Start-ups set to be hit by baby boomer retirements

Start-ups could be affected by a ‘baby boomer brain drain’ in 2011, according to a survey by change management consulting company Change Factory.

According to the 2010 HR Priorities Survey, businesses are changing their focus from survival to expansion as they recover from the global financial crisis.

With many baby boomers looking to retire, survey respondents are concerned about the ability of younger generations to step up to leadership roles.

Change Factory director Kevin Dwyer says the baby boomer brain drain will force start-ups to compete with larger organisations for young, technically-competent staff.

“They’re going to find that remuneration will go up as most organisations are not that inventive as to how they attract and retain staff,” Dwyer says.

“Gen Ys are looking for opportunities to develop, so try and prove to them that you’re the sort of organisation that provides plenty of training.”

“Not just classroom training but experiential stuff where they might be on a project team or they might get an opportunity to relieve in a position.”

Survey respondents identified the lack of performance management systems as another key challenge in their business.

According to Dwyer, most start-ups lack such systems, which can lead to lower morale and productivity.

“It’s the most common mistake I see, particularly with family companies,” he says.

“If you’ve got a small business, they are so focused on survival that they quite often don’t put a lot of thought into internal processes like performance management systems.”

“They may grow… and by the time they reach 300 people, they still haven’t got a decent, consistent and congruent performance management system in place.”

“If you [employ] 10 or 20 people, you can get away without it – you can manage 10 or 20 people as a CEO just by personal interaction.”

“But when you grow beyond say, 50 employees, it really becomes almost impossible.”

According to the report, another issue concerning businesses is the salary expectations of employees, being driven up by the increasing cost of living.

The report states: “[This is] a trend that puts many companies in a difficult position as they struggle to find both the right people for the available roles, and pay them in line with their expectations once they have been found.”

In the report, the Corporate Leadership Council found that when bonuses are out of alignment with employees’ expectations, 27% of employees and 35% of senior managers reduce the amount of effort they put in at work.

Dwyer says bonus schemes are “fraught” and start-ups need to be careful in their approach to them.

“Even if bonus schemes are well directed, people get used to the bonus… It’s now almost seen as a negative thing [if an employee doesn’t receive a bonus],” he says.