What Five Generations in the Workplace Means to Your Firm

In our last post, we looked at workforce trends related to the virtual office, gig economy, technology, and workforce shortage. 

 

In this post, we’re going to continue looking at workforce trends, focusing on the challenges of multiple generations in the workplace. Once again, this is a critical issue for sales and marketing departments within A/E/C firms, because if you don’t have the right mix of people, you’re limited in which projects you can chase. If you don’t have the staff to deliver a project on time – because your firm can’t recruit or retain staff – the go/no-go decision becomes quite simple. That’s why industry marketing professionals are increasingly collaborating with their firms’ HR departments.
 

Right now there are actually five generations in the workforce! While you weren’t paying attention, Generation Z began graduating from high school. Call them Nexters, call them Edgers, or anything else, this post-Millennial generation is now seeing its oldest members about to graduate from college.

 

Compare that with the Traditionalists, the current “oldest” generation in the workforce. Although they only represent a few percent of total employment, they represent a high level of intellectual capital at our firms – as well as continued ownership.

Baby Boomers are no longer the largest generation in the workforce (Millennials passed them a few years ago) and Gen Xers are still feeling squeezed between the two larger generations – although they are now stepping up to become senior leaders of their firms.

Within this “bucket” of workforce trends, there are four major issues to consider:

These all have the capacity to make, or break, our firms in the next few years.

Policy

Kristi Weierbach, PhD, SPHR, SHRM-SCP, FPC, director of workforce advisory services with Stambaugh Ness, sees a critical issue that companies have been neglecting for far too long: outdated employee policies.

 

“Frequently I talk with companies who have not updated their Employee Handbook in the past year, and in many cases updates haven’t been done for several years. The risk with this is that legislative changes aren’t captured and company practices begin to deviate from what is written in the Employee Handbook. This causes confusion and unnecessary exposure to organizations. Businesses continue to evolve (those who don’t, normally go out of business) and so too should policies and procedures. Traditional ways of doing business are no longer acceptable, as younger generations are looking for more flexibility and a work/life balance.”

By 2020, Millennials and Nexters will represent more than 70% of the workforce. Although this is not news to HR professionals, it seems to have snuck up on far too many A/E/C firm leaders. You’ve probably read ad nauseam about how Millennials want flexibility when it comes to core hours and working remotely. The 8-to-5 workweek just doesn’t appeal to many of them. They have no problem putting in their 40 (or more) weekly hours, but they prefer to do it on their schedules, not the companies’. They want to leave early on Fridays – or not even show up on Fridays! They want to dress casually and have flexible technology options instead of being glued to a desk or specific task. They think email is yesterday’s technology, and see no problem with doing three things at once. “As a Gen X-er, it took me a little while to embrace the flexibility concept; however, I can no longer imagine working in a company that doesn’t offer such arrangements. Now that is a great retention strategy, especially when working in an industry that hasn’t embraced the concept yet.”

According to research by PSMJ Resources, Inc., at least some firms in the A/E/C industry have responded to the changing workforce. Roughly two-thirds of firms have flexible schedules, and just under a quarter offer comp time to salaried employees who don’t have the opportunity to earn overtime wages. 

But with some firms – mostly in other industries – now offering unlimited time off, the concept of flex time is beginning to seem quaint.

 

For much of our workforce, however, it is critical to be on the jobsite or in the office during certain hours. Construction drives our businesses, and we need workers onsite to meet project schedules, as well as workers in the office to answer questions coming from the jobsite.

 

And yet for many office workers, it really doesn’t matter if they are sitting behind their desk at 8am or 5pm. Technology has enabled them to work from anywhere, at any time.

Unfortunately, our policies tend to be based upon the “that’s the way we’ve always done it” mentality, which is no longer acceptable. Whether or not you want policies that allow remote working, flex time, or comp time, the power has shifted to the employees. Many firms cannot find talent right now, and with the problem only getting worse, companies need to revise their employee policies to keep up with competitors in the A/E/C industry – and competitors for talent outside of the industry.

Imagine losing out on the perfect hire – that your firm desperately needs – not because you couldn’t meet their salary demands, but because they wanted to wear jeans to the office and leave at noon on Fridays!

Time off benefits are a huge driver as well. Work-life balance is important to all generations, but with each successive generation it seems to elevate in importance. It might not be the primary factor for why someone decides to accept – or leave – a job, but certainly contributes to the overall thought process.

Companies have increasingly moved to wide-open offices. Private offices are few and far between, cubicles are coming down. But many companies have combined vacation-sick day policies, creating a bucket of “leave” for employees to pull from. So what do they do? They consider all leave to be “vacation” days, and show up at work when they are sick. Only now, with the shrinking-footprint-open-office approach that so many companies utilize, the sick employees liberally share their germs with colleagues.

Maybe it’s time for firms to begin rethinking policies – and updating them for the 21st century employee. As Kristi Weierbach points out, “The common theme in this area is that companies need to place as much emphasis on improving the employee experience as they may or may not place on client experience. Do you want a steak from a more prestigious establishment or from the local buffet?  Polices come and go, but it is the experience and how we make employees feel that will leave lasting impressions.”

Culture

Technology, from the internet to social media and mobile devices, has created an “always on” culture. Gone are the days where everyone had their “work” personality and their “home” personality. We are always reachable, and our personal and business networks often overlap online.

 

Technology has also blurred the lines between corporate culture and brand. In fact, for many people culture equals brand. Large companies may spend millions of dollars to create a specific brand for a company, but the reality is that brand has always been, and will always be, about perceptions.

 

In order to win the talent war, you need a robust, attractive culture, which needs to be visible outside of your office. Thus, culture and brand may become indistinguishable, which isn’t necessarily a bad thing – so long as your brand, and your corresponding culture, are attractive to potential employees and prospective clients alike. Take Apple, for instance. Their brand is tied to innovation. And so is their culture – from the way they develop products, to their facilities (the new “spaceship” campus), to the way they’ve innovated the customer experience from product launch events as well as the in-store experience.

Many savvy A/E/C firms demonstrate culture via social media channels – and yet, each and every social media post also relates directly to brand. Culture is critical for both employee recruitment and employee retention.

But business strategist Peter Drucker said it best: “Culture eats strategy for breakfast.” You may be able to “fake” culture externally, at least for a while, but everyone who works for your firm understands your culture for what it really is.

Unfortunately, Millennials feel that the culture of most businesses (far beyond the A/E/C industry) is one that doesn’t appreciate them. Research by Deloitte found that only 28% believe that their firms are making full use of their skills, while Gallup found that only 29% of Millennials feel engaged in their current jobs.

“In my opinion,” says Kristi Weierbach, “engagement begins to decline when employees lose sight of their purpose and are not regularly using their strengths. Employers have a responsibility to cultivate a culture that promotes personal and professional growth. Career paths will increasingly become more important, and it is important that companies strategically align these paths with the future direction of the firm.”

Engagement of all generations is absolutely critical, because the lack of employee engagement leads to this next negative trend.

Churn

PSMJ Resources found that firms with 350 or more employees are experiencing turnover rates as high as 20%! And firms with 101-200 employees aren’t fairing much better, with turnover at 15.4%. Simple math tells us that a 1,000-person firm, on average, must hire 200 people annually just to maintain their staffing level! Replacement fees (including placement, training, education etc.) are typically in excess of $5,000 per hire. Even if you only hire 20 people, you’re spending more than $100,000.

According to the United States Bureau of Labor Statistics, the average tenure for an employee today – all generations, in all industries – is a mere 4.2 years. Gone are the days of working for a single employer for life.

In fact, Forbes has noted that the average tenure for Millennials is just two years. How can you invest in a young employee if they will be gone in just a few years? The reverse question to ponder is how can you not invest in a young employee? In addition to flexibility and casual environments, Millennials want to be exposed to different aspects of your business and be provided with ample training opportunities. Firms that don’t invest in their young employees will probably be without their services in the near future. And Millennials don’t just leave firms, they leave industries. This is vastly different than prior generations.

“We need to be comfortable with the fact that we are many times a stepping stone in the career path of an employee,” according to Kristi Weierbach. “At some point they may boomerang back to our organizations, or provide us with connections to our next hire. Don’t look at the short-term loss but the future gains of investing in talent among the different generations.”

LinkedIn and CareerBuilder talk about passive job seekers – people who aren’t actively looking for a new job, but would be open to leaving their current firm if the right opportunity arose. Somewhere between 70-75% of employees fall under this category. Think about that: three-quarters of your employees would be open to considering a new job.

And on top of all this is the fact that the A/E/C industry can be a brutal environment for women, from lack of respect and opportunities to gender discrimination and worse. Check out this post to learn the shocking statistics and see how prevalent this issue really is. A/E/C firms talk about the talent war, but as an industry we can be very off-putting to half the potential workforce! 

Feedback from employees is absolutely critical, says Kristi Weierbach: “Do you conduct ‘stay interviews’ or send out employee surveys? By asking for feedback from employees, it allows companies to be alerted to an unspoken issue or to demonstrate that the company values the voice of the employee. Employees want to know that they are appreciated and that they play a part in the higher purpose of the organization.”  

Ownership Transition

Who will own the A/E/C firms of tomorrow? Traditionalists have mostly transitioned ownership, although some continue to hang on. Baby Boomers are retiring in droves – think about the 10,000-per-day stat shared in the last post. Many of these Boomers are firm owners, and they want to sell. But because Gen X is a smaller generation, there aren’t enough buyers. Plus, Gen Xers have felt like they’ve been burned – they’ve seen multiple recessions and underemployment. Many have held off in purchasing shares of companies, or limited their purchases because they are worried about paying for their children’s college tuition or are unsure about their future.

And Millennials aren’t in a position to buy into firms. For one, they often view their current job as transient, and thus they don’t want to get tied down to their job and their company. Beyond that, however, is that they’ve waited later than previous generations to get married and start families. In fact, they’ve stayed at home longer, and then become renters instead of home owners, which is why home ownership is at a 50-year low. They also face very real liabilities in terms of student debt. Many have also been, or still are, underemployed.

So firms that are ready to transition ownership face an interesting dilemma. They are top-heavy with Boomer-generation owners. Rusk O’Brien Gido conducted research and found that for A/E/C firms, the top three shareholders in a firm average 70% of total ownership. And it is often this cohort of owners that are looking to sell the company and retire.

But there’s not enough buyers lined up within their firms. Furthermore, the 25-34 age range continues to grow, as does the 55+ range; however, the 45-54 age range is in decline, and this is the ideal age for people to buy into companies.

In the past, companies relied upon employees to take year-end bonuses and invest the money back into the companies. However, at many firms, bonuses aren’t what they used to be, and at other firms, employees use bonuses to pay off debt or as down payment for a large investment, like a house. Employees aren’t willing to invest in their firms like they used to be.

The icing on the cake here is that even though there’s clearly both a generational problem as well as an industry problem, the Society for Human Resources Management (SHRM) has found that only about one-third of companies even have a succession plan for their firms.

This explains the unabated merger and acquisitions trend that has been so prevalent in our industry – and will continue to be in the coming years. If you can’t sell our company from within, your only options are to be acquired or close your doors.

Is this model sustainable? How can A/E/C firms evolve their policies to be more attractive to potential employees while maintaining current employees? How can firms reduce churn?

“It is critical that companies have the appropriate individuals at the table to discuss the transition of the organization from a financial, legal, valuation, workforce, insurance, risk etc. perspective,” says Kristi Weierbach. “An unsuccessful transition plan will ripple for years to come. Is that the legacy you want to leave behind?”