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Establishing the Positive ContributoryValue of Older Workers:

A Positive PsychologyPerspective

SUZANNE J. PETERSON BARRY K. SPIKER

rganizational Dynamics, Vol. 34, No. 2, pp. 153–167, 2005 ISSN 0090-2616/$ – see frontmatter2005 Elsevier Inc. All rights reserved. doi:10.1016/j.orgdyn.2005.03.002

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INTRODUCTION

There is growing evidence that the aging ofthe global workforce will be the dominantfactor for business and organizations in thenext two decades. According to renownedmanagement expert Peter Drucker, this isbecause the rapid growth of the older popu-lation and the rapid shrinking of the youngergeneration will result in a growing scarcity ofknowledgeable and competent professionalsin our global labor pool.

Indeed, many key industries are alreadyexperiencing an inability to supply enoughtechnically qualified people to replace thosewho are retiring. For example, approxi-mately half of the aerospace industry work-force will become eligible to retire in the nextten years, leaving a significant gap in skillsfor the industry as a whole. More specifically,the National Aeronautics and Space Admin-istration (NASA) has been cited as havingmore than twice as many workers over 60years of age than under 30 years of age. Thisjeopardizes the program’s ability to ‘‘handoff’’ leadership roles to the next generation.

Higher education faces similar chal-lenges with the retirement of many ‘‘olderworkers,’’ e.g., full professors who haveworked over lifetimes to become experts intheir chosen disciplines. Other examplesinclude government, where nearly 65 percentof middle managers are within three years ofpotential retirement; nursing, with shortages

that could lead to the closure of many hos-pitals just when we need more health care;and the consulting industry, where the lossof older workers is creating a ‘‘brain drain’’never seen heretofore. Recent data revealedby Deloitte Consulting suggests the numberof partners over age 50 has doubled in the lastfive years. In a grueling profession markedby demanding travel schedules and pensionsthat vest at 50, many of those partners areheading straight for the exits — leaving ahuge experience hole in key positions.

Despite these realities, few organizationsare currently preparing for the loss of knowl-edge and experience when workers retire.Nor are they actively seeking to retain theseworkers. As Greller and Stroh point out in arecent Organizational Dynamics article, this isdue primarily to inaccurate perceptions thatolder workers are of less value than theiryounger counterparts.

We suggest that these flawed percep-tions exist in part because organizations haveyet to fully understand (or be convinced) ofthe contributions and value of older workers.Therefore, the purpose of this article is toanalyze and explain that which constituteswhat we term the positive contributory valueof older workers. We take a positive psychol-ogy approach to older workers, focusing onleveraging the strengths and talents of olderworkers for organizational success. We makethe argument that organizational leadershave yet to turn their full attention to attract-

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ing, developing, and retaining older workers,primarily because of the negativity sur-rounding older workers.

Threats aimed at warning organizationsof the negative legal, social, political, andeconomic consequences associated with inat-tention to older workers have not been aneffective means of convincing organizationsof the value of older workers. We suggestthat a positive approach would be betterreceived and more effective. As a represen-tative for PricewaterhouseCoopers recentlynoted, ‘‘Warnings of the boomer crisis arebeing ignored primarily because most com-panies are not in enough pain yet, and arestill in the mindset that there are too manypeople at the water cooler, not too few.’’

We suggest that a positive approach tothe management of older workers would bebetter received and more effective. Drawingfrom recent research findings, our approachfocuses on older workers as valuable assetsand highlights the positive consequencesassociated with appropriate attention tothese workers. Said differently, instead offocusing on the problems associated withmismanaging the careers of older workers,a positive psychological approach makes abusiness case for focusing on the opportu-nities related to the proper management ofthe careers of these workers.

In particular, we suggest that olderworkers may contribute equal if not morevalue than younger workers, because theiroverall human capital contribution, definedas the sum of psychological, intellectual,emotional, and social capital or PIES, isgreater than the overall human capital con-tribution of younger workers. After layingthe groundwork for a positive psychologyapproach to older worker management, eachform of capital will be described in detail inthe sections that follow.

POSITIVE PSYCHOLOGY VIEWOF OLDER WORKERS

Past research on older workers has taken anegative psychology approach focusing on

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what is wrong with older workers and theproblems and burdens associated with hav-ing to (or else face discrimination lawsuits)manage the careers of older workers. More-over, organizational leaders have been bom-barded with media reports detailing thethreats of not responding to older workersand examples of the failures associated withthose who are not yet responding. While theimpending demographic shift in the globalworkforce is a problem in need of recogni-tion, we believe a new way of looking at olderworkers (i.e., as an opportunity) is needed.

As recently as 1998, renowned psy-chologist Martin Seligman introduced thepositive psychology movement. Positivepsychology has emerged and gained mo-mentum as an approach that redirects focusfrom what is wrong with people or organiza-tions toward one that emphasizes humanstrengths that allow individuals, groups,and organizations to thrive and prosper.The overall goal of positive psychology isto create organized systems that actualizehuman potential. The first step toward apositive psychological approach to the man-agement of older workers is to accentuate thepositive by dispelling two key myths asso-ciated with older workers:

Myth #1: Older workers are not top learners.It has typically been perceived that abilityand skill decrease with age. Moreover, it isthought that older workers can’t learn newtechnological changes, can’t keep pace, areless flexible and adaptable, have a lower zestfor life, and are at a stage in life where theyare experiencing social and psychologicalwithdrawal from society. These are funda-mentally flawed perceptions. In 1999, HarrisInteractive conducted a nationwide survey of774 human resource (HR) directors and con-cluded the following about older workers:

� 80% have less turnover� 75% have higher levels of commitment� 74% are more reliable� 71% have as much ability to acquire

new skills� 62% are more creative and innovative� 80% have less absenteeism

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� 48% are more flexible/adaptable� 49% are more motivated

In response to this report, the Committeeor Economic Development (CED) concludedhat increasing the work participation rate oflder workers would only add to the learningnd productivity of the workforce. The CEDurther suggested that any noticeable declinemong older workers in the areas measuredy Harris Interactive was more likely due to aycle of improper stereotypes, contributingo an older worker self-fulfilling prophecy ofower abilities, adaptability and motivation.

Myth #2: Older worker are not top perfor-ers. Examination of several meta-analyses

xamining the relationship between age anderformance has generally revealed that

here is no significant difference in job per-ormance between older and younger work-rs. In fact, in many cases, older adultsppear to have slightly higher job perfor-ance than younger adults. Moreover,

esearch has shown that occupational inju-ies occur at a lower rate to older workershan to younger ones. Accident frequencyeclines steadily up to age 64 and then dropsven more sharply for workers over 65. Thesendings underscore what Michael Sturmanas pointed out . . .. ‘‘It is not age but what theerson brings to the table that matters in

erms of employee performance . . .. Theuestion is not whether older workers bringomething of value, but what they bring, andhy they are not recognized for bringing it.’’

Based on the evidence, there is reason toelieve that members of the over-50 genera-ion have the potential to be exceptionalearners and performers. However, in a fol-ow-up report by Harris, surprising discre-ancies emerged. While fully 92 percent ofR directors cited older executives as a valu-

ble resource for their companies, only fiveercent indicated that it is ‘‘very necessary’’

o encourage older executives to defer retire-ent and remain with the company for

onger periods. Less than 50 percent said thatt is ‘‘somewhat necessary,’’ and over 40ercent said it is ‘‘not necessary at all.’’ Itppears there is a disconnect between the

expressed values of HR directors and theiractions surrounding these values.

Even if organizations do acknowledgethat older workers are valuable, how do theyquantitatively measure their contribution orvalue? That is, how do they make the businesscase for older workers? As Fitz-enz argued, ‘‘Ifwe are ill-equipped to measure on organiza-tion’s primary value producing asset, we can’tmanage it.’’ While some organizations haveattempted to quantify the value of theirhuman assets, they have fallen short of cap-turing the depth of human assets. How do wecapture one’s capacity to innovate? How doesa university count the real world experiencethat a person brings into the classroom? Howdo you count relationships, connections, net-works, the quality of management, creativityor the energy and passion that an individualbrings to a place of employment?

Meyer and Davis tell an interesting storythat is emblematic of what they coin as ‘‘ThePicasso Principle.’’ As they tell it, ‘‘A beautifulwoman once approached Pablo Picasso in aParis cafe. She asked him to sketch her andoffered to pay him fair value. In a few minutes,the artist created a drawing — and asked for500,000 francs. ‘But it only took you a fewminutes,’ the tourist protested. ‘No,’ Picassosupposedly replied, ‘it took me about 40years.’’

Picasso knew what his talent and valuewere. Picasso’s value represented the sum ofall his years of experience, his skills (currentand potential), his knowledge, relationships,study, travel, observations, etc. adjusted forthe supply (or scarcity) of his talent and thedemand for the same. Meyer and Davis state,‘‘All you know, all you’ve done, all your con-tacts and relationships, and the intelligenceyou bring to future work give you a value inthe marketplace.’’ We have termed the sum ofthese talents one’s Positive Contributory Value.

MEASURING POSITIVECONTRIBUTORY VALUE

Webster’s Unabridged Dictionary definescontributory as ‘‘having a share in bringing

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about a result’’ and value as ‘‘the quality ofsomething that is more or less desirable, use-ful, estimable, important, or worthy.’’ Thisexpression of value is often referred to inthe management literature as human capital.According to Luthans and Youssef, humancapital is the sum of explicit knowledge(knowledge, skills, abilities, or competenciesderived from education and experience) andtacit knowledge (organization-specific knowl-edge acquired through socialization into anorganizational culture). In their article,Luthans and Youseff distinguish betweenhuman capital and other forms of capital,namely social and psychological capital. Wetoo recognize and will address these differentforms of capital and seek to build upon theconcept of human capital. In particular, webelieve types of capital such as psychologicaland social capital are dimensions or subsets ofhuman capital.

We agree with Weatherly that a com-pany’s human capital is the collective sumof personal attributes, life experiences,knowledge, inventiveness, energy, andenthusiasm that its employees choose toinvest in their work. Stated similarly, JacFitz-enz wrote in his book The ROI of HumanCapital that in business terms human capitalis a combination of the following factors:

� The traits one brings to the job; intelli-gence, energy, a generally positive attitude,reliability, commitment.

� One’s ability to learn: aptitude, imagi-nation, creativity, and what is often called‘street smarts,’ savvy (or how to get thingsdone).

� One’s motivation to share informationand knowledge: team spirit and goal orienta-tion.

Summarizing Fitz-enz’s conceptualiza-tion of human capital combined with whatLuthans and Youssef have suggested aboutother forms of capital, we believe humancapital to be a core construct comprised offour subsets of capital: psychological capital,intellectual capital, emotional capital, andsocial capital — or what we have termed PIES.

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The aggregation of these forms of capitaldetermines the positive contributory valueof a worker. Fig. 1 represents our model ofpositive contributory value and suggests thatby creating positive contributory value, posi-tive organizational outcomes will result. In thefollowing sections, we define each subset ofhuman capital and describe how it relates toolder workers. We finish with a discussion ofthe implications of older workers’ positivecontributory value and how organizationscan best retain this value.

PIES: PSYCHOLOGICAL,INTELLECTUAL, EMOTIONAL,AND SOCIAL CAPITAL

‘‘P’ ’ is for Psychological Capital

Based on the premise of positive psychol-ogy, Fred Luthans proposed positive organi-zational behavior or POB. POB appliespositive oriented human resource strengthsand psychological capacities that can be mea-sured, developed, and managed for perfor-mance improvement in today’s workplace.These POB capacities include confidence,hope, optimism, and resiliency, each ofwhich is described below.

� Confidence: Belief in one’s ability tomobilize motivational resources and executespecific course of action within a specificcontext. Confident people achieve goalsand persevere in the face of obstacles.

� Hope: The sum of ‘‘willpower’’ and‘‘waypower.’’ Hopeful people have thedesire or agency to achieve goals and havethe capability to develop various pathwaysor strategies toward goal accomplishment.

� Optimism: A positive explanatorystyle that attributes positive events to inter-nal, permanent, and pervasive causes andnegative events to external, temporary, andinstitutional ones. Optimistic people takecredit for good things that happen to boostmorale and distance themselves from badthings that happen.

� Resiliency: Capacity to bounce backfrom adversity, uncertainty, failure, or

FIGURE 1 A MODEL OF POSITIVE CONTRIBUTORY VALUE

even positive but seemingly overwhelmingchanges.

Combined together, these capacities createa form of capital called psychological capital.A unique aspect of psychological capital isthat its components are measurable and opento development and change. That is, we candevelop interventions or training programsto create psychological capital in people.Recent research has demonstrated that psy-chological capital contributes to performanceimprovement and is a sustainable source ofcompetitive advantage. As such, psychologi-cal capital contributes positive value to orga-nizations.

Psychological Capital as i tRelates to Older Workers

It is hard to imagine an instance when aconfident, hopeful, optimistic, and resilientemployee would not make a positive value

contribution to an organization. We suggestthat older workers, when compared withtheir younger counterparts, often possessmore of these capacities. While youngerworkers are often enthusiastic and idealisticin their early careers, recent research by theSociety of Human Resource Management(SHRM) has reported that many youngerworkers also possess a great deal of apathytoward the idea of work. Years of downsiz-ing combined with economic periods char-acterized by lackluster job opportunitieshave led to younger workers’ disillusion-ment with the workplace. The SHRM reportsuggests that younger workers have a desireto work less for more money, are less loyal totheir employers, and are not deriving asmuch pleasure from work as prior genera-tions.

In contrast, older workers, who maintain amore traditional value of work and view ofworkplace expectations, are enjoying workmore than ever. Projects such as the

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MacArthur Foundation Study on Aginghave shown that the longer older workersremain in the workforce, the more engagedthey are at work and in life. Engagementrefers to the desire to maintain relationshipswith others — a form of connectedness; theability to achieve, to add value; the chance tobe intellectually stimulated and challenged;and the chance to make a contribution to abroader community. Thus, it seems thatwork enhances the quality of life for olderadults by keeping them mentally, physically,and socially engaged. Research by leadinggerontologists and the Gallup Organizationback up these findings, suggesting that workcan and should be a positive life experiencefor personal health and well-being over theyears.

The combination of living healthier, longerlives and feeling that their skills and knowl-edge are valued is contributing to more posi-tive experiences in the workplace for olderworkers. A recent American Association ofRetired Persons Survey (AARP) confirms thatolder workers choose to keep workingbecause of the thrill of challenging work,the interaction with great people, and theopportunity to keep learning and growing.Older workers remain confident in theirabilities to learn, grow, and contributeand are hopeful and optimistic abouttheir futures in the workplace. In addition,having lived longer and gone throughmany more life experiences than youngerworkers, older workers have dealt with life’sups and downs and have come to realize thatchange is a constant. They have survived thebad times and thrived in the good times eco-nomically, financially, professionally, andpersonally. This seesaw of surviving andthriving demonstrates a sense of resiliencythat younger workers are less likely to havedeveloped.

A promising aspect of psychological capi-tal pertains to its malleability. This meansthat if older workers have become demora-lized due to past negativity surroundingtheir employment and have experienced age-ism, negative stereotyping, or lack of oppor-tunities, organizations can do something

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about it. Research has clearly shown thatconfidence, hope, optimism, and resiliencycan be developed. Therefore, organizationswanting to increase psychological capital inolder workers can do so with success.

‘ ‘I ’ ’ is for Intel lectual Capital

Intellectual capital includes an employ-ee’s experience, skills, knowledge, intuition,and attitudes developed over a lifetime.Organizations help to create intellectualcapital by increasing the capacity of indivi-dual workers through investing significantamounts of time and money to train anddevelop their workers. Moreover, intellec-tual capital is rapidly becoming an increas-ing source of value and competitiveadvantage, as today’s economy becomesmore and more knowledge-based. The ideathat knowledge can be managed and lever-aged for competitive advantage just as aphysical or financial asset is a powerfulconcept. In his book Intellectual Capital: TheNew Wealth of Organizations, Tom Stewartdescribes what it takes for knowledge tobecome such an asset: ‘‘Intelligence becomesan asset when some useful order is createdout of free-floating brainpower — thatis, when it is given a coherent form . . ..Intellectual capital is packaged usefulknowledge.’’ In other words, intelligencebecomes an asset when someone can use itto create contributory value.

Intel lectual Capital as it Relatesto Older Workers

Part of the contributory value of olderworkers comes down to a build-up of intel-lectual capital through their years of experi-ence. It is simply a matter of ‘‘time in thesaddle’’ or ‘‘been there — done that.’’ Asregards older workers, however, intellectualcapital does not receive enough emphasis. Aperpetual negative attitude toward olderworkers prevents organizations from fullyharnessing their intellectual capital. The wide-spread myth that fresh energy, high technol-ogy, and a change mindset are characteristics

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ound only in younger workers, has contrib-ted to the lack of retention, promotion andiring of older workers.

While there is no solid empirical evi-ence suggesting that older workers arefraid to try new things – new technology,ew approaches, new techniques – olderorkers are still being passed over for pro-otions or being let go in favor of managers

5 years their juniors. From a competitive-ess perspective, this may be a mistake.fter all, older workers got the companieshere they are today, and many are still

ager to learn and contribute if given thepportunity.

Take the following true example of aetired manufacturing engineer who wasalled upon shortly after his retirement toome back and help diagnose a problem withome very expensive machinery. After a cou-le of hours of walking through the plant, thengineer took a piece of chalk and marked aarticular piece of machinery with an X. He

hen gave the plant manager a bill for hiservices for $50,000:$1 for chalk, and $49,999or knowing where to put the X. This is alassic example of the value of a long-timexpert versus someone who may just bereaking in to the business.

More specific examples include Billates’ recent comment that if he lost his

op 15 software engineers, all who haveeen with the company for many years,here would no longer be a Microsoft Corp.r the leveraged-buyout firm Castle Harlan

nc., which targets retired CEOs and direc-ors to serve on the boards of the companiest buys. Castle looks for people with experi-nce in the businesses it runs. This approachives Castle an edge by attracting knowl-dge and wisdom from those who wouldtherwise not have been available. Yetnother example is Chevron Corp., whichorks hard to hang on to valued senior

ntellectual capital. Chevron is currentlysking retired chemical engineers andxecutives with distinguished careers toerve as consultants. According to Chevron,hese workers are an invaluable source ofalent because they bring 30–40 years of

detailed technical experience that can’t bereplaced in the immediate future.

‘ ‘E ’ ’ for Emotional Capital

Emotional capital includes maturity,motivation, social skills, self-regulation,and other aspects of what can come to becalled emotional intelligence. Daniel Gole-man writes in his book Working with Emo-tional Intelligence that the higher the level ofthe job, the less important technical skillsand cognitive abilities are, and the moreimportant emotional intelligence becomes.Indeed, there is evidence that the mostsuccessful employees are better able to exer-cise self-control (e.g., ‘‘grace under pres-sure’’), are more empathic and sensitive,have high integrity, take personal respon-sibility, and are able to get along better withpeople of all backgrounds. As a result,employees high on emotional intelligence,or what we call emotional capital, contri-bute more positive value to the organizationthan those who do not possess as muchemotional capital.

Emotional Capital as i t Relatesto Older Workers

Developmental psychologists and geron-tologists argue that self-awareness and self-exploration increase with age. This is becauseas we grow older, we see greater and greatermaturation processes taking root: better angermanagement, higher self-esteem; greaterempathy, greater social awareness, betterstress management, positive change skills,self-renewal, and more. These characteristicsare common indicators of emotional intelli-gence.

One area where emotional capital is espe-cially relevant to older workers is in custo-mer service. According to recent data, olderworkers demonstrate superior customer ser-vice skills. In a recent study examining olderand younger employees at the Days InnsReservation Center in Atlanta, McNaughtand Barth found that older workers spentmore time talking on the phone to callers

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seeking reservations, but were more success-ful in booking reservations. Increased atten-tion to customers resulted in improved sales,and the experience of older workersappeared to contribute to their improvedsalesmanship. A study examining a buildingsupply chain in Britain found older employ-ees to be friendlier and more cooperativethan younger workers. Companies such asWal-Mart Stores, The Walt Disney Co., andHoneywell International have recognizedthis service trend and are increasingly pla-cing older workers face-to-face with custo-mers.

‘ ‘S ’ ’ for Social Capital

Nahapiet and Ghoshal define social capi-tal as ‘‘the sum of the actual and potentialresources embedded within, availablethrough and derived from the network ofrelationships possessed by an individual orsocial unit.’’ Similarly, Luthans and Youssefdefine social capital as the value of relation-ships between people and the value of dif-ferent networks individuals are included inand develop over time. These social relation-ships are formed through connections,norms, and trust. At the heart of both ofthese definitions is that goodwill is a valu-able resource that should increase over time.Because employees directly or indirectlywork with others, the relationships and con-nections formed between these individualsare highly important to organizational suc-cess.

For example, recent work by the GallupOrganization has found that the strongestpredictor of employee engagement at workwas when employees answered ‘‘stronglyagree’’ to the statement, ‘‘I have a best friendat work.’’ Gallup concluded that whenemployees have best friends at work, theyare more apt to help one another on the job,show up to work on time, and contribute tothe social climate via a positive attitude.Similarly, results of other studies haveshown that when there is a task to accom-plish or a problem to solve, people turn notjust to authority figures, but more often to

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friends, family, colleagues, and others forhelp. Such findings point to the power ofsocial capital as a source of contributoryvalue.

Social Capital as it Relates toOlder Workers

Social capital needs to be nurtured so it cangrow in value. Since no one person has soleownership rights to social capital, when some-one withdraws from a relationship, socialcapital decreases. Therefore, in order to har-ness social capital, the retention of older work-ers – who arguably have met more people,traveled more, and been in more social situa-tions over the years than younger workers – iscritical. Older workers contribute valuethrough social capital three primary ways.First, as suggested by Lesser and Prusak,organizations benefit from social capital whenthey are able to reduce rework and reinven-tion. According to the International Data Cor-poration, the cost of rework deficiencies isapproximately $5,500 per employee per year.Since older workers are more socialized intoan organizational culture, they not only have agreater understanding of organizational his-tory, norms, and rites, but also ‘‘know theropes,’’ leading to fewer mistakes and lesstime spent in rework and reinvention.

Second, older workers contribute tosocial capital through a decreased learningcurve. Given the length of time spent in a jobor with an organization, institutional mem-ory has been created by the older worker.Jobs have been streamlined and tasks do nothave to be taught from scratch or re-taught.In addition, the acquired connections andrelationships developed through associa-tions in networks lead to vast knowledgecreation. Having dealt with many differenttypes of customers, bosses, subordinates,competitors, and peers, older workers haveexperienced the gamut in interpersonal rela-tionships.

Finally, older workers are more likely toparticipate in organizational citizenshipbehavior (OCB) than are younger workers.

OCB involves discretionary behavior thathelps coworkers, supervisors, and the orga-nization, but that is not formally recognizedby the organization’s reward system. Assist-ing newcomers to the organization, not abus-ing the rights of coworkers, not taking extrabreaks, attending elective company meet-ings, and enduring minor impositions thatoccur when working with others are exam-ples of OCB. Research has shown that olderworkers enjoy mentoring younger workers,sharing experiences and knowledge, and areeager to contribute to their organizations.Younger workers, on the other hand, aresomewhat less likely to take part in OCBsince they are more concerned with buildingtheir own careers and have an entitlementperspective toward work.

SUMMARIZING HUMANCAPITAL AS IT RELATES TOOLDER WORKERS

Undervaluing PIES or the overall humancapital of older workers will almost surelylead to mismanagement. An exampleinvolves the payroll cost versus replacementcost of an employee. A 60-year old mightearn a salary of $80,000 and cost $250,000to replace; however, is it really possible toreplace everything this person brings to thetable? That is, can you replace an older work-er’s acquired confidence, years of experience,emotional maturity, or network of relation-ships? The answer is probably not, since thevalue of such an employee may be more thanthe $250,000 replacement cost, and far greaterthan the $80,000 expense that the organiza-tion uses to value that individual. That 60-year old employee has built up valuablehuman capital over many years that cannotbe duplicated, and replacement is difficult atbest.

As we have discussed above, humancapital should continue to increase withexperience and time and those workers withgreater human capital will bring more posi-tive contributory value to companies. WhilePIES relates to workers of any age, we argue

that older workers are at minimum moreunderutilized human capital than youngerworkers. By fully utilizing older workers’human capital to create value, organizationswill see numerous positive organizationaloutcomes such as those described in thefollowing section.

POSITIVE ORGANIZATIONALOUTCOMES ASSOCIATEDWITH OLDER WORKERS

Given the positive contributory value of olderworkers, organizations should reap the ben-efits from attracting, developing, retaining,and in all senses, positively utilizing this valu-able asset for a sustainable source of compe-titive advantage. Indeed, we suggest that oncethe positive contributory value is created,organizations will obtain benefits in the formof increased employee loyalty, decreasedemployee turnover, retention of institutionalknowledge and memory, and increasedemployee productivity.

Increased Employee Loyalty andDecreased Turnover

Employee retention of valuable employ-ees is now on many top managers’ ‘‘radarscreens’’ as a central issue in growing anorganization. While the costs associatedwith turnover are enormous, approximately84 percent of companies in the United Statesdo not formally track turnover costs. Infact, most do not even have a way to quan-tify the turnover costs that are incurred bytheir organization. So, in essence, organiza-tions do not fully realize what they arelosing.

How can these costs be avoided? Theanswer to that question is an obvious one —retain the firm’s most important resource:its human capital, and particularly thatwhich is contained in older workers. Olderworkers maintain a more traditional view ofthe employer/employee relationship, andtherefore, often report a desire to put theorganization’s needs before their own, feel

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allows for knowledge and memory from

a sense of obligation and loyalty to employ-ers, and think of work as a positive aspect oftheir life. For example, a 70-year-old execu-tive for Chevron who just returned as a con-sultant recently stated . . ..‘‘I had to comeback. I don’t want to play golf all the time,for God’s sake . . . and I feel a strong, strongallegiance to Chevron.’’

Furthermore, recent evidence has indi-cated that today’s older workers are absentless, are more committed, and turn over lessthan younger workers. This is ironic in lightof the fact that the most typical justificationfor letting go of older workers is that they aretoo expensive to retain. The rationale is thatby replacing the ‘‘expensive’’ older workerwith a ‘‘cheaper’’ younger worker, organiza-tions can better meet short-term financialgoals.

However, from a long-term perspective,consider the potential cost of new employeehire: recruiting, interviewing, applicationprocessing, testing, relocation, referencechecks, agency/search fees, signing bonuses,orientation, in-house training, outside train-ing, etc. And these are just the more obviouscosts. Indirect costs such as lost productivityof the vacant position, lowered productivityof coworkers as they adapt to the newemployee, and the new hire’s limited pro-ductivity during the learning curve also con-tribute to overall turnover costs. By andlarge, it is more expensive to hire a newemployee at a lower salary than to retain ahigher paid current employee.

Enhanced Insti tutional Memory

Because of their experience and timewithin an organization, older workers havemore knowledge. Organizations that letthese workers go before that knowledge iscaptured or put into institutional memoryare at risk of losing vital information andcompetitive advantage.

Delta Airlines felt this first-hand when inApril of 1994, the airline chose to lay off18,000 employees, approximately 22 percentof its labor force. While short-term resultswere positive (i.e., the next 100 days after the

162 ORGANIZATIONAL DYNAMICS

layoffs, the S&P 500 Index increased by fourpercent and Delta’s stock value increased bydouble that amount), long-term consequenceswere less rosy. With those layoffs, Delta con-cluded that essential knowledge was lost,along with the possibility of innovation dueto years of experience. Delta tried to weatherthe storm by hiring temporary workers to takethe place of those downsized, but those tem-porary workers were untrained and inexper-ienced. This led to an increase in operatingcosts and resulted in additional high costsassociated with the rehiring process. Deltalearned that company loyalty, productivity,and firm-specific skills should be seriouslyassessed prior to a massive layoff. Delta wasalso forced to realize how valuable its employ-ees were to the organization.

In contrast, when valuable workers areretained, institutional knowledge is retained,and memory is passed on to new workerswho enter the organization. One example of acompany that actively utilizes its workforcefor memory creation is Harvard PilgrimHealth Care. This company implemented aprogram to ensure that vital and uniqueknowledge was not lost when employees leftthe firm. The five key steps to its captureprocess were:

� Department leaders choose experts ineach area for debriefing

� Expert employees complete job knowl-edge notebooks

� Expert employee’s direct supervisorand senior management certify knowledge

� Together, human resources and thedepartment head evaluate and establishvalue of the knowledge

� Knowledge reward is paid toemployee

The outcome of the process is that criticalknowledge is captured and managers areable to effectively train new hires. Olderworkers arguably have the most knowledge,so should be given proper attention in termsof recruitment and retention. Activelyrecruiting older workers is beneficial, as it

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ompetitors to come into your organization.etaining existing older workers preventsital knowledge and memory from goingut the door.

ncreased Productivi ty

According to recent studies, people live anverage of four years longer when they areroductively engaged. Based on those find-

ngs, older workers should have a strongesire to keep working and contributing to

he organizations in which they are a part.arris Interactive reported that older work-

rs are on average 49 percent more motivatedhan younger workers. Increased motivation,ombined with older workers’ desire to findpportunities to add value, to be challenged,o remain connected to others, to enhancencome and standard of living, and to har-ess a sense of overall well-being are alleasons why we can expect high productivityrom older workers.

In addition to increasing their individualroductivity, older workers can enhance theroductivity of those around them. By creat-

ng a climate of positive attitudes and moralepsychological capital), sharing well-devel-ped skills and experience (intellectual capi-al), being a mature and savvy role modelemotional capital) and participating in net-

orks and citizenship behaviors (social capi-al), older workers can add even more torganizational productivity.

In the previous section, we discussed theositive outcomes associated with recruitingnd retaining older workers. However, whatf these workers do not want to be recruited

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and retained? Below we describe two keymethods for retaining older workers.

HOW TO RETAIN OLDERWORKER HUMAN CAPITAL

The good news is that people are not onlyliving longer, they are choosing to worklonger. In today’s marketplace, the age 50and over segment of the workforce is thefastest growing. In fact, an AARP study con-firmed that the first 76 million ‘‘baby boom-ers’’ have hit 55 years of age and 80 percentbelieve they will work through retirement.Additionally, we have a growing pool todayof 6–7 million Americans aged 55 and olderwho are retired, but are still passionate aboutwork and looking for opportunities.

However, not all workers feel this way.Many older workers are sick of the dailygrind of work and without suitable alterna-tives (e.g., part-time appointments, opportu-nities to work from home, or extendedvacations) are looking forward to retirement.In addition, a host of legal and politicalbarriers (e.g., Social Security) often create adisincentive to working past a certain age. Toovercome barriers, it is imperative that orga-nizations offer various incentives to attractand retain older workers.

1. Flexibility in HR Policies. In order toattract and retain valuable older workers it isimportant to shift paradigms and create poli-cies, procedures, and systems which fulfillthe unique needs of older workers. Below is asummary of potential incentives that may beutilized to retain older workers.

onetary incentivesStock optionsIncentive compensationRetention bonusesPurchase discounts

evelopment opportunitiesTraining opportunitiesIncreased job scopeSkills developmentMentoring

enefits incentivesImproved medical benefitsImproved retirement plans

chedule flexibilityPhased retirementBridge employmentPart-time work or other form of flexible schedulingConsultant or contingent work

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Polaroid Corp. is a good example of acompany that uses flexible work arrange-ments as a method of retaining employeeswho are at or close to retirement age. Theemployees have two main choices withinthis flexible arrangement. The first isreferred to as the ‘‘rehearsal retirement’’program. It allows employees to take a leaveof absence for up to three months with thepossibility of extension for up to six months.At the conclusion of their leave of absence,employees are allowed to come back to thesame jobs with the same responsibilities orthey may select alternate jobs. The secondprogram is referred to as the ‘‘tapering off’’program. With this alternative, employeescan reduce their workweeks anywherefrom 32 hours per week to a minimum of20 hours per week. Providing these optionsto employees at or close to retirement ageled to increased morale and worker produc-tivity at Polaroid, which indirectly led toretention.

Phased retirement is slowly becomingthe option of choice for organizations want-ing to encourage older workers to stay. Whileonly eight percent of today’s companies usephased retirement, its use is expected toincrease in the coming decade. AerospaceCorp. currently uses phased retirementoptions to retain institutional knowledgeand specialized skills, thereby boosting pro-ductivity by keeping high experience work-ers, lowering hiring and training costs, andattracting the best employees over time.Aerospace employs a process whereby theretirement-eligible can take a leave ofabsence for up to three months to exploreinterests and career trajectories prior toretirement. Then, if they choose, they mayreturn to work and switch to any form ofcustomized work arrangement if it meets theneeds of the organization.

Other examples include Deloitte Con-sulting, which recently implemented a seniorleaders program, allowing retirement-eligi-ble partners to downshift from full-timeto part-time or from consulting to mentoring.Chevron also works hard to hang on tovalued senior managers by allowing older

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workers to leave a permanent career trackand come back as a trainer to new executives.In addition, Chevron also encourages retiredworkers to come back into the workforceto serve on boards to counsel youngermembers.

2. Attitude Change. In addition to theplethora of incentives toward older workerretention described above, organizationsmust focus their efforts on changing theattitudes of employers and employees(and society in general) toward the idea ofvaluing the aging workforce and its incred-ible amount of human capital. People whofeel valued and respected will stay with theorganization, are more positive, will spendmore time doing citizenship behaviors, andwill be more productive. These behaviorsare likely to rub off on new workers, creatinga positive climate of respect. While challen-ging long held beliefs is not easy, a focus onhuman strengths will ultimately shift thefocus from negativity to one of positivityand prosperity.

Baptist Health Care South Florida is anexample of an organization that has all butabolished negative attitudes surroundingolder workers in favor of a more positiveview. Baptist Health has received numerousawards and recognition for being a greatplace to work at any age, in part becausemanagers keep asking the questions, ‘‘Howcan we keep our older workers a little whilelonger?’’ and ‘‘How can we leverage andutilize the wisdom and experience of ourgrowing population of aging workers?’’ Asmore organizations challenge the negativestereotypes surrounding older workers andcreate new positive ‘‘stereotypes,’’ olderworkers will begin to flourish and thrive.

3. Knowledge Transfer Programs. Whilelengthening the average worker career willhelp with recruitment and retention, olderworkers will still ultimately leave the work-force. Without proper programs in place,when this happens, valuable knowledgeand memory will walk out the door with theseworkers. Knowledge transfer programs referto programs that help define, capture, man-age, disseminate, and measure information.

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Many companies, such as Chevron, Pru-dential Insurance and Monsanto Company,are leading the way in tailoring work so thatseniors can better transfer wisdom and skillsto younger colleagues. Programs employedby these companies include knowledgeaudits that can take place yearly as a methodof measuring and capturing current intellec-tual capital. Also, exit audits are utilizedbefore an employee leaves a company as ameans to evaluate acquired knowledge.Such programs are aimed at the measure-ment and retention of valuable organiza-tional knowledge. Companies with suchknowledge management initiatives areahead of those without; they have acknowl-edged that information is critical to theirsuccess and are implementing programs toprotect it.

ONCLUSION

here are many challenges associated withlder worker management — governmentalarriers, policy barriers, social stigmas andocietal expectations, all adding up to a for-idable wall keeping older workers out of

he workforce. However, as this paper sug-ests, the time has come to take a positivesychology perspective on older workers. Byecognizing the positive contributory valuehat older workers can bring through theirigh levels of psychological, intellectual,motional, and social capital, organizationsan reap financial and competitive benefits.

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SELECTED BIBLIOGRAPHY

Our discussion has been influenced by recentwork in the areas of demographic changeand aging as well as the perceptions sur-rounding older workers and ageism. Forexample, see P. Drucker’s work, especially‘‘The Next Society,’’ The Economist, Novem-ber 2001; P. Peterson’s Gary Dawn: How theComing Age Wave Will Transform America andthe World (Crown, 1999); M. Greller and L.Stroh, ‘‘Making the Most of ‘Late-Career’ forEmployers and Workers Themselves: Becom-ing Elders not Relics,’’ OrganizationalDynamics, 2004, 33(2), 202–214; M. Sturman,‘‘Searching for the Inverted U-Shaped Rela-tionship Between Time and Performance:Meta-Analysis of the Experience/Per-formance, Tenure/Performance, and Age/Performance Relationships,’’ Journal of Man-agement, 2003, 29(5), 609–641; G. McEvoy andW. Cascio, ‘‘Cumulative Evidence of the Rela-tionship between Employee Age and Job Per-formance,’’ Journal of Applied Psychology, 1989,74(1), 11–17.

Key surveys from which statistics weredrawn include The US Department of Labor,February–March 2004; Society of HumanResource Management, June 2003; MacArthurFoundation Study on Aging, 2000; AARPReport, June 1998 and June 2004; Committeefor Economic Development, 1999.

Our positive perspective on older work-ers was inspired by the positive psychologymovement. Two special issues of the Amer-ican Psychologist have been devoted to posi-tive psychology: 2000, 55(1), and 2001, 56(3).Other key references include C. Rick Snyderand S. Lopez’s Handbook of Positive Psychology(Oxford University Press, 2002); and F.

Suzanne J. Peterson (Ph.D., Universiprofessor of organizational behavior atRichard T. Farmer School of Business a

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Luthans ‘‘Positive Organizational Behavior:Developing and Managing PsychologicalStrengths for Performance Improvement,’’Academy of Management Executive, 2002, 16,57–75.

Detailed discussions of psychological,intellectual, emotional, and social capitalcan be found in F. Luthans and C. Youssef’s,‘‘Human, Social, and Now Positive Psycho-logical Management: Investing in Peoplefor Competitive Advantage,’’ OrganizationalDynamics, 2004, 33(2), 143–160; M. Hitt andD. Ireland, ‘‘The Essence of Strategic Leader-ship: Managing Human and Social Capital,’’Journal of Leadership and Organizational Stu-dies, 2002, 9(1), 3–14; J. Nahapiet and S.Ghoshal, ‘‘Social Capital, Intellectual Capital,and the Organizational Advantage,’’ Acad-emy of Management Review, 1998, 23, 242–266; T. Stewart, Intellectual Capital: The NewWealth of Organizations (Currency Double-day, 1997); D. Goleman, Working With Emo-tional Intelligence (Bantam Books, 1998); J.Fitz-enz, The ROI of Human Capital: Measuringthe Economic Value of Employee Performance(AMACOM, 2000); and T. Davenport, HumanCapital: What It Is and Why People Invest It(Jossey-Bass, 1999).

Regarding positive outcomes associatedwith retaining older workers see W. Zinkeand S. Tattershall, Working Through Demo-graphic Change: How Older Americans CanSustain The Nation’s Prosperity (HumanResource Services, Inc., 2000); S. Davis andC. Meyer, Future Wealth (Harvard BusinessSchool Press, 2000); E. Lesser and L. Prusak,Creating Value With Knowledge (Oxford Uni-versity Press, 2004).

ty of Nebraska) is an assistantthe Department of Management,t Miami University, Oxford, OH

45056, USA and the School of Global Management and Leadership atArizona State University. In addition to the study of positive organiza-tional behavior, her work focuses on leadership development (Tel.: +1513 529 4232; fax: +1 513 529 2342; e-mail: peterssj@muohio.edu).

Barry K. Spiker (Ph.D., Ohio University) is the Markley VisitingProfessor of Management at the Department of Management, RichardT. Farmer School of Business at Miami University, Oxford, OH 45056,USA. For the past 20 years, he has managed and led practices in three ofthe largest global management consulting firms in human capitalmanagement and change management and worked with over 100 clientsin health-care, government, hi-tech, manufacturing and transportation.He has authored or co-authored nine books and several articles inacademic and trade related journals (Tel.: +1 513 529 4232; fax: +1 513 5292342; e-mail: spkerbk@muohio.edu).

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