Racing to Replace Retirees

A workforce crisis is looming as baby boomers prepare to retire. States are turning to succession planning to avoid major headaches.

by / October 1, 2001
When Andy Robinson describes the workforce crisis his department faces in the not so distant future, he has to look no further than himself to see whats going to happen. Robinson, who is director of information services for the Texas Department of Insurance, is an aging baby boomer. In five years, he and about 25 percent of the departments information technology workforce will be eligible for retirement.

"A lot of us boomers are aging out," he remarked. But when it comes to finding a solution to the problem, state executives like Robinson have little to fall back on. "I have to say that succession planning within the state is inadequate," he confided. For a heavily decentralized state government like Texas, where each of the states 250-plus agencies have their own human resource department, that can spell trouble. But the Lone Star state is hardly alone. Across the country, state and local governments face a major crisis as senior staff reach retirement age in record-breaking numbers.

In 1999, the Rockefeller Institute of Government took a look at the aging state and local government workforce. What it discovered would have alarmed any human resource executive. According to the study, 42 percent of the 15.7 million state and local government workers are between 45 and 64 years old. For some states the figures are worse. In Washington, 50 percent of state workers are 45 or older. At the executive level, more than 50 percent are eligible to retire in just five years, as are 30 percent of the states mid-level managers.

In Iowa, the state faces the same gloomy numbers. Approximately 33 percent of Iowas 21,000 employees will be eligible to retire over the next 10 years. Right now, 70 percent of employees at the supervisor level are over 45 years old, according to Mollie Anderson, director of personnel for the state. When Anderson took over as director two-and-a-half years ago, information on just how many people would be eligible for retirement didnt exist. "People knew anecdotally that it was happening, but it takes data to realize the scope of the problem," she said.

The data has come in the form of a retirement calculator developed by the Personnel Department that allows agencies to project over the next 10 years how many retirements will occur in each agency and in what job classification. Not surprisingly, wake-up calls went out to many agencies when they used the calculator, particularly agencies with older staff, such as the departments of agriculture and labor. Interestingly, the states IT department found itself in somewhat better shape, since it was a relatively new state agency with a younger workforce.

Upping Compensation
Faced with a shrinking workforce, states have responded in a number of different ways to shore up their labor resources and to hang on to those senior staff and the knowledge they carry. One step that a number of states have taken, especially in the area of IT, is to address the compensation problem. In Texas, where the high-tech industry has been extremely hot, the loss of skilled workers to the likes of Dell and other firms reached crisis proportions. "Our turnover was reaching 35 percent in 1999," said Robinson. "Thats pretty bad for a small division such as ours, which has only 79 workers."

The states legislature responded by reclassifying technology workers and bumping up the pay scale to a level that reduced the difference between the public and private sector enough to halt the loss of workers. Turnover is less than 10 percent today. Aiding the situation is the sudden slowdown in the high-tech sector and the subsequent rise in layoffs. "We have plenty of people apply for jobs here," Robinson quipped. "That wasnt the case last year."

In a further effort to sweeten the pot for all workers, the Texas legislature recently passed a bill that allows state workers who have retired to return to the public-sector workforce and draw a full paycheck while they receive their retirement annuity. Prior to the legislation, returning workers could only work nine months of the year and had their salary capped at $60,000. With the elimination of those caps, the state hopes to bring back some of its brain trust.

In Iowa, the departure of workers with special skills has driven up the need to outsource services. "In particular, we have increased our reliance on outside contractors in the IT arena," said Anderson. "We discovered in the last year we spent $483 million on outside contractors, a large portion of which went toward technical support contracts."

Like Texas, Iowa found that its pay scale for technology workers and other skilled labor lagged behind the private sector. So the state created a new compensation and classification system that mirrored the private sector.

Succession Planning
One workforce strategy that is drawing increased attention in the public sector is succession planning. Once considered a tool mainly for finding managerial replacements in the private sector, the practice is beginning to draw attention in government. No firm figures exist on how many state or local governments are beginning to practice succession planning, but the term is popping up more and more in government personnel departments and elsewhere.

The Texas state Legislature, in addition to changing the rules under which retired workers can return to a public sector job, also added a clause to the law calling on every state agency to develop a workforce plan to address critical staffing and training needs, including the need for experienced workers to impart knowledge to their eventual successors. "What the state is saying is that we have a potentially serious problem and lets get cranking on it," said Robinson.

In the past, succession planning was a highly subjective effort, often involving small groups of people who tried to pick the right individual for a specific leadership job. "Succession planning was usually something that was done on the back of an envelope," said Marcia Jones, senior vice president of product strategy for Peopleclick, a human resource software firm.

But todays leadership positions are more demanding and fewer people have had the training or on-the-job experiences to prepare them for senior-level positions. As a result, succession planning has become much more organized and is usually an ongoing effort to determine what sort of competencies are needed to fill a position, where leadership potential lies and how to assess an individuals specific strengths and weaknesses.

In Washington, the states Department of Personnel has recommended that agencies use succession planning as a way to prepare a pool of qualified candidates to meet future workforce needs and to provide an avenue for long-term employees to pass on accumulated knowledge. Iowa has launched a succession planning pilot project to identify the type of competencies the state expects from its future workforce, as well as what kinds of skills will be required of managers and to begin offering training programs to bring future managers up to the competency level the state expects.

But as Anderson pointed out, job promotion in state government is merit-based. "We cant identify somebody and say, We are going to develop you as a manager in the future," she said. "What we need to do is make sure we provide opportunities for all employees for career development, and then identify training programs that address what competencies we need and document the people who have been through the program and have performed well. Then, on that basis, give them the opportunity to apply for the managerial position."

Software Solutions
Even if bureaucracy limits some of its impact, succession planning still has its place in government and human resource agencies can take advantage of new tools to help with the process. A number of software programs are available that can help assess workers in an agency, match skills with open positions and pick the right person for the job. Some of the products available include Workforce Vision from Peopleclick; ExecuTRAK from HRSoft; and MyHRIS from NuView Systems.

These programs wont take the human factor out of gauging whether an individual is right for the job, but they can eliminate some of the guesswork, according to Jones. "The software doesnt show how an individual performs in the course of a days work," she said, "but it can gather and help analyze a persons skills, interests and what theyve learned from prior positions and from working with past managers."

For example, Workforce Vision can help perform a gap analysis, so managers can find out where their weaknesses are in terms of existing staff versus future needs. The software can help HR executives analyze competencies among staff and will graphically display who the top performers are and help them move up within the agency. According to Peopleclick, the software helps an agency look beyond simple skills checklists and to identify talent based on performance and competency profiles, as well as to align succession plans with employee career paths, so that the two dont diverge when growing numbers of older workers begin to retire.

But succession-planning software isnt cheap. It can cost anywhere from $50,000 to $200,000, depending on the size of the agency and the scope of the planning project. According to Peopleclick, the IRS is the only government agency to use its succession planning software. But given all the potential problems states face as their workforce ages, any resource that may help down the road is worth the investment, because even the best thought out plans arent going to make the problem go away any time soon.

"Solving many of these issues takes time," Iowas Anderson pointed out. "You cant create a skilled IT worker or increase the supply of workers over night. Its going to take years to fix this."
Tod Newcombe Features Editor