by Sylvia Ann Hewlett, Laura Sherbin, and Karen Sumberg
Right now, managers of people are operating in full recessionary mode. They’re wrestling with whether and how much to reduce head count, weighing alternatives like furloughs and pay cuts, and generally trying to get by with less. Not many are focused on what just a few years ago was described as “the war for talent.” As the economy recovers, however, companies will return to the challenge of winning over enough highly capable professionals to drive renewal and growth. Only then will they realize that the rules of engagement have changed—that the landscape of talent management has been transformed.
The combination of Generation Y eagerly advancing up the professional ranks and Baby Boomers often refusing to retire has, over the course of a few short years, dramatically shifted the composition of the workforce; each of these generations is roughly twice the size of Generation X, which lies between them. More important, Boomers and Gen Ys are together redefining what constitutes a great place to work. As we will show, they tend to share many attitudes and behaviors that set them apart from other generations. These shared preferences constitute a new center of gravity for human resources management.
Going forward, what will it take to be an employer of choice? Last year, the Hidden Brain Drain Task Force, a group of 50 multinational companies committed to global talent innovation, took up this challenge. Four of the companies—Booz Allen Hamilton, Ernst & Young, Time Warner, and UBS—spearheaded two large-scale, nationally representative surveys: one, in June 2008, of 3,782 employed college graduates and the other, in January 2009, of 1,046 people from the original sample. The resulting data allowed us to unpack the work aspirations of high-echelon talent across age groups and sectors. We augmented the survey results with qualitative input from 30 focus groups and 40 interviews. Stated at the highest level, our finding is that people, especially Gen Ys and Boomers, are looking for what we call a “remixed” set of rewards: Flexible work arrangements and the opportunity to give back to society trump the sheer size of the pay package. That was true before the downturn hit and remains so even as its full brunt is being felt.
This rewards remix is both challenging and liberating for talent managers. It’s challenging because it means letting go of cash as the prime motivator and tangling with the difficult task of redesigning incentives. It’s liberating because if nonfinancial rewards are less expensive to fund, companies can lay out more plentiful options. Perhaps that explains why we found managers experimenting with a whole range of such rewards—figuring out how to use time, for example, as currency, or a green workplace as a retention tool. In a period when many were not able to offer raises or bonuses, some realized it was the right time to respond to the attitudinal changes they were already sensing in the air. Because some of their initiatives deftly address the demands of the 800-pound-gorilla cohorts, Gen Ys and Boomers, we believe they show the way to tomorrow’s best practice.
It’s All About a Wider Purpose
When a young man we’ll call Aaron Johnson received an employment offer from UBS in early 2008, he readily accepted it yet felt a tinge of regret. Having interned at UBS between his junior and senior years at Stanford, he knew he’d enjoy the work of an analyst. But the job was to start right after graduation, giving Aaron no break between one highly structured situation and another.
Fortunately, in the spring of his senior year, UBS informed Aaron about its new graduate deferral program. The initiative gave new hires the option of postponing their arrival for a year and devoting the interim period to community service or the acquisition of new skills. For pursuits UBS considered worthy, it was offering to pay half the base salary associated with the accepted position, plus a stipend for health insurance—while holding the promised job open for the individual’s return. Aaron wound up spending that gap year in India with a nonprofit organization that trains paramedics, helping a California-based nonprofit develop AIDS-education tools for underserved populations, and writing a novel. Others in the program used the year to learn Spanish in Argentina, do economic development work in Vietnam, study advanced econometrics, work on an offshore oil rig, and rebuild houses destroyed by Hurricane Katrina.
Meanwhile, CVS/pharmacy, the retail division of CVS Caremark, was offering an option that many employees at the opposite end of their careers considered heaven-sent. As one of America’s largest pharmacy chains, CVS has stores in every region of the country—and in every regional climate. So in 2004 CVS created its Snowbird Program to let experienced store employees move seamlessly among CVS locations according to their seasonal preferences. As the program’s name implies, many of the participants are mature workers who enjoy wintering in southern states and summering in northern ones. Since the program started, over 1,000 employees, ranging from retail clerks to pharmacists and managers, have enthusiastically participated, earning CVS a high-profile award from the American Society on Aging.
And in yet another industry, Time Warner recently developed a mentoring program that engages people on both ends of their careers. In this case, some of the company’s senior executives were challenged to stay at the forefront of a rapidly evolving new-media landscape. To raise their awareness of digital media, Time Warner launched Digital Reverse Mentoring—a program in which tech-savvy college students mentor senior executives on emerging digital trends and technologies such as Facebook, Twitter, and other Web 2.0 applications. In addition to imparting technical skills, Gen Y mentors provide Boomer mentees with a peek into the values, consumer behaviors, and communication styles of the younger generation.
What’s the thread running through these three HR initiatives? A certain type of hard-nosed manager might say they all smack of indulgence: paying people to find themselves, sun themselves, and surf the net. On that score, it’s worth noting that these programs earn their keep by even the most shortsighted accounting. UBS trims payroll costs in the near term while keeping hold of talent that it invested in recruiting and that it will need when the economy improves. CVS mobilizes employees to match the seasonal migration of its customers. Time Warner enjoys the immeasurable benefit of a more market-attuned leadership team. In a broader sense, however, programs like these pay off by proving that a company is part of a new breed of employer—one that respects educated workers’ increasing desires for flexibility, personal growth, connectivity, and a chance to give back.
Like Boomer, Like Y
It isn’t that the same employees who in the past wanted one thing have now changed their spots and want something different. The shift we are seeing in workplace preferences has everything to do with a new mix of people. Specifically, Generation Y (born 1979 through 1994) is 70 million strong—roughly double the size of Gen X (1965 through 1978). Under any circumstances, that large a cohort would be a force to be reckoned with. In this case, its influence is compounded by the fact that the huge Baby Boom generation (1946 through 1964), unlike any previous cohort at its age, remains very present in the workplace—and these two oversize “bookend” generations have an extraordinary amount in common. To be sure, they are not indistinguishable, but emerging from our survey data were several common themes.
Odyssey.
Both Boomers and Gen Ys, we found, are drawn to opportunities that allow time out to explore passions, hobbies, and good works. For example, 47% of Ys say it’s important that the company they work for offer sabbatical leaves—that such perks boost commitment and performance. It’s a preference that also resonates with Boomers, 29% of whom report having taken time out. Both groups see such breaks as opportunities for personal fulfillment: 53% of Gen Ys and 49% of Boomers who temporarily step away from work use the time to explore passions or volunteer.
Shared vision and values.
Gen Ys and Boomers also share a heightened sense of obligation to make a positive contribution to society and to the health of the planet. Respectively, 86% and 85% say it’s important that their work involve “giving back.” That’s not as true for Gen X: People in their thirties and early forties are 10% less likely than twenty-somethings to find this important.
Achieving balance with flex and remote working.
Overwhelming majorities of Gen Ys (89%) and Boomers (87%) say that having flexible work options is important. Similar percentages (87% and 83%, respectively) say that work/life balance matters to them, so it’s not surprising that roughly two-thirds of both groups also wish for opportunities to work remotely. Having the freedom to choose when and where to work is very powerful, particularly for young employees: 83% of Ys say this freedom motivates them to give 110% effort. (That’s also true for Gen Xers, although to a lesser degree.) But the desire to work remotely is tempered by Ys’ and Boomers’ love of teamwork and community. While some (27% and 16%, respectively) would even give up a personal workspace to be able to work remotely, most who want a remote option would prefer working from home just one day a week.
Mentoring and generation-jumping.
Gen Ys are usually the offspring of Boomers—and a famously doted-upon set of children. Perhaps that’s why these two generations seek each other out in the workplace. Boomers delight in taking Ys under their wing: 65% say that members of the younger cohort look to them for advice and guidance. Generation Y’s motto, meanwhile, seems to be “Trust those over 50.” Most Ys (58%) say they look to Boomers, rather than Xers, for professional advice, and over three-quarters say they enjoy working with Boomers. The fact that 42% of Ys go to Boomers for mentoring is also remarkable, given the layers that typically separate them in a corporate hierarchy.
“Kippers” and Velcro relationships.
The parent-child bond that creates such close connections between Gen Ys and Boomers also involves demands on time and resources. A large proportion of Ys (42% of women and 30% of men) report that they talk to their parents every day. The fact that many of their generation are still financially dependent on their parents has given rise to a new acronym: Kippers (for Kids in Parents’ Pockets Eroding Retirement Savings). We found that Boomers who provide financial support give their adult children, on average, $471 a month in direct assistance.
Rewards remix.
Finally, Gen Ys and Boomers share a sense that financial gain is not the right reason to join or stick with an employer. Both generations rate four other forms of pay as at least as important as money: a great team, challenging assignments, a range of new experiences, and explicit performance evaluation and recognition. (Women, in particular, of both generations place high importance on receiving recognition for a job well done.)
We must note that we don’t know why these markers of a shifting value proposition show up in the bookend generations more than in Gen X. If a 38-year-old man is less likely to crave an odyssey or opt for a rewards remix, is that because he is more likely to have a hefty mortgage and school-age children? In other words, is it a matter of life circumstances rather than underlying values? (Interestingly, Gen X’s conventional value proposition gets more complicated when we unpack our survey data by gender: Gen X women are 19% more likely than Gen X men to rate flexibility as very important.) How the trend will unfold is unclear, but the fact that differences exist today is incontrovertible. A Gen X worker is 9% less likely than a Gen Y worker to want an odyssey, and 23% more likely than a Boomer to rate high compensation as very important.
The New Workplace Imperatives
Few companies in today’s knowledge-intensive economy would deny that they compete on the caliber of their people. With this richer understanding of the two generations that now dominate the workforce, the challenge becomes clear. Companies whose employment offers align best with the shared values of Boomers and Gen Ys will enjoy a major talent advantage. If we were designing a workplace from scratch today, or consulting to a big employer, we would insist on five crucial elements.
