Paper presented at Annual Roundtable Shanghai Academy of Social Sciences: China & EU cooperation: Energy, Security and Economic trends from the Mediterranean basin across Eurasia, Shanghai, China, 23-24 November 2012
Prof. Maria Cristina Bombelli
Wise Growth, Sesto San Giovanni, Italy
Department of Human Sciences, University of Milan-Bicocca, Milan, Italy
Dr. Alessandra Lazazzara
Department of Human Sciences, University of Milan-Bicocca, Milan, Italy
Dr. Barbara Quacquarelli
Department of Human Sciences, University of Milan-Bicocca, Milan, Italy
KEY WORDS: ageing workforce, Italy, age management, best practices, age stereotypes
Introduction
Ageing trends that are going on in the society affect not only the Italian population but also the workforce composition and require companies to face the challenge of managing an extended working life and an older workforce. The matter became particularly urgent since when the retirement age has been increased and companies have started to realize that it’s not possible to postpone the attention on this issue anymore, and they are required to undertake adequate actions as soon as possible in order to stay competitive longer and keep their workforce motivate.
Are employers and especially human resource professionals aware of the implications of the phenomenon and ready to manage it? The level of attention and the involvement in all the European countries is very high and in the last decade a number of studies, benchmarks, initiatives and conferences have been organized and conducted by the European Commission and especially by Eurofound, the European Foundation for the Improvement of Living and Working Conditions (Naegele and Walker, 2006; Taylor, 2006; Warwick Report, 2006). Moreover, the European Commission has launched for the 2012 the program “European Year for Active Ageing and Solidarity between Generations 2012”, aimed at raising awareness about the population ageing and to strengthen policies and initiatives across Europe and promote opportunities for economic growth and job creation through hundreds of activities, projects and events that are taking place in member states.
Italy too has been involved in comparative studies for defining the scenario and the magnitude of these trends especially by means of case studies and best practices undertaken by companies in order to manage properly older workers collection, as for example the Warwick Report (2006) and the more recent Panorama study “Managing extended working life” (Lucy, Broughton, Lazazzara, Stettes, Le Boulaire and Tran, 2012). What emerges is that Italy, as well as almost all the European countries, are in the initial stage of implementation of human resource management strategies focused on the ageing workforce, but it’s noteworthy that this represents the beginning of an irreversible change process that need to be undertaken, and is important to analyze in detail what companies have already started to do and what remains to be done not only for managing properly older workers but also to implement what can be defined as an holistic and preventive approach, which means to establish the basis for assuring an easier management of future generations of older workers.
Through presenting the demographic context, the recent changes in the retirement system and the future challenges and consequences in term of national welfare, the aim of this paper is to present and analyze best practices that have been applied for managing an ageing workforce undertaken by four large Italian companies operating in the energy, telecommunication, manufacturing and bank.
The demographic scenario and the older workers’ participation rate
Trends as the increasing of the average rate and of the related rate of people aged over 65 as well as the steadily low birth rate have been going on for many years. Anyway, due to the short term orientation of companies and management practices, more focused on the changing economic external environment that on long-term strategies, it has been necessary the new direction imposed by governmental actions to keep the employers aware of the need to manage in a more proactive way older workers.
In Italy, the rate of population aged over 65 has more than doubled in size since 1950 representing now the 20.3 per cent and is expected will reach 33 per cent of the total Italian population, by 2050 (UN, 2009). On the opposite, the number of young people aged below 15 years is shrinking and represents 14 per cent of the population. Therefore, the so called ageing index, the number of persons 65 years old and over per one hundred persons under age 15, is 144.5 while the old-age dependency ratio, the number of persons 65 years and over per one hundred persons aged 15 to 64 years, is 30.9 (Istat, 2011).This is dramatically changing the age pyramid’s shape that is shifting toward an inverted pyramid-shaped age structure.
Behind the phenomenon are the increase in the average life and the low birth rate, as well as the ageing of the large number of "baby boomers" - those born between 1945 and early Sixties – which represents a large part of the Italian population. Italy in fact, is among the higher positions in the European ranking of ageing index and in the lowest positions in those of total fertility (Istat, 2011). The high average age of the population, that is 43.5 years, proves also the increase in life expectancy both for males and females, which has reached respectively 79.2 years for men and 84.4 years for women. With regard to the fertility rate instead, the average number of children born to each woman in fact is 1.41, whereas 2.1 children per woman would be the fertility rate necessary to ensuring generational replacement.
In order to promote the inclusion of older people in the society and in the labour market, the strategic target set by the Lisbon and Stockholm European Councils was to raise the average EU employment rate for older people (aged 55-64) to 50 per cent by 2010. Nevertheless, despite the high participation rate reached by older workers in some Northern countries as Sweden, Denmark and Finland, and other countries as Germany, United Kingdom and Netherlands, the EU-27 average (47,8%) has not reached yet the strategic target while other countries, mainly in the Southern area, have lower participation rate of older workers (Eurostat, LFS). In the latter countries in fact, governments and companies are just beginning now to adopt actions in favor of older workers, like for example changes in the retirement systems and the implementation of projects aimed at improving the employability and quality of life of older workers, and even Italy falls in this cluster.
Anyway, it's noteworthy to point out that the participation rate of older workers in Italy is gradually increasing since 1990, with a sharp rise especially in the last five years, and it’s expected to rise in next years due to the effects of the retirement system reform.
The reform of the retirement system in Italy and the risks related to a non adequate management of older workers
The recent reform in the pension system, also known as the “Monti-Fornero reform” (12/2011), is one of the measure introduce by the Italian government in order to ensure the sustainability of the welfare system by obtaining short and medium run savings through increasing the average retirement age. In order to extend the working life in fact, the eligibility for old-age pension has been raised from 60 to 62 years for women and from 65 to 66 for men, with financial incentives to try to keep them working until 70. Moreover, the retirement age for women will be gradually increase up to 66 years starting from 2018 and, from 2021 onward, it will rise to 67 for both women and men. The minimum number of contribution years for the seniority pension (calculated as a mix of age and the number of years of paid contributions) instead, has increased from 40 to 42 years for men and from 40 to 41 years for women.
The reform abolishes de facto early retirement, a practice that has been usually considered the short-term response to the need for corporate downsizing, especially in the 1980s and 1990s, but that is not more compatible with an ageing society. Even when older workers have excellent performance records in fact, they are often made redundant because considered too expensive, with the expectation of long-term cost savings for the employers and economic benefits also for the employees (Segalla et al., 2001).
However, the expectations of future savings and the sustainability of the public pension system are not the only reasons behind the shift toward a longer working life and a better management of older workers. Other important drivers in fact, are the expected shortage in the availability of labour force and awareness about the loss of knowledge and know how that companies have experienced when older workers leave earlier the organizations without having previously managed the share of critical know-how.
The described decline in the birth rate as well as the high numbers of Baby boomers near retirement age will reduce the number of potentially active workers and could provoke a labour shortages over the coming decades (McDonald and Kippen, 2001; Börsch-Supan, 2002; OECD, 2004; Istat, 2008). According to McDonald and Kippen (2001), by analyzing the migration and fertility trends and the labour force participation, Italy stands to lose about 40% of its labour force (from 23.2 million in 1995 to 14 million in 2050). One of the main consequence of ageing in fact, is the decline in the number of people who work and generate an income in comparison to those who do not work and depend on incomes generated by others resulting in potential issues in terms of economic growth and development (UN, 2007). Therefore, an increase in the number of active workers is required in order to support an older population. This can be accomplished by raising the employment rate of the over 55 age group, that are the only group of workers set to increase, and by enforcing pre-emptive measures that enforce the motivation of older workers to stay at worker longer and human resource management practices designed to fit their own specific characteristics. Moreover, in order to avoid a skill gap it is important that workers keep their skills up to date during the course of their working lives and continue to enjoy access to training programs after the age of 45. The changes in the demographic composition of the workforce and in the way of organizing the work itself, in addition to the demand for knowledge and skills increasingly more complex, the rapid obsolescence of know-how and the emergence of new technologies, involve systematically older workers and require large intervention in term of training and employability (Lazazzara and Bombelli, 2011).
Best practices for age management and age-related stereotypes
In order to increase both the participation rate and the quality of work of older people, a number of companies have already started to adopt new human resource management approaches aimed at managing properly an ageing workforce and avoiding workforce and skills shortages. With this regard, according to Taylor (2006) “good practices […] can be defined as establishing employment conditions for older and ageing workers that provide an environment in which each individual can achieve their full potential without being disadvantaged by their age”. The six key good practices identified by EurolinkAge (2000) for managing an ageing workforce fall into the following categories of HR management practices: job recruitment; learning, training and development; career and internal job changes; flexible working practices and modernization of work; employment exit and transition towards retirement; workplace design and health promotion.
The hardest obstacle to the implementation of these good practices is that HR management policies are often based on age-related stereotypes and are "youth-centric" (Jackson, Schuler and Rivero, 1989) because associates positive values and images to youthfulness. In this way, biased logics can cause erroneous managerial decisions. There is in fact a disposition known as “ageism” (Butler 1969) at using a set of discriminatory attitudes and behaviors based on age for which older people are attributed a number of negative characteristics and stereotypes.
Taking into account the recruitment of older workers, according to Lahey (2008) a younger worker is over 40 percent more likely to be offered a job interview than is an older worker. Companies in fact, are more inclined to hire older workers only if they are facing a structural labour force shortage (Karpinska et al., 2011), and often interviewing and hiring practices are not based on skills, competence and experiences of the applicants but more on the individual assessment of the HR professional responsible for interviewing them, that should receive adequate training with a specific focus on non-discrimination on the basis of age (Warwick Report, 2006; Naegele and Walker, 2006).
Although training and development practices are strategic assets also for their ability to provide a supportive framework even for the other good practices, there are explicit or implicit age limits affecting the access to learning and training opportunities (Lazazzara and Bombelli, 2011). Moreover, a number of negative stereotypes affect the decision of HR professionals to involve older workers in training activities. Lazazzara et al. (in press) sketch the profile of older workers who are likely to receive training, the preconditions are that: they perform well in their job, are highly skilled, have a low absenteeism rate and are preferably under 50 years old. Furthermore, they are advantaged with regard to taking part in training activities if the company faces a labour force shortage, training is aimed at external mobility and the training decision is taken by an older, with no managerial responsibilities, HR professional.
Given that training also provides older workers with the opportunity to progress in their career or change their job, as they are excluded from training activities there is also evidence that the time-frame for career development has decreased and the cut-off of eligibility for promotions, especially for emerging sectors, is 45 years, the beginning of what is considered to be the final stage of a career (Schein, 1978; Maurer, 2001; Bombelli and Finzi, 2006; Van Vianen et al., 2009). However, companies are starting to realize that career development is not necessarily hierarchical, but can also be seen as a broadening of the skills and knowledge base of older workers, and sometimes older workers are deployed as mentors and trainers for their younger colleagues or in general for other employees (Lazazzara and Bombelli, 2011).
Even when non directly implemented in a context of age management, flexibility allows an high degree of individual control on work hours and meet the needs of work-life balance of employees. Moreover, flexibility concerns also retirement plans, so the reduction in the hours worked per week, flexible working arrangements, partial retirement, specific paid leaves or particular models of job rotation are a way for handle new needs that a worker may experience at the end of the working life and can attract, retain and motivate older workers (Naegele and Walker, 2006).
Lastly, the promotion of health and well-being in the workplace and the redesign of workplaces for an ageing workforce will prevent physical decline and stress and will enhance the productivity of older workers as well as their retention.
An analysis grid of four Italian best practices
The four best practices oriented to the right management of an ageing workforce in Italy presented and analyzed in this section have been collected by the authors in Lazazzara and Bombelli (2011) and the report “Managing extended working life” (Lucy, Broughton, Lazazzara, Stettes, Le Boulaire and Tran, 2012). The aim is to create a conceptual framework for analyzing age oriented actions undertaken by Italian companies in order both to identify what are the main areas of action toward which Italian companies are more oriented and what can be considered the features of the Italian approach to age management.
The sample involves four large Italian companies operating in the telecommunication, energy, bank and manufacturing sectors. The analysis grid is based on two dimensions: the level of age focus of the initiatives, that is high if the practices are specifically age related and involve age specific aspects and low if initiatives and practices are general and oriented to all the company’s population; the other dimension instead, takes into account the level of necessary adaptation, namely if the implementation of these practices require a low or high level of change in term of contents of the task, work organization, career tracks, training styles and any other work related aspects.
Telecom Italia is a private company leader in the telecommunications sector with more than 84.300 employees worldwide. The company has undertaken several actions directly designed to increase the motivation and productivity of older workers through an awareness campaign aimed at raising knowledge and involvement on age diversity issues, by enlarging their roles giving them teaching tasks and also sharing critical know-how inside and outside the company.
The company has an high focus in fact on activities that we can define as typical of the age management approach, aimed at increasing the awareness on age diversity through dedicated focus groups, a permanent working group called “Age Diversity” and making use of external networks with companies interested in the management of older workers (and even encouraging the use of and training in new technologies for persons over age 60 outside the company). The company promotes also lifelong learning for all employees thanks to an internal training academy and giving to its employees the chance to attend one of the university courses implemented by the International Telematic University Uninettuno. In this way the company not only invests in internal welfare, but also improves the employability of its employees and keeps their skills updated. In term of career mobility instead, Telecom Italia implements some initiatives aimed at sharing knowledge even outside the company with the “School-Company Network” in which professional experts, known as “Maestri di Mestiere”, are involved in teaching activities for several technical secondary schools in order to transfer technical and entrepreneurial know-how to younger people.
In this way, Telecom Italia minimizes the risks of an early exit from the labour market of its older workers and at the same time improves the knowledge base of the company and enhances the value of older workers (Lucy et al., 2012).
Eni is an Italian integrated energy company that, in order to react to demographic changes and the rise of new competency requirements affecting the European gas sector, has introduced a policy of knowledge management, recognition and professional development aimed specifically at non-managerial staff members who possess valuable know-how acquired over time and that were over 40. The company developed and launched in fact the “Knowledge Owner” project, in which employees with excellent skills, recognised professional authority, know-how requiring long-term development and not easily replaced on either internal or external labour markets, over 40 years and with highly-skilled, non-managerial profiles were identified as strategic targets within the working population and were formally given the professional title of “Knowledge Owner” in 2008. By means of training programmes and specific initiatives to prepare the nominated senior workers to become teachers, trainers and coaches, in turn, the “knowledge owners” conducted general or business/profession specific workshops targeted at other employees, and were assigned the roles of mentor or facilitator.
By assigning teaching and training roles to older workers not only companies can retain intellectual capital but, at the same time, promotes the sharing of knowledge and expertise. A key element in this case is also the adaptation of age-appropriate career tracks (Calo 2008) which do not only involve vertical paths (Lazazzara and Bombelli, 2011).
Intesa Sanpaolo is the leading banking group in Italy and is also among the top banking groups in the euro zone. The group has over 100.000 employees, about 70.000 of which in Italy and more than 30.000 abroad. All the HR department is involved in the design of a complex and integrated project oriented towards managing senior workers in a systematic way. Through workshops involving junior and senior employees and ethnographic researches the company try to increase age and generational awareness. Moreover, in order to shift from a vertical to an horizontal career model is promoting job enlargement for older workers by means of new tasks like mentoring or coaching activities for younger colleagues or for those of the same age. In the same way is important that the company culture sustains the change of paradigm as well as the adaptation to the new leadership and managerial models. In addition, changing in the working time for older workers and flexible retirement process for older workers are part of this comprehensive approach (Lucy et al., 2012).
Luxottica Group is a manufacturing company that produces and distributes prescription eyewear and sunglasses of high technical quality and style all over the world and has more than 60.000 employees. The company invests constantly in the professional growth of all its employees on the basis of meritocratic criterions and without any discrimination. Training and development opportunities in fact, as well as hiring and promotion practices, are based exclusively on merit, qualifications and skills as settled in the Code of Ethics. Even if this approach is not directly targeted to older workers, it can be defined as a preventive approach, because thanks to a well developed internal welfare system that promotes flexibility, work-life balance and life-long learning for all employees, it assures in this way an easier age management for future generations of older workers and that are particularly important for people over 50 years. Measures directed to increase the flexibility in the working times are supported by an high degree of individual control on work hours and overtime and a wider use of vertical and cyclical part-time arrangements. Moreover, it has also been planned the use of job-sharing measures, especially in the case of an unemployed spouse or family member or children near to achieve an educational qualification. In the latter case the use of a job-sharing agreement involving an employee and his/her offspring offers a way to facilitate the transition towards retirement for the older generation, but also towards entering the labour market for the younger. In addition, the company has designed measures for health protection and promotion through financial support in case of illness and by providing training programs on safety, preventive and ergonomic aspects that are particularly important for older workers (Lucy et al., 2012).
What emerges in general by the analysis of the practices oriented to the management of older workers and an extended working life is that Italian companies are more oriented toward an higher age specific focus and less to the adoption of a preventive approach involving all the employees while, on the other hand, the level of adaptation, mainly in term of late career mobility and flexibility receives an high level of investment.
Nevertheless, it’s almost impossible finding best practices in terms of job recruitment of older workers, which means that they are clearly excluded from this kind of practices except in the case they possess a strategic know how absolutely impossible to find elsewhere. They are also rare interventions of workplace redesign like the one implemented for example by the German company BMW that, in order to anticipate and manage the physical decline of its workforce due to the expected rise in the average age, has undertaken a complete renovation of the facilities taking into account the ergonomic and motivational needs of older workers in one of its plants in Dingolfing, Lower Bavaria (Bauer and Mauermann, 2010).
Conclusion
The analysis of the Italian demographic context, the changes in the retirement system and the challenges in term of welfare, reveal that the ageism will be one of the most important issue in the HR management practices of the future. Anyway, even if the presented best practices represent the beginning of a new trend more oriented to a positive approach to age management, both in the society than in the organizational contexts the awareness about the topic is still quite low.
Given that ageing trends will have an enormous impact in the next years and it will be necessary to design a completely new welfare system, Europe in general, and Italy in particular, have to become aware of what is going on and redesign possible strategies to cope with it.
Even if from their side many companies are engaged in developing an organizational culture oriented to the diversity management, also developing strategies and ideas in order to improve their ability to be truly inclusive, the most important issue in these programs is still the gender gap, given that the women’s employment rate as well as the “glass ceiling” phenomenon still exist in Italy, but the focus is slowly shifting also on age-related aspects.
It is true however that age management programs are very much influenced by the company’s and national cultures, whereby it’s possible to find very different situations at different latitudes across the world. In Western societies in fact, are generally assumed negative stereotypes against mature people while youngness is evaluated more positively. In Eastern societies instead, the respect for the elder is still very important.
In conclusion, the required steps to implement new HRM policies oriented to the enhancement of age diversity are:
- To develop awareness about its own company culture;
- To compare the age profile of the internal workforce with the external one
- To identify the main related risks or problems in the company
- To implement new solutions on the basis of best practices’ benchmark.
The most important driver of this process is not considering age only as a proxy for performance and behaviors, but founding HRM practices only on the actual abilities and competences of the individual.
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