Overview | Reduced costs - increased profit | New markets | Employers of choice | Becoming more attractive to investors | Greater efficiency

Greater efficiency

An efficient business can be defined as one that makes optimum use of its resources - human, material and financial - to drive growth and profitability.

Age diversity contributes towards this process by helping businesses to place employees in jobs that best suit their experience and talents, providing them with the opportunity to realise their full potential.

It also removes prejudice from employment issues such as recruitment, promotion and redundancy, ensuring they are based on objective criteria that meet business needs.

The principal efficiency benefits of age diversity are:

• Recruiting from a wider labour pool
• Avoiding promotion bottlenecks and skills vacuums
• Greater workforce stability
• Greater workforce loyalty
• Managing change more effectively

Back to top

Recruiting from a wider labour pool

Smart companies strive to eliminate factors that constrain business development. For instance, they will source materials or services from another region, or even country, if doing so is more cost-effective than buying locally.

An example of this is seen in the print and publishing industry, where many UK publishers source print from as far afield as Singapore, because of the cost savings that are available.

Smart companies seek to eliminate age prejudice for similar reasons. By removing an artificial barrier to fair and effective employment practices they gain access to a wider labour pool with a broader base of skills and experience.

Why restrict your choice of employees in a time of skills shortages?

If employers continue to target only younger age groups, simple laws of supply and demand dictate that access to skills will become increasingly restricted. Skills shortages, wage inflation and the problems of a shrinking labour market will thereby be magnified.

Skilled workers are already becoming increasingly difficult to recruit. Research from recruitment firm Reed Executive shows that more than half of UK companies are experiencing skills shortages.*
See the Royal Bank of Scotland case study

Back to top

Avoid promotion bottlenecks and skills vacuums

A company that fails to embrace age diversity often falls victim to promotion bottlenecks and skills vacuums. The former can damage morale while the latter can limit ability to develop the business; both can hamper competitiveness and affect the bottom line.

A promotion bottleneck occurs when a business recruits people with similar experience and ambition from a narrow age band. When a promotion opportunity arises, only one of these similarly qualified candidates can be successful, leading to resentment and frustration for the other applicants, who have a similar claim to the post. This leaves the business vulnerable to the loss of experienced and valued employees, who may resign out of frustration at the lack of career opportunity.
See the HM Land Registry and GlaxoSmithKline case studies.

	During the next decade, companies in some sectors are likely to have to replace 65 per cent or more of their current workforce due to retirements and turnover. (Towers Perrin, 2000)

Skills vacuums are caused by a number of skilled and experienced employees leaving a business within a short period. This can be a product of recruiting from a narrow age band, which results in groups of employees simultaneously reaching career milestones such as maternity leave or retirement. Fixed points of temporary or permanent exit from the labour force, while entirely predictable, can mean an employer experiences a sudden loss of staff in key areas - often at the peak of their performance.
Skills vacuums can also result from promotion bottlenecks, as noted above.

When significant numbers of staff leave as a result of bottlenecks or vacuums, replacement can be difficult and leave a business vulnerable.

Age diversity enables an employer to balance its workforce more effectively. By ensuring employees represent mixed ages at different levels within a business, at different life stages, an employer can minimise the risk of bottlenecks and vacuums.

Back to top

Greater stability

	33 per cent of organisations feel that staff turnover rates have risen over the last three years. (Reed Personnel Services, 2000) 68 per cent of employers believe that enthusiasm among the workforce is the single most important factor for increasing productivity. (Toshiba, 2000)

Age diversity can reduce employee turnover by contributing to a more stable working environment, in which motivated individuals feel they have a long-term future.

In fact, employee motivation and business productivity are clearly linked.**
See the Barclays case study

'Changing labour markets, including the increasing significance of human capital, higher employee expectations and difficulty in managing and retaining employees, raise the significance of commitment among staff.' ***

A more stable workforce will be easier to motivate as individuals stay in post long enough to absorb the corporate culture, and benefit from training and rewards.

Back to top

Greater loyalty

'Soft' factors such as equality of opportunity in the workplace are increasingly recognised as being key to employee loyalty, alongside more tangible financial rewards. Conversely, discrimination de-motivates and therefore has a negative financial impact on business, as disillusioned employees fail to perform, or move to a new employer.

By removing age barriers, an employer sends a clear message that all employees are valued. Over time, this will build up levels of trust and motivation as employees worry less about their future. This will have a positive impact on absenteeism and turnover.

Reduced staff turnover will increase stability. An age-diverse workforce with equality of opportunity is therefore more likely to be skilled, motivated, loyal and highly productive.

Back to top

Managing change

Modern businesses are learning to live with rapid and frequent change in markets, trading conditions and business objectives. Globalisation and the growth in multi-national operations also entail a constant process of restructuring, through mergers and acquisitions (as well as through de-mergers) that looks set to continue over the coming years.

It follows that businesses that operate in this environment need flexible, creative employees who can manage change and turn it to business advantage. Inevitably, the need for effective management in a period of change will be seen as a measure of success by investors.

Age diversity can help a business develop the flexible, motivated workforce it needs to manage change effectively, by building a balance or experience, energy and potential from across the age spectrum. Age diversity tends to bring together new ideas, greater perspective and extensive market knowledge, thereby enabling a business to cope with change more effectively.

Back to top