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Balance Sheets Best Practice

Managing Retirement Costs

by Beverly Goldberg

Case Study

A Midwestern US Nursing School

One of the major causes of the general nursing shortage in the United States is the shortage of nursing faculty to train those who wish to enter the field. This shortage is the result of both the retirement of older tenured faculty and the lack of interest of nurses with advanced degrees in teaching rather than nursing, primarily because nurses with specialized skills earn more than nursing faculty.

In the case of this Midwestern state university-based nursing school, the problem was particularly severe because of the aging of the state’s population: like many other states in the northern Midwest, the population in general is older, with a consequent increase in the demand for nurses. The university’s board of regents asked the nursing school to increase the number of nurses they graduated each year and made available some funding for the effort.

After careful examination of the issue, a program was developed that included the following actions:

  • Recruiting recently retired faculty to teach as adjuncts at a salary higher than that usually paid to part-time university faculty.

  • Working with hospital administrators in the region to find out which current older nurses were planning to retire in the next two to five years because the work had become too physically demanding. These nurses were offered scholarships for advanced degrees in exchange for promises to join the faculty for a given number of years.

  • Meeting with principals of high schools in the region to see whether they knew of older teachers, especially science teachers, who were planning to retire because of burnout or boredom. Such teachers were offered scholarships for degrees that would enable them to pursue a new career teaching nursing students (a more dedicated and mature student body), again in return for a promise to teach at the university’s nursing school.

  • Running advertisements in other regions promoting the advantages to nursing teachers of relocating to the region and offering them relocation expenses and recruitment bonuses.

Each of these approaches had some degree of success. Only a small number of new faculty were recruited as the result of seeking adjuncts and placing advertisements in other regions. However, the number of soon-to-retire nurses and teachers who applied for and were granted scholarships gives promise that the needed expansion of the faculty will occur over the next five years. The time frame is longer than expected because those who accepted are, for the most part, attending school only part time. The reason for this is that the scholarships only provide tuition and do not cover such things as living expenses.

Conclusion

Senior managers cannot bury their heads in the sand when it comes to the issue of the approaching retirement of baby boomers, which will begin in earnest in 2010. Analyzing the possibility of shortfalls of needed skills now will give businesses time to put in place programs to prevent the loss of employees with those skills and to develop plans that will ensure that new employees with those skills will be available when needed.

Making It Happen

Because senior management often dismisses the issue of the aging of the workforce, the CFO, along with the heads of human resources and personnel, must formally evaluate the likelihood that major problems will develop and estimate the costs of programs aimed at addressing such problems. Only by presenting hard evidence will they be able to convince senior management to take action aimed at eliminating these threats to the long-term success of the business. Such evidence should include:

  • a general demographic profile of employees, as well as profiles of various divisions, functional areas, and teams;

  • a catalog of specialized skills and educational levels of current employees in various divisions, functional areas, and teams;

  • the retirement plans of current employees, matched to their areas and skills;

  • when these analyses indicate a future skills shortfall, a further analysis should be carried out to determine:

    • recruitment costs when it comes to difficult-to-replace skills;

    • the general availability of people with those skills;

    • the costs of training people in those skills;

    • the costs of various programs aimed at retaining retirees with those skills for a period of time.

Notes

1 Hay Group. “Study says utility industry faces severe manpower shortage as majority of its workforce plans retirement”: www.jobbankusa.com/news/business_human_resources/utility_industry_faces_severe_ manpower_shortage.html.

2 Submission by National Electrotechnical Training (NET): www.scottish.parliament.uk/business/committees/historic/x-enterprise/inquiries-01/lli-submissions/ell-010.pdf.

3 Luftman, Jerry with Rajkumar Kempaiah. “Tips for recruiting and retaining IT talent.” Information Week: www.informationweek.com/news/management/trends/showArticle.jhtml?articleID=201807942.

4 Grossman, Robert. “Keep pace with older workers.” HR Magazine: www.shrm.org/Publications/hrmagazine/PastIssues/2008/Pages/20085.aspx.

5 Towers Perrin, 2007.

6 Goldberg, 2000.

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Further reading

Books:

  • DeLong, David W. Lost Knowledge: Confronting the Threat of an Aging Workforce. New York: Oxford University Press, 2004.
  • Dychtwald, Ken, Tamara J. Erikson, and Robert Morison. Workforce Crisis: How to Beat the Coming Shortage of Skills and Talent. Boston, MA: Harvard Business School Press, 2006.
  • Goldberg, Beverly. Age Works: What Corporate America Must Do to Survive the Graying of the Workforce. New York: The Free Press, 2000.

Report:

  • Towers Perrin. Perspectives of employers, workers and policymakers in the G7 countries on the new demographic realities. September 2007.

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