Goodbye baby boomers: But who will come after?

The global Covid 19 pandemic and the resulting rapid surge in digitization are influencing our working world to an unimagined extent. In order to remain successful in the market, companies must both rethink their business models and establish alternative forms of work. This has direct consequences for personnel recruitment and talent management. Problems that have been hidden by economic success in recent years are now mercilessly coming to light: Succession management of executives is being criminally neglected, according to a long-term study by Transformation Management AG from St. Gallen. And this despite the fact that many millions of well-trained baby boomers are about to retire.

Four levels of maturity

Even in the first stage of the study, in which around 300 companies from the entire DACH region have participated since 2009, there were only halfway usable testimonials for very few companies. However, among the 60 companies that were surveyed again in a follow-up study, hardly any changes can be detected. Numerous names from the top tier were also examined, such as Voestalpine, Deutsche Börse, Migros, EnBW and Bosch. All the companies surveyed again together employ 1.4 million people and achieve a total turnover of 373 billion euros. But for ten years, their average rating in talent management has remained at the second lowest level of maturity.
Four levels of maturity would be possible on the benchmark developed by Transformation Management AG to measure successful talent management. Starting with ad hoc staffing of positions up to future-oriented, strategic action. However, the best maturity level is still not achieved by any single company. Few at least maintain their position in the top group. Dr. Petra Reindl, who is globally responsible for human resources development at Munich Re, is among the top 25 percent with her company. The study enabled her to derive concrete steps for talent management in order to "make internal high potentials visible and bind them to the company with individual, attractive development measures."

If the baby boomers are missing, there is a risk of a rude awakening

However, according to study director Prof. Gerhard Graf, systematic identification and development of high potentials is very rarely seen as an urgent task in companies, even if HR departments rate corresponding packages of measures as very important: "The topic has been on the same spot for ten years!" In 80 percent of the organizations surveyed, no business management indicators are used, nor is the return on investment measured. Employers today have a much greater obligation to be attractive to future employees. However, there is a lack of initiatives to meet the increasing demands of the successor generation.
Instead of systematically working on young talent that is closely aligned with the strategic goals of the organization, those in charge usually see the necessary processes as nothing more than tedious compulsory exercises. "In three to five years at the latest, companies without initiatives in strategic talent and succession management will experience a rude awakening," Graf fears. He sees an urgent need for action in talent management, completely independent of the size of a company or the industry it comes from.

Systematic talent search is needed

The comparison of three values alone, in each case for the bottom and top quarters of all the companies surveyed, makes the relevance of systematic talent search and cultivation visible:

1. Companies with professional talent management show a 15 percent higher employer attractiveness (KUNUNU values, 2021).
2. They are also more successful as entrepreneurs. Sales per employee are 40 percent higher at the top quartile companies than at the bottom quartile companies.
3. At the top, only 25 percent of the positions to be filled are bought in from outside. In the bottom quarter, it is almost exactly the opposite, with a rate of 61 percent. It can be assumed that filling a position internally is financially much more favorable, less risky and more suitable, and is certainly associated with a higher level of loyalty to the company.

Filling the gaps of the baby boomers

In terms of the gender ratio in the pool of future managers, there has been only one woman for every three men for ten years, unchanged.
In recent years, companies have placed too much emphasis primarily on employer branding and invested a lot of money there, Graf explains. That attracts capable and interesting people. However, the promises of training and development opportunities are rarely followed by systematic and enforceable initiatives. Hardly properly trained, these hopeful talents leave the company again after only two to three years. Or as Dr. Reindl from Munich Re puts it: "Employer branding only works if talent and succession management purposefully takes into account the investment in personal development. Simple 'window dressing' does not produce sustainable effects." And that weighs heavily because now the retiring strong cohorts of baby boomers are leaving gaps that are difficult to fill. For now, to be sure, there is a truce in the "war for talent." But it's deceptive. After the Covid-19 crisis, the battle will flare up again with unimagined ferocity. And then the well-prepared organizations will prevail in the market.

Software alone does not provide a solution

Many companies are trying to cope with the talent problem that is rolling towards them by using HR software. For Graf, this is the wrong approach: "The need for action cannot be replaced by purchasing software. Without individual integration into the company strategy, an IT deployment with homogeneous software solutions that tend to be inflexible will only lead to a technical cementing of previous management mistakes."
Energie Steiermark AG shows how succession management is done systematically. "By 2030, around 30 percent of our 1,800 employees will retire. This is not the only reason why the topic of 'strategic talent management' is a focal point of our personnel development," emphasize board members Christian Purrer and Martin Graf: "We were able to derive valuable measures from an initial status survey of the Talent Management Index: From new internal personnel development programs, the focused promotion of women's careers and the establishment of our e-campus to the redesign of our employer branding. Talent management is firmly anchored in our corporate strategy."

Source and further information: Transformation Management AG