When Millennials Rule the World

June 1, 2010 (PLANSPONSOR.com) – A new study finds workplaces will be different when Millennials are CEOs.

The survey, titled Millennial Inc., conducted by the marketing firm Mr. Youth and the market research firm Intrepid, indicates the long boardroom table will be replaced with round tables, as Generation Y values collaboration, shared responsibility, and consensus.

The quantitative study completed by nearly 1,000 participants found 82% of Millennials believe it is important to have a staff that can do each other’s jobs. More than half (54%) of Millennials prefer to make decisions by consensus, and that number shoots up to 70% when they are among their peers.

While 401(k)s and stock options are nice, Millennials need to be in an environment that continually keeps them stimulated and engaged or they will keep looking. The study found the number one reason in both the UK … and U.S. … for switching jobs was, “Just needed a change,” - far exceeding the desire for a better salary, benefits, or a more senior position.

The study noted the average 26-year-old has changed jobs seven times from age 18, in search of something more.

… With Millennials, authority is earned and proven through direct interactions, not given blindly based on titles and experience. In creating virtual companies during the study, Millennials designed a model that required each employee, despite title or skill set, to start at the ground level and move her way up through the company.

This approach ensured that every “employee” would have some face-to-face contact with his customer base and experience the brand firsthand. Those who excelled would be promoted quickly and paid more for their ability, rather than being rewarded for a demonstrated facility in corporate politics. Many Millennials believe that high-level executives lack proper understanding of the front lines of their own business.

Millennials believe individuals with big ideas are successful and gain respect through their work, and they expect this to be true everywhere, especially in their career.

In addition, the study found Millennials view technology as a facilitator that allows companies to cater to consumers and create uniquely personal experiences.

More about the study is here.

Rebecca Moore editors@plansponsor.com

Tackling Longevity Risk

Wouldn’t it be nice if we could use 401(k) money to buy annuities with pretax dollars?

Financial Advisor Magazine

By Mary Rowland

When I have questions about changes in the retirement landscape, I go first to Ethan Kra, worldwide partner and chief actuary for retirement at Mercer, the New York-based benefits consultants. Kra has been—for nearly 20 years—an infallible guide to what’s going on in this marketplace. ...

... The biggest danger is longevity risk—the possibility retirees will outlive their money. ...

He has done considerable work on longevity risk, and says the average 65-year-old has no concept of how much risk he has. There’s a one-in-four chance, for instance, that one of the spouses in a 65-year-old couple will celebrate his or her 95th birthday—and there is a one-in-ten chance that one of the spouses will live into the 100th year of life.

“For a 65-year-old couple, the odds are greater that one will see their 100th birthday than that the house will burn down,” Kra says. “How many people don’t carry fire insurance?” And, he asks: “How many don’t carry longevity insurance?”

Not only are the chances for an extremely long life good, but as people pass the age of 85, their ability to manage their finances decreases. “We’re asking people to do something they’re not capable of doing,” Kra says.

His solution? Longevity insurance in the form of an annuity that starts paying at age 85 and pays for life. He suggests that a person at age 60 take 10% of the money from his 401(k) plan or IRA, go to an insurance company and buy an annuity that spreads the money across the risk pool—an annuity that starts paying out when the client is age 85. The client then takes the other 90% of the money and spends it down over his expected remaining life. There is no provision yet for someone to do this with pretax dollars, Kra says. ... “That would require an act of Congress,” he says. “They’re looking at it.” ...

... “It doesn’t pay anything to those who die.” That means there is less possibility of “adverse selection” against the insurance company, in other words, for the less risky policyholders to opt out and the more risky ones to opt in and inflate premiums. Therefore the product would pay out two to three times what you would expect to get for a life annuity. ...

Although it seems that it might be difficult to persuade people to buy a product that might not result in a payoff, Kra points out, “When you buy fire insurance, you pray you don’t need it.” ...

Having A Reliable Income Stream These questions come amid vast changes in the way people are retiring.

Kra frets, for instance, that over the last generation we’ve moved from annuities to lump sum distributions. ... And if you are pondering whether lump sums are better for society, Kra says consider this: Half the people who take one will outlive their money.

People’s anxiety about how much they might have after retirement can also be seen in the re-emergence of the defined benefit plan. Since their introduction 25 years ago, defined contribution plans such as the 401(k) have slowly eclipsed DB plans and been touted for portability. In a defined contribution plan, the amount of the annual contribution is defined instead of the amount of the ultimate benefit (the pretax contribution limit was at $15,500 for 2008).

For young people who moved to new jobs often and got nothing from a DB plan, the 401(k) once looked good because the money you put aside could travel with you. But now that bias has flipped, according to Kra. “Today American workers appreciate the defined benefit plan,” Kra says. For instance, in Florida and Nebraska, he says, state workers were offered a choice between the defined contribution plan and the defined benefit plan, and 97% chose the latter.

Kra says people start thinking about their pensions in their 40s. Baby boomers are now beginning to retire. The next generation, Generation X or the baby busters, born between 1965 and 1979, will demand better pensions. Thus he predicts defined benefit plans will be a competitive draw for companies, especially those that are going to see a talent drain with so many employees retiring. ...

Dealing With A 401(k) With a 401(k) plan, on the other hand, employees have an increasing responsibility for their own retirement. Still, it is the responsibility of the employer to look at fees and performance and determine whether they are acceptable. The employer must decide that the funds it offers are good ones so that a diligent employee could build up an adequate retirement stake by contributing to the 401(k) plan.

Kra says the government is focusing more and more on the details of 401(k) plans. ... Now under new law, employers can automatically enroll their workers. When enrollment was voluntary, the employer had to do complex nondiscrimination testing to demonstrate that the plan did not favor highly compensated employees over the lower-paid ones. But automatic enrollment eliminates the requirement for such testing.

Kra says that the touted Roth IRAs and Roth 401(k)s offer no advantage over their non-Roth predecessors if all the assumptions remain the same. ... For example, if you receive $3,000 in regular income and you pay one third in tax, you can put in $2,000, and in 20 years, you have $8,000. If you put the entire $3,000 into a regular IRA, in 20 years you have $12,000. But then you pay one third in taxes and have $8,000 left. “As long as the tax bracket is the same and earnings are the same, there’s no difference in the amount of money you have,” Kra says. ...

Flight of the High Performers

A new survey finds that nearly half of high performers are actively looking for other jobs. Why are they seeking greener pastures and what are companies doing to keep them?

Risk & Insurance

October 1, 2008

By MICHAEL O'BRIEN, a staff writer for Human Resource Executive®, a sister publication of Risk & Insurance®

Human resource executives would be wise to keep a closer eye on their company's high-performing employees. Chances are, a good number of them are inching ever closer to the door.

According to a recent survey by Washington-based consultancy Leadership IQ, 47 percent of high performers are actively looking for new jobs, by posting and submitting their resumes and even going on interviews. ...

This prelude to an exodus of valuable employees is a problem facing many companies, regardless of the current state of the economy. To avoid the problem is to risk watching your best assets walk right out the door and possibly into the arms of the competition.

"High performers keep companies in business," says Mark Murphy, Leadership IQ's CEO. "So every company is at risk if these people leave. If you lose some low performers, you might actually be better off. But when your best people quit, revenue drops, quality suffers and snafus increase. Even large companies can take a big hit with the departure of just a few key employees."

The list of reasons many high performers leave their current jobs may be as varied as the skill sets of the high performers themselves, but Murphy thinks the No. 1 reason most high performers leave is clear.

"Frankly, we treat our high performers worse than any other employee," he says. "When a manager has a tough project upon which the whole company depends, to whom do they turn? Who gets the late hours and the stress? It's not the low performers."

Some companies are catching onto the dangers of this negligence and are implementing programs to engage these employees before they burn out or fly the coop, from better identification and communication of their prized status to allowing them to follow their interests and participate in projects outside their immediate job description.

IDENTIFY FIRST

..."It would be an absolute shame to have (a high performer) leave without ever knowing that" the company viewed that employee as such, says Steve Robison, Dow's HR director of succession management.

...He says the company looks at each employee's performance against his or her goals as one indication of meeting high-performer criteria, and then compares them to a global competency model.

After supervisors identify their high-performing employees, Dow's HR department swings into action to organize calibration sessions, where supervisors get together to make sure they are comparing apples to apples. ...

Then there's a diversity review to ensure fair treatment, and the information is updated on the company's online performance-management tool. The employee is notified of his or her status during the annual performance review.

The high-performing group list is reviewed annually to ensure that workers with longer-range goals are being given the proper access to resources in order to achieve them. Robison says the company's attention to this cream of the crop reaps untold benefits in the long run.

"It's all about development," Robison says. "We're looking to build capacity and build a talent pipeline in the organization."

NEW OPPORTUNITIES

Indeed, the opportunity to put their skills to use in a different setting or develop new skills are two major reasons high performers seek new job opportunities elsewhere.

According to Scott Thomas, senior vice president and senior HR business partner team leader at Charlotte, N.C.-based banking and financial services organization Wachovia Corp., employee engagement surveys consistently show that "advancement and development opportunities are a high priority for our employees."

In order to satisfy that demand, a new program has been instituted there that allows the 6,000 employees in the company's IT department the opportunity to work on new tasks and projects recommended by department leaders that may lie outside their current position. ...

LIFELONG CAREER

By keeping employees focused on pursuing opportunities within the business rather than outside, one company is looking to return to the idea that an employee can build an entire career at one organization.

Linda Sharkey, vice president of people development at Palo Alto, Calif-based computer maker Hewlett Packard, says it's important for HR executives to "take the time to go out and know your high performers well, know your business and strategies well, and help people find the right path. ... That way, they know that someone is paying attention to who they are." ...

HP recently overhauled how it categorizes jobs for its 156,000 worldwide employees, by "collapsing" all their jobs into 400 job families to make it easier for employees to view online in order to plan for career moves within the organization.

The company also took a look at its own internal recruiting process and turned an eye toward giving its own high-performing employees the first crack at new openings.

"Now, we post our jobs internally (before going public) and then search our internal database, where we look for people who match the jobs. We're continuing to do more and more of that at every level of our employee base," she says. ...

The program also allows employees to "do career-development plans for themselves, so they can continue to grow within the job they have or within other jobs," Sharkey says.

However one chooses to entice one's high performers to stay, Dow's Robison says a company needs to effectively communicate their plans for employees' future development.

"The challenge is to make sure we have a compelling case as to why people should stay with us, and oftentimes, that is going to align with development opportunities. If you can't make that case, then I don't know how you can expect people to not go somewhere else where they will have those opportunities."

Copyright 2008© LRP Publication

The Young & (not so) Restless

Employee Benefit News

By Lydell C. Bridgeford

July 1, 2007

Current research shows Generation Y is 75 million strong and becoming the fastest-growing segment of the U.S. workforce, increasing from 14% to 21% over the past four years to about 32 million workers.

As their ranks continue to swell, employers must become more strategic in their efforts to understand, and therefore retain, Gen Y employees (born from 1978 to 1989). Yet some labor analysts assert many employers are clueless as to what this generation wants from a workplace environment, thus hurting their chance of success to woo and keep Gen Y employees with their companies.

Money is not everything

There still lingers a misconception among some CEOs that many younger workers only care about how much they are being paid.

However, Peter Hart, CEO of New York-based Rideau Recognition Solutions says, “At my company, we call them the Nintendo Generation because they have been literally brought up as kids playing online and video games. When you think about it, they are getting recognized almost every second,” noting how video games reward players for achievement at each level.

Therefore, Hart says Gen Y similarly expects instant recognition in the workplace. In some cases, they are even looking for recognition before they have been assigned a task to complete.

Company culture also is meaningful to this generation, Hart says.

“It’s really not about the money, but creating a culture that rocks,” which means creating an environment where young people enjoy coming to work, he says.

Managing Gen Y

Compared to baby boomers and other generations in the workforce, Gen Y tend to be more concerned about meaningful work and relationships with coworkers, attitudes that are key for employers to remember in retention efforts, says Mark Lifter, national practice leader of the talent solutions consulting at Aon Consulting.

Corporate decisionmakers are boomers, so workforce decisions about quality-of-life issues and benefits likely are framed through their experiences, Lifter explains. “As a result, I am not sure if they are as sensitive to the needs of Gen Yers as they could or should be.”

Arturo Coto, CEO of Inquisite, a Texas-based human management software company, agrees. Consider, for example, one of Coto’s clients, a manufacturing company with an attrition rate less than 3%. However, when the company’s leaders started to drill down on that number by segmenting employees by age, they realized young managers — mainly newly minted MBAs — were largely driving the number.

“They were not sticking around and the average [tenure] was about year,” Coto explains. “You had people on the front lines that had been there for nearly 30 and 40 years. Now all of sudden, you have a [twenty- or thirty-something MBA] coming in to gradually implement changes and improvements,” he says.

The situation, if not handled properly, can create a stressful work environment, stemming from generational differences in communication, expectations and entitlement.

In addition, management discovered through employee surveys and interviews that their young mangers did not find the work on the front line challenging enough to put in the time to continue their career path with the organization.

It’s all geared toward “better coaching, nurturing and developing of young talent and teaching them how to walk before they run,” Coto says.

“I think it’s important to validate these trends within your workforce and really understand the new generation within your organization,” Coto remarks. “What are their implicit needs and what do they expect from you?”

Appealing benefits

Gary Cumpata, senior vice president at Aon Consulting believes consumer-driven health plans and voluntary benefits are poised to resonate with younger workers and reverse such turnover trends.

Young employees tend to be attracted to the variety of wellness programs and online health information typically touted by consumer-driven heath plans, and voluntary benefits by their very nature allow employees to select the benefits that are important to them, Cumpata suggests.

“Often employers will augment voluntary benefits with entertainment, coupons, books and discounts features to social activities,” Cumpata adds, saying that younger workers find value in these features. They like that “instead of saying, ‘Here is what you get,’ it’s, ‘Check the list for what you want.’” —L.C.B.

Job satisfaction and the ‘Nintendo Generation’

A 2006 online survey by Harris Interactive, commissioned by the Massachusetts-based American Business Collaboration, polled 2,775 exempt and non-exempt workers at medium and large corporations about job satisfaction. Among employees under 30: • Exempt women cite salary as the most important factor in job satisfaction. Other top priorities are meaningful work and work-life balance. More than half of this group say financial security is most important to achieving a general sense of fulfillment. • Exempt men and women cite advancement as an area of dissatisfaction. In addition, men cite meaningful work and work-life balance as areas of dissatisfaction, in contrast to women, who cite dissatisfaction with benefits and workload. • Exempt women are extraordinarily committed to their jobs. They have the highest engagement level of any group. • Exempt men cite advancement second to salary as the top priority in job satisfaction. This group ranks family life as most important to personal fulfillment. • Non-exempt workers tend to be dissatisfied with utilizing their abilities and with salary. • Non-exempt men also cite dissatisfaction with advancement. Source: The American Business Collaboration