Rehiring Retirees as Consultants Is Bad Business

Rehiring Retirees as Consultants Is Bad Business author Webmaster1 On: 04/01/2013 Views: 108

Why would any organization set up a system that discourages experts from sharing their business-critical knowledge?

Obviously, no leader deliberately set out to do such a thing. Yet it happens all the time when companies make a practice of hiring back retirees as consultants to perform the same functions they did before, at higher pay.

Prior to 2008, GE Global Research Center (GEGRC) followed this process. A scientist or engineer would retire from the organization, wait the mandatory six months, and then field a call from a former manager with an offer to re-engage. The corresponding consulting fees, combined with their pension, generated an income not too different from the person's pre-retirement salary, with far fewer hours worked. In HR groups around (and beyond) the company, this scenario was the norm. Retirees were simply another, albeit expensive, form of contingent labor. And the arrangement seemed like a win-win. The retiree satisfied financial and personal goals while the organization reinserted someone with unrivaled knowledge and expertise into a project and took its time sourcing replacement talent.

So what was wrong with this picture? For one thing, at GEGRC, internal analysis predicted a potential tsunami of retirements hitting the two top technical levels between 2008 and 2013. That meant a costly practice could get prohibitively expensive. Worse, the rehiring agreements were structured only to provide project continuity, not to retain or transfer knowledge. After all, why would a soon-to-be or recent retiree want to impart his smarts? Most wanted to be paid, and to be missed, when they eventually quit for good.

Not all the knowledge in the head of every departing employee is valuable, of course. Some may be outdated or strategically irrelevant. But at GEGRC and many other companies, increasing numbers of Baby Boomers walking out the door are taking a lot of valuable deep smarts — that is, business-critical, experience-based knowledge about not only technical issues but also "soft skills" like customer relations, project management, creative team leadership and stakeholder management — with them. That can be devastating to competitive advantage.

Ironically, the financial downturn of 2008 gave GEGRC an opportunity to change. In an effort to reduce costs, the organization forbade re-hiring of retirees in 2009. An outcry ensued, of course, but management and HR began to face the painful fact that they had been aiding and abetting a vicious cycle of capability dependency and knowledge loss.

For a while, would-be retirees simply stayed on longer than they had planned. And it was that lull in departures which allowed the organization to redesign some of its incentives, practices and culture. It launched a significant knowledge-sharing program drawing on some of the advice outlined in this article and set up a phased retirement program, offering flexible work schedules and leaves of absence to spend more time with family or to winter in a warmer climate. GEGRC still has a handful of returned retirees, but a condition of rehiring is that they agree to teach and mentor others or otherwise contribute to the long-term capabilities of their successors. They are not permitted to merely resume their preretirement roles.

Companies must work harder to make sure retirees pass on their valuable knowledge. Until more do, they will continue to undermine their own long-term capabilities.





Signup For ThoughtLeader









Subscribe


CIO Index

Our Focus is On Your Agenda

CIO Index is the world's largest professional network for CIOs - of the CIO, for the CIO, by the CIO. 

Over 70,000 CIOs and other IT Executives use CIO Index to Learn, Network and Share.

 

Cioindex, Inc.

  • (+1) 800-309-3550
  • Mon - Fri 9:00am - 5:00 pm
  • 115 Franklin Tpke, Mahwah, NJ 07430