A New Age in Business Strategies May Be Dawning Across U.S.

At the leafy campus of Aerospace Corp. in El Segundo, the average age of the rocket scientists who design satellites, launch vehicles and space systems is 47. The employee turnover rate is an almost unheard-of 4% annually. Many workers are still going strong in their 70s; others retire, but are invited back as part-time consultants.

“As the work force ages, we’ll be in a good position,” says Marlene Dennis, the company’s general manager of human resources.

“We sell experience. Gray hair is good around here.”

Like it or not, businesses are going to be seeing a lot more gray hair. As the baby boom generation--now aged 34 to 52--grows older, so too will the nation’s work force.

With fewer young people entering the job market, companies will be forced to reexamine longtime policies concerning retirement, health care, recruitment, work schedules and compensation. In all likelihood, they’ll be faced with more age-discrimination litigation.

In a broader sense, employers will be required to rethink a deeply ingrained mind-set that values youth almost to the exclusion of age and experience.

Will U.S. businesses be ready? Some who have studied the aging issue--such as Sue DeNuccio, vice president of human resources and work/life initiatives at Target Stores--think not.

“It’s going to come crashing into our faces before we’re ready for it,” she says.

Many businesses are still coping with the wrenching cutbacks, mergers and consolidations that transformed industry during the past decade. Others continue to vie for a shrinking pool of young workers, while clinging to practices that encourage older employees out the door.

What’s more, the two industries regarded as the bedrock of Southern California’s new economy--technology and entertainment--are notoriously averse to older workers. Many high-tech firms find the suggestion that they should prepare for future work-force contingencies almost laughable. Most don’t even know what they’ll be selling or if they’ll be in business in a few years.

Many companies remain focused on the young end of the age scale, recruiting heavily at colleges and, in some cases, high schools. When it comes to rewarding employees, stock options--which carry the potential for big short-term payoffs--are more in vogue than retirement plans.

Sara Rix, senior policy advisor at the American Assn. of Retired Persons, says her group is concerned that companies won’t see another solution.

“It’s not necessarily the case that employers will say, ‘Aha, older workers,’ ” she says.

Plans in Place

Even so, many businesses clearly are at least thinking about the aging issue. A recent survey by the big benefits consulting firm Watson Wyatt Worldwide found that more than 40% of chief executives around the world say their companies account for the aging of the work force in their long-term plans.

And there are a few companies, like Aerospace Corp., that have been out in front with progressive policies, in large part because they rely heavily on brain power and don’t want to lose it.

Rockwell International Corp., based in Costa Mesa, is also on the leading edge. The electronics concern offers one of the most generous 401(k) plans and encourages employees to explore alternative work arrangements such as job sharing. It also brings retirees back for short-term projects or as part-time mentors.

“We don’t want our retirees leaving Rockwell and going to one of our competitors,” says Nanette Clements, director of succession planning and human resources.

Staying Adjustable

Two other industries, fast food and retail, are aggressively recruiting and retaining older workers. DeNuccio says Target Stores is trying to address the issue largely through flexible work schedules, which she calls the “No. 1 inclusive policy that any employer can implement.”

McDonald’s Corp. started recruiting seniors several years ago as the pool of available teens began to shrink. “What we’ve learned,” says company spokeswoman Lisa Howard, “is the customers sometimes become the employees.”

The fast-food giant also gives seniors opportunities for advancement, and helps them figure out how much they can earn without jeopardizing their Social Security and other retirement benefits.

At these companies, new buzz words are emerging to describe their elderly friendly policies. They talk of phased retirements, flex-time workers and “rehirements” of “unretirees.” Sabbaticals, common in academia, are migrating into the business world. Firms refer to their “wisdom workers,” and boast of “career-transition retraining programs.”

Some companies, such as Sony Pictures Entertainment, are rolling out elder-care benefits that they say appeal to baby boomers who are coping with frail parents while worrying about their own futures.

One Crisis at a Time

So far, however, few companies have actually implemented policies that will be in demand by aging boomers, work force experts say.

A recent survey of 951 Southern California businesses by Thomas Staffing Services found that despite all the talk about flex-time, job sharing and telecommuting, 80% of employers don’t offer such alternatives.

Some businesses say they’re too busy worrying about current hiring needs to devote resources to long-term planning.

“We don’t have time to think about what our future work force needs are,” says Intel Corp. spokesman Bill Calder.

IBM Corp. spokesman Dave Berman responds, “We’re really not work force experts. That’s why we hire outside consultants.”

Charles McBrayer, chief financial officer at Tustin-based Pairgain Technologies Inc., says “It’s probably safe to say we haven’t done a lot of deep thinking or in-depth analysis on this.” But he acknowledges that, at some point, high-tech firms might have to reconsider their emphasis on youth.

“It’s important to have lived through some ups and downs,” he says. “I expect that you’ll see less emphasis on getting the fuzzy-cheeked, out-of-school workers at tech companies.”

Rules Have Changed

Preparing for the future, critics say, isn’t something American business does well. When trying to cut costs, older workers are still among the first to go because they generally are more expensive in terms of salaries and benefits, even though their departure might mean the loss of knowledgeable, experienced, highly productive employees.

Once, U.S. business was far more predictable. Companies grew simply by serving an ever-expanding domestic population. They could plan on what they produced, how much they produced, and what their work force needs would be.

“Today, none of these conditions apply,” says Robert A. Jud, a Chicago-based consultant and corporate training specialist.

In the past decade, Jud notes, we’ve witnessed the emergence of a cutthroat business environment in which companies move rapidly to capture opportunities and employees have become more like free agents--quickly cut loose when the economic winds change.

“We have competition from all over the world,” he says. “Nobody realistically thinks of anticipating what their work force is going to be. Most companies don’t even know what business they’re going to be in.”

But critics say that one of the biggest problems confronting these companies is that they’ve become hapless at coping with long-term trends.

Labor force shortages have already developed in many industries, and it could get much worse, these observers say. Yet they predict that most companies, rather than trying to keep older workers, will use every other means possible to find new blood first.

Just recently, a pack of executives from Microsoft Corp. and other high-tech concerns descended on Capitol Hill to lobby for increases in immigration caps.

They are backing a Senate bill that proposes the government raise to 90,000 from 65,000 the number of visas allowed annually for highly skilled workers. These special visas are designed to open the door for a six-year period to foreigners with special skills--principally in high-tech and health care--who are in short supply here.

While the legislation might solve a short-term crunch, many workplace experts worry that companies are missing the bigger picture.

“You can’t necessarily turn on a [recruiting] program and be successful in a short period of time,” says Shelley Keller, a vice president at the consulting firm Booz-Allen & Hamilton Inc.

Survival Skills

Ultimately, how U.S. businesses respond to the reality of an aging work force carries enormous implications for productivity and competitiveness, economists and consultants say.

Companies with major expansion plans could hit a wall--sooner rather than later. Sears, Roebuck & Co. plans to hire more than 100,000 workers a year for the next five years as it launches a major expansion drive.

Says Tony Rucci, executive vice president of administration: “Companies are going to have to get very creative.”