirements of a particular job." Working in teams is another way to share the knowledge. "We work in concert with others on projects, so knowledge is shared rather than hoarded by any individual."

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In the finance area, for example, Darretta says a lot of time is spent on leadership development and succession to assure that key positions have an appropriate number of backups to be well-prepared for retirements, rotations or other movements. Every year, he says, "we go through a very formal process," where top management looks at every position to determine such things as who is the "ready-now" backup for key positions, and who coming up in the next one to three years will be capable of filling that position.

The way Darretta describes it, the company is basically focused on growth and leadership, and developing leaders who can create growth. To achieve its growth and leadership goals, J & J focuses on hiring "the best and the brightest" people to fill its leadership pipeline. It then provides opportunities for individuals to develop their skills within the company. The company likes to start young, pursuing new-hires at an early stage in their careers--right off college campuses--as well as supplementing with select hires at mid-career.

This year, about 100 undergraduate students will begin careers with J & J through its Finance Leadership Development Program (FLDP). It has a variation of the program for graduate students. In essence, it offers a two-year development program in which recent graduates rotate through a combination of classroom and structured on-the-job training that exposes them to two or three of the four broad parts of the business (including corporate headquarters). J & J has businesses in pharmaceuticals, medical-device diagnostics and consumer.

Following the first couple of structured years in the company, which has 110,000 employees and over 200 operating units, primary responsibility for an individual's career resides with the individual, says Darretta. "Our responsibility is to give them opportunities to fulfill their potential, but they have to take advantage of the opportunities."

Darretta's career is a good example of the broad-based J & J leadership development model. He started in finance at the company's headquarters in New Jersey 37 years ago, just out of college. He has moved in position and location to the Midwest and then back to New Jersey. In 1985, he left finance to run the J & J businesses in Italy, then went to California. He returned to New Jersey in 1995 and assumed the CFO position in 1997. He was also named Executive Vice President in 2002 and Vice Chairman in 2004.

"I've worked in several different companies, and I'm a blend of both financial management and general management," says Darretta. He opines that CFOs have become involved in so much more than finance, and that as the years have passed, he's taken on a broader range of responsibilities.

Thus, J & J's challenge differs from the retiree issue or even being able to attract people. Its chief concern is perpetuating its record. "Historically, we've grown our revenue by about 10-11 percent per year, so our business continues to grow in size and in complexity," says Darretta. Perpetuating that record is "about making sure you're getting high-quality people and you develop their talents, so that you're going to have a group of people who are capable of filling the positions associated with the growth in size and the increasing complexity of our business," he argues.

Bottom line, Darretta says, the quality of the people is the principal determinant of the success of the business. "Because we we're committed to growth, we have to be committed to our people. That's what's caused us to attach such great importance to leadership development--this fundamental understanding of leadership being the primary determinant of the ultimate success of the business."

--Ellen M. Heffes

RELATED ARTICLE: takeaways

* Four dynamics are contributing to the impending workforce shortage: 20 years of downsizing, the changed employer/employee contract, fewer young workers and an aging/retiring workforce.

* A recent survey shows at least 45 percent of respondent organizations are failing to capture critical workforce knowledge and experience from retiring workers.

* More than 25 percent of the current working U.S. population will reach retirement by 2010.

* Three steps to deal with critical knowledge loss include: become aware of the issue; develop a plan, strategy and approach; and measure progress against you plan.