If one looks at the research on older workers — those who are at or close to retirement age — one finds what Peter Cappelli, director of Wharton’s Center for Human Resources, calls “an incredible amount of discrimination, bigger even than discrimination against race or gender.” Older people, he says, often find it difficult to get a job, partly because relatively young supervisors are reluctant to hire and then manage employees who are decades older, even though these employees are the type of worker many employers say they want.
In a new book titled, Managing the Older Worker: How to Prepare for the New Organizational Order, Cappelli and Bill Novelli, former CEO of AARP, analyze this phenomenon from the employer’s perspective. The authors lay out the business case for keeping and hiring older employees, offering suggestions as to how a multigenerational workforce can be managed in ways that benefit all three constituents — the companies, the older employees and their younger supervisors. As Cappelli notes: “The goal of our book is to point out the opportunities that hiring older workers provide, and to examine why these opportunities are not being taken up.”
In an interview with Knowledge at Wharton, Cappelli talks about the benefits of a rapidly expanding older workforce, the strategies some companies use to get value out of older workers and the reasons he and Novelli decided to write this book, among other topics. In the accompanying video, he describes in more detail how younger managers can work more effectively with older employees, and offers examples of companies that have managed the process well and those that haven’t.
Knowledge at Wharton: Peter, in your book, you note that one of the biggest management challenges employers face these days is how to manage older workers. To begin with, can you define “older worker” and “younger supervisor”?
Peter Cappelli: The term “older worker” is obviously a relative one, but if you look at it from a legal perspective, the law says that if you are over 40 years old, you are protected against age discrimination. In the context of our book, the big challenge we talk about is the supervision problem with regards to people who are at the traditional retirement age — people we would have expected even a couple of decades ago to leave the workforce around 65.
Knowledge at Wharton: I thought most people retired at age 65.
Cappelli: More workers retire at ages 62 and 68 than at 65. Working until 65 was never the model until the government instituted Social Security and the corporate world set up company-driven pension programs structured around a retirement age of 65. Before that, however, employees tended to slowly taper off in retirement, with no focus on a specific age.
The term “younger supervisor” is again a relative one, but where we see problems is with people under 40 who may not have a lot of experience under their belts. With flatter hierarchies and especially with start-up firms, it’s possible for people who are quite young to have some serious responsibility. As start-ups get a little bigger, for example, they have to reach out for talent — such as marketing experts and chief operating officers — who will help them reach the next level of growth. The founders don’t want to hire a kid; they want to look for somebody who has done this before, such as an executive looking for a second career. You see that quite often.
But that’s when the problems start, and the biggest one is discrimination, which manifests itself mainly in hiring. If you look at the research on older workers, you see an incredible amount of discrimination against them, bigger than race, bigger than gender. Older workers struggle to get hired. And yet these are individuals who are perfectly suited to what employers say they want — somebody who can hit the ground running, who knows how to handle work-based problems, who is not interested in a long-term commitment from the company, and who is self-motivated and self-managing. All this exactly defines older workers. They are ideally suited for many of these jobs, and yet when push comes to shove, younger supervisors won’t hire them.
The reason they won’t hire them is the second problem, which is how to manage the older worker if you are a younger supervisor. The issue is that this seems to invert the natural order. How can I give orders to somebody who is older and more experienced than I am? In some cultures, such as China and Japan, there is deference given to age. You don’t see that in the U.S., but you do see deference given to experience. So somebody with less experience managing someone with more experience seems to upset the natural order.
Knowledge at Wharton: Are we talking mainly about white-collar workers here, or can this apply to blue-collar workers as well?
Cappelli: I think it applies to any job where experience really matters — craft work, knowledge work, all kinds.
Knowledge at Wharton: What other advantages, in addition to the ones you mentioned above, do older workers bring to the workplace?
Cappelli: They can serve as mentors to younger employees. If older workers stay with the same company, they carry on the culture. They have tacit knowledge that you can’t find in a book. And surprisingly, if you look at job performance data related to age, it turns out that older workers perform better on every dimension of job performance. They turn over less, are absent less, their performance appraisals are better and, contrary to prevailing assumptions, they don’t cost employers more than younger workers. Wages are higher for experience, not seniority, and higher wages for experience reflects productivity advantages.
On the health care side, the assumption is that older people are sick a lot and will use the health care system more. That’s true. But they don’t have dependents. In most companies, the actual costs for employers are highly associated with an employee’s dependents, not with the employee. So older workers may not even cost more for health care.
Knowledge at Wharton: Do you have an example of a company that is hiring older workers wisely?
Cappelli: CVS is one. It discovered, not surprisingly, that in winter its business goes up. The company also knows that a lot of seniors choose to spend their winters in Florida because of the warm weather. So CVS now has a policy under which retirees can work for them during the winter season. It’s a way for the company to staff up during the busier months, and for seniors to make some extra money to help pay for their Florida trip.
Companies that are older-worker friendly are those that think about the particular needs of older workers, such as the need for flexible schedules to engage other interests associated with moving into retirement, such as families and hobbies. Flex time is not a hugely difficult need to accommodate. In addition, smart companies know that older workers are less motivated by money, and more interested in meaningful work, social contacts, etc. So when you go down this list, the interesting thing is that older workers sound like younger workers — those who say they don’t want to make long-term commitments to an organization, who say they are motivated by the mission of the company and are looking for work-life balance, time to pursue interests outside of work, and so forth…. In some ways, the quirky part of this is that people in the middle of their careers are the unusual ones. They are stuck because they need money for mortgages, their kids’ education and other commitments. They are the ones who can’t move and can’t be as flexible.
Knowledge at Wharton: As we all know, the financial crisis has meant that older workers are holding on to their jobs longer; their 401(k)s have taken a hit and in addition, they are looking at longer life expectancies than at any time in history. But by choosing not to retire, or by trying to get back into the workforce once they do retire, are they taking up jobs that in better times would have gone to younger workers, thereby denying the younger generation the “job space” they need to begin and advance their own careers? Does this, in fact, skew the way the labor market is supposed to work?
Cappelli: It’s hard to get our hands around how economies actually work. The view you just presented suggests that there is a fixed number of jobs in society and it’s all about carving them up. You see that with arguments about immigration — that immigrants who are willing to work longer for lower pay are taking jobs away from Americans. And there is some truth to that.
But it’s not zero sum. If you add more workers to the economy, they create demand. As the economy grows, people spend money and thus create other sorts of jobs. At the same time, it is not completely elastic in the sense that adding more workers does make it tougher for people who are looking for work.
In response to your question — does this skew, or subvert, the way the labor market works — you assume that we are talking about a corporate career, where people predictably retire and move on. For the most part, that hasn’t been true for a long time, as I noted before. The idea that people stay in corporate jobs until 65 and then retire seems to almost never happen. In corporations now, you never see people retire at 65. They are pushed out, or leave, earlier on. What we see with older workers is that many of them are not hanging on to their current jobs; instead, they want to come back into the labor force and do something different. To the extent they keep working in their company, it’s as a consultant or as a part-time employee. That’s the typical model.
So we are talking mainly about people who had a job in one area and want to shift and work someplace else. They want to work part-time; they are not talking about staying in a 9 to 5 career for another 20 years. They are talking about leaving Pepsico and working in a school, for example, or moving to a resort town and getting a service job. In that sense, they are probably more in competition with younger people in their 20s than they are with middle-aged workers.
Knowledge at Wharton: Whom did you interview for this book?
Cappelli: We interviewed employers. And in fact this book is written mainly from an employer’s perspective. The goal is to point out the opportunities that hiring older workers provide, and to examine why these opportunities are not being taken up. We are suggesting ways that employers can take advantage of this opportunity. There are many surveys about what older workers want, but not about employers. So the bigger puzzle was on the employers’ side.
Knowledge at Wharton: What is the most important piece of advice your book offers to readers?
Cappelli: The part of this book that is unique is that it calls attention to the whole issue of younger supervisors managing older workers. Awareness of the issue is a big point. We also go into ways to address this issue, which revolve around changing the ways that younger supervisors manage. For example, they can’t boss older employees around based on their formal authority and expertise, because older workers will have more expertise than the supervisors. And you can’t threaten or bribe them. The usual model is to say, “You have to do this or we will fire you.” Older workers obviously don’t want to be fired, but it is not as big a deal as it is for workers who are 40. Supervisors have to manage in a way that is more empowering. They have to say, “Here is a project; we want your ideas on how to get it done.”
Another issue is that younger supervisors sometimes undermanage older workers because they are afraid of them. So they just don’t deal with them, don’t talk to them. That’s a problem as well. We discuss these issues and how to solve them.
Knowledge at Wharton: Are some industries more hospitable to older workers than others?
Cappelli: Places where there are labor shortages, like health care, pay attention to this. In health care, a lot of employers are trying to keep older nurses and technicians around because they are in short supply. In more creative fields, there are increased efforts to retain research scientists — in the pharmaceutical industry, for example. These are places where there are individual contributors who work independently. Some efforts are underway in some corporations to bring back expertise for consulting arrangements. Big companies realize they have gotten bad at managing knowledge. An example is a company that suddenly discovers nobody in its ranks has met any of the partners in its Japanese subsidiary because the only people who knew them have just retired. Or consider the power company that discovered there were only a few people who knew where all the underground lines were and they had just retired as well. They were brought back in as consultants. There are a lot of places out there that aren’t thinking about these issues ahead of time.
Knowledge at Wharton: What else is unique about this book?
Cappelli: Many books talk about the public policy issues related to older workers. People need to work longer; this is changing society; Social Security is being affected, and so forth. But that is all at a macro level. And then there are books written for individual employees that say, here is how you need to go about finding a job, or here is how to think about what you want to do, here is how to plan your life, write a resume, etc. But there aren’t really any business books on this. This is a business book.