Using Phased Retirement Programs to Avoid the Retirement Tsunami

Agencies across government are coming to grips with a stark reality – the federal workforce is relatively old. The median age of federal employees is 48. Further, workers in government have nearly double the tenure of their private sector counterparts (7.8 versus 4.2 years). These statistics conspire to create an imminent danger in the form of retirements. With wages frozen for the third year running, those that are at or near retirement eligibility, now nearly 30% of all federal employees, are increasingly saying “adios”. This development threatens continuity of operations for many agencies, as experienced employees with irreplaceable knowledge depart and create an institutional risk in their wake.

For years, private sector organizations have engaged in creative practices to mitigate this risk. Phased retirement programs, in particular, have helped organizations successfully bridge the experience gap that inevitably exists between departing employees and their successors. Unfortunately, just 11% of federal employees say their agency has a phased retirement option and another 50% indicated that they aren’t aware of one (Government Business Council).

Clearly, the option of phased retirement is a relatively new idea in government. In fact, it was first formally introduced on July 6, 2012 in the “Moving Ahead for Progress in the 21^st Century Act”. While the act and complementary guidelines published by OPM focus on the mechanics of the program from the compensation and pension perspectives, much ambiguity remains regarding just how to implement phased retirement within a team. Who is eligible? What does it look like (i.e. how does the retiree interact with his or her successor)? What responsibilities does the retiree have?

CEB has done extensive profiling of the approaches deployed at best practice organizations. Invariably, these organizations engage in 4 steps:

1. Conduct a formal demographic analysis to understand retirement eligibility projections by department and employee level. Compare this with internal churn and turnover data and hiring goals and achievements. Evaluate the historical and estimated “take-rates” (percentage of employees taking retirement as soon as eligible) and apply to future retire eligible populations.
2. Determine employee eligibility by using formal criteria and/or approval processes. Progressive organizations outline the formal decision criteria to increase transparency, they utilize an HR-led approval committee to ensure consistent application of the criteria and they expedite and document the administrative process by creating a form-based application process.
3. Use mentoring and toolkits to integrate knowledge management into phased retirement. Organizations use mentoring to explicitly train employees that are replacing retirees. However, the process should also produce greater sustainability, so as not to repeat the same lack of “institutional memory” when faced with future departures. For this reason, managers should be required to capture corporate knowledge in the form of simple toolkits that another employee could pick up and learn from.
4. Measure program effectiveness through focus groups, exit interviews, or metrics. At its best, phased retirements can enhance knowledge management and provide more time for succession planning. But these outcomes shouldn’t be assumed. Regular monitoring through qualitative and quantitative means will ensure that the agency gets the most from its investment.

By Adam Cole, Senior Director – CEB (http://gov.exbdblogs.com/)