Newsletter December 2005

Improve Ageing Workforce?!
How to identify the future age structure with help of workforce forecast

Politics and pension fund managers already have cared about the demographic change of the society for a long time. Now more and more companies are discussing the problem, too. The increasing average age of the workforce is a new challenge to the companies.
In the latest issue of German magazine „Personalwirtschaft“ two articles show which problems companies have to take care of soon. Furthermore it will be necessary to estimate the current and future age structure of the workforce. How to forecast the age structure into the future we will show in the second part of this article.
We do not want to say that older employees do perform lower than younger ones. Far from it. The first article (see „Personalwirtschaft“ 12/2005, p. 45 et seq.) refers to a study where greater professional experience, experience of life, technical and company specific know-how are accredited to older employees. But for the author Thomas Muehlbradt (see „Personalwirtschaft“ 12/2005, p. 49 et seq.) the discussion does not end here. In his article he points out that fitness to work, working ability and innovative ability have to be ensured despite the increasing average age.
To ensure the fitness to work, healthiness is the crucial factor. Statistics of health insurance funds show, the older employees are, the greater the incidence of disability. Many companies for instance offer special conditions for gyms. But it is more likely that people use such offers, who are not in need of them.
To ensure the working ability means ensuring competence and achievement motivation. How many companies already act against an ageing knowledge base? Are there already concepts for personnel development especially for employees above forty years old? In the first article the author points out that older people are very interested in trainings. On the other hand there are not many of them attending courses. It is not clear if it’s a matter of willingness of investment or the small demand-orientated offer.
To ensure the innovative ability is especially for the high-income countries in Northern Europe and North America important for competing with other nations – declares the author Muehlbradt. You can recognize that there is a trend for less classic manufacturing companies and more know-how generating organisations. Another important fact for innovation is the advancement of products and working processes. In this regard it has been alarming that older employees rarely take part in idea management or employee suggestion schemes (examined through a study).

Now we have shown why it is important to care about the future age structure of workforce immediately. In the following part we’ll present the methodology.
As soon as you start dealing with the demographic change in your company you have to estimate the current and future age structure of your workforce. Many ask themselves how to forecast the age structure. The Markov model offers the possibility to estimate the future workforce based on historical data (see Scholz 2000, Personalmanagement, p. 340 et seq.). The historical data are to be analysed to evaluate the probability of entering and leaving an age group as well as the transition rates from one to another age group. It is resulting in a transition matrix. With help of it for a given group of employees the age structure can be estimated for the next years (see figure 1).

Figure 1: Forecast of the age structure with the use of Markov chains

Knowing the age structure of your future workforce an effective personnel strategy can be developed. The following example of questions could be discussed:

• How can the potentials of older employees be used effectively?

• Are existing career paths still suitable for the future age structure

• Which special personnel development actions can attract older employees?

• Is an early recruitment necessary to avoid over ageing?

The methodology of estimating a future workforce structure is not only used for age structure forecasts. In one of our next newsletters we will show you where else to use this methodology.

If you want to estimate your future workforce and need help with analysing data and building up a forecast, email us at kontakt@iprocon.de. We’d like to give you advice!

Back to Newsletter 12/2005