International

Companies face the challenge of balancing age groups in the workforce

September 1998 Vol. 219 No. 9
International

Kurt S. Abraham,
International Editor

Need for U.S. majors to balance workforces is apparent

The July issue of Chevron's in-house publication, Chevron Now, has several articles devoted to challenges related to that firm's workforce. They reveal some provocative statistics about the company's future.

One conclusion derived from demographic data is that Chevron faces an "inflection point," whereby, the company will have to address a major transition from one generation of workers to the next. The situation may become critical within five years. Already, in very competitive growth areas, such as the deepwater Gulf of Mexico, the firm concedes that it already has a shortage of engineers and support personnel.

As a company bent on growth, Chevron's staffing may become its biggest challenge. This will require recruiting fresh talent out of universities, as well as encouraging current employees to remain with the firm longer. Consider some simple numbers. Chevron has (as of mid-1998) 25,567 U.S. dollar-paid employees. More than 15,000 of these, or nearly 60%, are so-called "baby boomers," people born between 1946 and 1960. Another 3,000, or about 12%, are older still. This means that 72% of the company's employees already are 38 years old, or older.

Your intrepid editor began wondering whether other U.S. majors have the same problem, so another eight firms were contacted for data. Of these only Amoco (rather ironic given the sudden merger with BP) and Mobil could provide numbers in time for our deadline. Various reasons given by six other firms for why they could not get the data to us are stories in themselves. One major said that the data were "too sensitive to release." Another said that "only one person in human resources is able to put together such numbers, and she's on vacation — we run a really lean ship here." A third outfit remarked that "we've never been asked for such data before. We have no idea where to find it."

Anyway, Chevron and Amoco data reflect corporate-wide employees, while the Mobil numbers are only for E&P operations. You can see the skewing of Chevron's workforce toward the front half of the baby boom in the graph on this page, which reflects percentage shares among age brackets of each company's employee population. Amoco's pre-BP-merger age distribution is remarkably close to Chevron's, nearly identical. The Mobil E&P curve is even more skewed toward the first half of the baby boom, with huge drop-offs in older and younger employees.

The numbers reflect how majors, between 1986 and 1995, early-retired and laid off tens of thousands of workers above 55 and under 30. Yet, what may have been short-term expediency (re: profits) was not good for long-term staffing. As noted in Chevron Now, average workforce age went up. "The pyramid (age curve) has retained the same shape but with a real concentration in the middle. It may look good, but it might not be healthy over the long run."

In a perfect world, a company's employee age curve should be flatter, with greater weight at both ends of the spectrum. Now, the challenge is how to retain older employees, and hire and retain younger workers. This will not be easy. As Chevron points out, many baby boomers will be able to retire earlier than ever, thanks to the soaring value of stocks, mutual funds and 401(k) plans that create sizeable paper wealth for instant conversion into cash. Another factor is a trend among workers to retire early and then start "second careers" that emphasize "passionate" interests and more relaxed schedules while still attaining additional modest earnings. Finally, many older workers are simply tired of endless cycles of cost-cutting, downsizing and doing extra work inherited from positions eliminated.

Meanwhile, in today's tight job market, young Generation X workers expect lucrative starting salaries, significant responsibilities and various other perks, such as casual dress codes and performance bonuses. These folks are not known for their patience or loyalty to companies. Chevron believes that one reason "20-somethings" put such emphasis on immediate cash compensation is that they don't expect to hang around long enough to be vested in the retirement packages that their parents had. They do not intend to be loyal to companies that they feel will downsize them sooner or later, so they focus on pulling as much compensation out of firms on the front end as they can.

Chevron found that young workers expect to switch jobs or careers about every four years. The company's experience shows that a third of new hires in their late 20s and early 30s typically leave within five years. This is not unique. Spokesmen at Amoco and Mobil confirmed that their trends among young workers, as well as baby boomers, are similar to Chevron's. Two other majors who could not provide data did confirm that they have "serious reservations" about their ability to attract and retain Generation X employees, given the industry's boom-and-bust cycles.

Clearly, the major companies face a growing challenge in how to balance their workforces. How they choose to address and solve the problem will be interesting to watch. We should get an early glimpse of this when BP and Amoco begin shedding 6,000 of 100,000 combined jobs.