Enterprises must pay attention to the age management of talent

If I ask you a question: Have we ever systematically counted, thought and managed the age structure of the company's employees? The answer is probably no for many companies!

We throw out this topic, it is clear that age management is necessary. So, from the age structure of employees, we can see what the problem? Or, what kind of guidance can the age structure of employees give us?

For the above question, it is estimated that few people have thought about it. I don't know if you still remember, in 2017, Huawei "retired" a technical service system employees over 34 years old. The news originally came from a post on Huawei's internal communication website, Voice Community. At that time, the post revealed that Huawei a system began to focus on clearing the 34-year-old delivery engineering maintenance personnel, while the R & D system began to focus on clearing the retirement of older employees over 40 years old, mainly for programmers.

Such an event, from the perspective of employees, individuals, the workplace, is bound to cause a huge uproar, a lot of people for Huawei, that such an enterprise is not humane; part of the people will think out the career crisis and career anxiety; however, few people from the point of view of the enterprise to think about - why is 34 years old, However, few people think about it from the perspective of the company - why 34, 40 years old? What is the logic behind Huawei's move? What kind of reference significance does it have for us to do business?

We always like to learn from Huawei, but to learn from Huawei, you can't just stay on the surface, you have to deconstruct the logic at a deeper level.

Does the age of talent matter to an organization? Of course, we see that many companies often have an age limit when recruiting. This means that age is an important consideration.

However, when we enter a company, we find that very few companies manage and consider the age of their employees. This is a brutal indicator for professionals, but one that must be taken into account in the talent dimension for sustainable business development!

A 2005 study by economists Cai Fang and Wang Dewen pointed out that demographic factors, especially the age structure of the population, are important factors affecting economic development. For the country, we can easily understand this. This is why the liberalization of two children, because the labor force is getting smaller and smaller!

This is obviously equally important for businesses. However, it is often overlooked! As mentioned, this importance basically just stays in the recruitment stage of the enterprise talent, but what about after recruitment?

Imagine, the same industry, an average age of 40 years old and an average age of 28 years old employees of the enterprise, will be the same?

What would be the result of a business where the average age of a new manager is 26, and another business where the average age of a new manager is 36? I've seen this kind of data in an industry that is basically close, and I can imagine that the latter business is much less well managed, team dynamic, and competitive.

We believe that every different industry must have a secret hidden in a different age group. And in general, if ageing, it is basically a not so good phenomenon.

Similarly, what is the basis for this age requirement that we set when hiring? Can anyone give a definitive answer?

To explain the logic behind Huawei's move, and to answer the questions posed above, we did a study using data from 2010-2014 from 50 GEM-listed companies. The conclusions of this study are of great practical significance to the structured management of human resources, which can directly reflect the value of human resources management, which can truly create value for the enterprise, and can also bring operational thinking to human resources management. We have inadvertently proved the correctness of two famous principles: "Peter's Principle" and "Paradox of Power". This is discussed further below.

We utilized 50 GEM-listed companies, with data selected from 2010-2014, from the companies' annual reports, a ****250 sample. The reason we chose GEM-listed firms initially was that most GEM firms conducted age statistics and published them in their annual reports. The reason why we chose 2010-2014 is that the years when most firms counted and published their age structure were these 5 years, and our aim was to maximize the sample to reduce research fallacies.

However, we inadvertently found that GEM enterprises have several ****similar characteristics: first, they are basically fast-growing and of a certain scale entrepreneurial enterprises, small and medium-sized enterprises (SMEs), as well as high-tech enterprises, and most of them have a total operating revenue of between RMB 200 million and RMB 1 billion, and the problems they face in the course of their operations are relatively consistent or similar; second, most of these enterprises are in the process of stage of transformation from factor-dependent to system-driven, and factors such as human capital may still play a greater role than organizational systems in the process of enterprise growth. The reason for indicating this point is that our findings, which may have differences in different growth stages of enterprises, are more suitable for enterprises with a size of 200 million to 1 billion dollars, but the regularity of which may shed light on other types of enterprises.

In terms of industry, the sample companies in our study are mainly concentrated in 15 industries, as detailed in the table below. The higher percentage is in the biopharmaceutical industry with 9, followed by the ICT industry with 8. Indicating this is also to show that the significance of our conclusions for direct reference is higher for industries with a higher percentage of the sample.

For the purpose of this study, we broadly categorized the age structure into 4 stages: 30 years and below, 31-40 years, 41-50 years, and 51 years and above. The reason why, divided by such a structure, is that most enterprises are adopting this age structure, and there are almost no enterprises that publish the age distribution status of enterprises in a more detailed way, and there is a lack of research in this area in the existing academic research. Fortunately, in our country, "the Analects of Confucius - for political" in the "twenty weak crown, thirty and standing, forty not confused, fifty know the fate of God, sixty flowers a son, seventy ancient rare, eighty for the oldest old age," the division of the age structure to 10 years for the stage of such a division, that is, it is also predicted that in the different ages of the people's experience, the situation and the state of affairs will be different. Therefore, this paper believes that the age structure of this division has the desirability.

As for the methodology, it belongs to the specialized things, which will not be introduced here, so it goes directly to the key part of the conclusion. Five conclusions are drawn from this study I***:

We carried out a hypothesis test that age may measure part of the level of human capital, because age, which may be similar to educational qualifications, partly measures the level of skills and knowledge that a person acquires later in life - at the very least, experienced people are equipped with the ability to allocate resources at a higher level; it may also measure aspects of physical strength, health, and motivation (energy), all of which constitute important elements of human capital.

Economists Schultz and Zhou Qiren have both pointed out that human capital constitutes the source of present and future revenues for firms. If this is the case, there are differences in the value created by people of different ages to firms due to their different levels of human capital. Our findings show that this hypothesis passes the test at the 5% level of significance. In other words, there is a 95% probability that this conclusion is correct.

Let's start with two levels of understanding of this conclusion:

First, human capital, measured by age, does have a positive value creation effect on firms;

second, age explains about 45% of the level of human capital that a person possesses, and 45% of that can be explained by age. For example, a 35-year-old employee creates 1.5 million in output, while a 25-year-old employee creates 1 million in output, and there is a difference of 500,000 in output between them, and the human capital represented by age brings in 45% of the 500,000, i.e., human capital represented by age explains 225,000 of these sources of income. So, from this perspective, the importance of conducting employee age structure management comes to the fore.

So, what is the level of human capital, as measured by age, expressed through? It is self-evident that it is through the contribution to the economic performance of the firm. In this study, we utilize the marginal contribution ratio, in other words, differences in human capital measured by age are manifested through differences in their marginal contribution. The so-called marginal contribution is the incremental amount of revenue brought about by increasing 1% of people of a certain age. For example, if the turnover of 1 enterprise is 200 million dollars, and there are 30 people aged 31-40 years old, and the marginal contribution rate is 0.2, then the incremental amount of revenue brought about by increasing 1% of 31-40 year olds is 400,000 dollars (200 million dollars * 0.2%), therefore, the marginal contribution is 400,000 dollars.

And the curve connected by the marginal contribution at each age constitutes the "Marginal Contribution Curve", which we will discuss in more detail below.

Differences in Marginal Contribution Rate by Age, Peaking at 31-40

The second key conclusion we draw is that there are large differences in the Marginal Contribution Rate of people of different ages, with the highest rate for those in the 31-40 age range, followed by those under 30, then 41-50, and finally those over 50, as shown in the following table:

The Marginal Contribution Rate by Age is the highest in the 31-40 range, followed by those under 30, then 41-50, and finally 50 and above. p> The data in the above table are connected into a curve by age, which constitutes the "marginal contribution curve", and it is easy to find out from the above table that this marginal contribution curve is in the shape of "∩", i.e., it rises first and then falls, as shown in the figure.

From this conclusion, it is not difficult to explain why Huawei wants to retire people over the age of 34. The conclusions of this paper will be somewhat different from those of Huawei, but still explain the logic behind Huawei's dismissal of maintenance engineers over the age of 34. Because their marginal contribution margins may have been much lower in Huawei than those under 30, there is another reason why the higher costs of those over 34 years of age have eaten into their profits, and the overall trade-off is a decline in their profits.

For example, if Huawei's average annual salary for people over 34 is $1 million, with 120,000 personnel, and a marginal contribution rate of 0.2, and the average annual salary for people under 30 is $600,000, with 40,000 personnel, and a marginal contribution rate of 0.18, Huawei's annual turnover is $500 billion,. The income (marginal contribution) from increasing 1% of the personnel over 34 years old is 1 billion, while the increased cost is 1.2 billion, the profit due to the increase in personnel is -200 million, while for the young people, the income from increasing 1% is 900 million, while the cost is 240 million, and the net profit is 660 million, and the conclusion is clear that it will be clear that it will clear out the employees over 34 years old, although the 34-year-old personnel's marginal contribution rate is high, but their costs are also high.

This conclusion of ours explains a story that circulated online in February this year. A 43-year-old head of sales in a private company left his position and interviewed with 15 companies in an embarrassing situation. The findings of this paper show that the marginal contribution rate of people over 40 years of age is lower than that of young people, and will become lower and lower, so it does become more difficult for older people to find jobs when they are unemployed and re-employed.

I don't know if you have read Lawrence Peter and Raymond Hull co-authored a book called "Peter's Principle", a very classic, which reveals a common phenomenon: in the hierarchical organization, the promotion of employees from competent positions to incompetent positions, every person in every class, sooner or later, will come to this step. This phenomenon is known as "Peter's Principle" and is widely spread in management. And our research just confirms this conclusion. Why does everyone move towards incompetence? There is no more convincing reason than the fact that their marginal contribution has declined.

So what is the relevance of this conclusion for us in business management?

First, when we are recruiting, age can be an important constraint. From the perspective of cost effect, unless there are some special positions, being too old is not in line with the requirements of profit maximization.

Second, structured management based on the age of the talent can bring human capital dividend, this part of the dividend comes from three aspects: (1) with younger employees instead of older employees, can get cost savings; (2) the marginal contribution rate of young people show incremental effect, so it can bring improvements in operational efficiency, per capita output value will rise; (3) the marginal efficiency of young people will even be greater than that of older employees.

Therefore, for enterprises, it is a very wise choice to introduce a large number of college graduates. If you pay attention to the training of graduates, increase investment, shorten the cycle of success of graduates (i.e., extend the peak value of their contribution), you can also harvest a source of human capital dividends. McKinsey is a typical case, through the world's top business schools to select the best talent and accelerate the training, shorten the cycle of success, so that not only can extend the time to create value, but also can save labor costs, thus maximizing the human capital dividend.

From college graduation to the age of 30 may be from the general-purpose talent to enterprise-specific talent transformation to form the key stage of enterprise-specific human capital, this stage, if smooth, then will bring great contribution to the enterprise. Therefore, enterprises focus on the training of young college students, human capital investment is of extraordinary significance: on the one hand, once a person enters the age of 40, the role of its human capital has become more and more limited, so it can only be invested in young people; and the reality is that most small and medium-sized enterprises do not pay attention to the introduction of the graduates and the training of the, which is precisely into a huge misunderstanding, they often hope that the recruitment of experienced people from the outside. This is a huge mistake, and they often look to external recruitment of experienced people.

Emphasis on the introduction and training of graduates, there is another objective reason, we usually from the talent market (we call it the secondary market of human capital, and the university called the primary market of human capital) to introduce the experienced talent, often the growth of the environment has a dependence on the environment of the original enterprise, that is, he is more adapted to the original environment, but changed to a different environment, its adaptability (creativity) to be But in a different environment, their adaptability (creativity) will be questionable. Therefore, the survival rate of introduced social talents is not high. And if you have high expectations, the risk of survival is further magnified.

We need to understand a basic fact is that talent is never evaluated in isolation, but rather in the context of the business environment, which is why we see that people who do well in this business don't do so well in a different position. This is also an important reason why companies must be autonomous in talent development. -- The implicit costs, explicit costs, and opportunity costs of socially recruiting talent are actually very high.

Dacher wrote a very famous book called "The Paradox of Power", which also reveals a universal phenomenon, this universal imagination is called "the paradox of power", that is, "people get power, usually rely on empathy, collaboration, openness, fairness, and sharing altruistic qualities and behaviors. But as people feel empowered and privileged, these qualities begin to disappear. People with power are more likely to behave rudely, selfishly, and unethically."

From the perspective of corporate human resource management, the "paradox of power" can reveal a common problem, that is, in the enterprise, those who are in charge of the "power" if misbehavior, will cause a "crowding out effect" on the other people who behave properly. The "crowding out" effect, so the efficiency of business operations will be reduced.

This view of Dacher's is validated in our study.

Our study found that people aged 41-50 have a "crowding out effect" on others. When we consider the marginal contribution rate of each age group individually and all of them at the same time, we find that the marginal contribution rates of people of different ages are quite different, as shown in the following table:

When we consider all of them at the same time, we find that the marginal contribution rates of people under 30, 31-40, and over 50 are lower than when they are considered individually, while those of people 41-50 are lower than when they are considered individually, and those of people 41-50 are lower than when they are considered individually. When considering all ages simultaneously, we find that the marginal contribution rate of people under 30, 31-40 and over 50 years old is lower than when considering them individually, while that of people aged 41-50 is higher, which indicates that people aged 41-50 have a "crowding out effect" on other people, of which the most crowding out is people under 30, followed by people over 50, with 0.085 and 0.083 respectively, and the contribution of these two people to the enterprise becomes insignificant, which means that it is not certain whether they can bring contribution to the enterprise or not. uncertainty. This phenomenon confirms the principle of Dacher's "paradox of power".

Why is it that 41-50 year olds "crowd out" others? Why is it that 41-50 year olds are "crowding out" the rest of the population, i.e., that they are crowding out the under-30s? --Of course, note that this is a probability, not a total, and it doesn't mean that they will engage in interpersonal crowding out behavior.

It can be understood this way: in business, those in power tend to be concentrated in the 41-50 year olds, and at this age is also the time when people have the most power and prestige, or have some non-authoritative influence within the business, or have a superior advantage in the interpersonal level, in other words, it is also the stage when bureaucracy is very likely to arise and become serious. Under the traditional virtue of "respecting the old and caring for the young", age will always give people a certain amount of power - whether it is formal or informal (for example, we may see in some enterprises that an old junior may create pressure on a young middle manager), and this will often hinder young people from being able to take advantage of the situation. ), and this can often stunt the growth and progress of younger people.

Therefore, when we find that a company is not operating efficiently, from the perspective of human resource management, there may be two reasons:

First, the age structure of the company's personnel is on the older side, and the overall marginal contribution rate is low. From the above, we can understand that when a company's 31-40 year olds account for a lower percentage, the company's operating efficiency will be low;

Secondly, the bureaucracy of the old people is becoming more and more serious (whether intentionally or unintentionally), which produces a "crowding-out effect" on other people.

So, to change this inefficiency, the simplest and most direct approach is to eliminate some of the older employees and promote a large number of young people, which is a problem at the level of corporate governance mechanisms. In many enterprises, the staff basically lack of mobility, can up not down, so it is easy to form a bureaucratic habit.

In fact, Huawei's practice provides a good example for us:

First, in Huawei, the age of the staff every five years to zero 1, managers and ordinary employees competing for jobs, and even appeared in the marketing department of the resignation of all the post such a practice;

Second, the qualification system as the core, the salary with the job changes, and has nothing to do with the age. In other words, in Huawei, the promotion mechanism is able to go up and down, and the salary is also able to go up and down, which is more flexible. This not only breaks the "paradox of power", but also allows older employees to rejuvenate (and sends pressure to employees early on internally), and at the same time, gives young people the opportunity to grow and motivate them.

Therefore, to break the "paradox of power", the best way is to establish a flexible, results-oriented, and clear performance assessment and evaluation of the management mechanism. In front of the results, a bowl of water end flat.

Role transformation of older employees: from human capital to intellectual capital

From the conclusion of the previous section, we can easily understand that, as we grow older, our marginal contribution rate will decline after the peak, and even lower than that of young people; and because of cost pressure, people over 40 years old easily enter the bottleneck in the workplace, and face an embarrassing situation in the workplace. So, how should people over the age of 40 be placed in the enterprise is more meaningful for enterprises and individuals?

When we consider people 51 and older in relation to R&D spending, the marginal contribution of people over 50 shifts from positive to negative, while the cross term is positive. In other words, when we associate people over 50 with R&D, their marginal contribution rises as R&D spending rises.

The explanation for this is twofold:

First, companies that focus on R&D investment, or have a high technology or knowledge content, are generally more likely to have people over 50 who can be more valuable, i.e., their workplace lifecycle will be longer;

second, the transfer of experienced people to R&D (R&D in this context does not necessarily mean R&D at the technical level, it also (R&D does not necessarily mean technical R&D, but also management R&D), and not letting them engage in too many leadership positions will improve their post-career contribution, which will also improve the efficiency of the enterprise. This role change is actually a shift from human capital to intellectual capital, and these older employees may play the role of knowledge producers or transformers and disseminators, such as becoming internal lecturers, mentors, trainers, or senior experts, chief experts, etc. This role change is not only beneficial to the older employees, but also to the company. This role change is not only meaningful for older employees to continue their professional lives and avoid falling into the "Peter's Principle" in the management line, but also for the enterprise to make the best use of their talents, which is of great significance.

In fact, Japanese scholars Ikujiro Nonaka and Hirotaka Takeuchi pointed out in their explanation of the secret of the success of Japanese companies that the key to the success of Japanese companies lies in their ability to form a spiral from the creation to the transfer of knowledge internally. And this role, people over 50 years old can play, and now many retired old scientists into primary and secondary schools to carry out science education, which reflects this role, this conversion is in fact from human capital to the conversion of intellectual capital, experienced older employees can play the role of knowledge disseminator or producer.

Therefore, for people over 50 years old, on the one hand, they can consider transforming into professional coaches within the professional enterprises - management coaches, and transform their tacit knowledge into explicit knowledge to teach young people within the enterprises; on the other hand, they can guide the research and development of certain specialized fields within the enterprises, which may reduce the research and development risk, and can efficiently transform the results.

Therefore, this conclusion of this paper can provide meaningful guidance for the development of employees in the post-career stage, as well as for the enterprise talent management. Avoid getting into a situation where both sides are embarrassed, i.e., companies are worried about the aging of their staff, while older employees are worried about the future of their careers.

In enterprise human resource management, a key place is that we need to know the marginal contribution rate of talent, draw the marginal contribution rate curve. When we know the marginal contribution rate of talent, we can manage human resources like capital. Talent structure optimization, which is able to increase or decrease a certain part of the staff through such a simple initiative to create real value for the enterprise.

Of course, the existence of the enterprise needs people of every age, although certain ages of people to create value is not high, but they are needed to constitute an enterprise's talent ecology, and support the operation of the whole system, it is likely to be at the expense of their value to enhance the operational efficiency of the organizational system, in this paper's research, we do not consider the significance of the organizational system.

But, but we know the marginal contribution or marginal benefit of people at each age, we can know the reasonable size of people needed at that age. There is a simple way of evaluating this in economics, which is that when the marginal benefit of the personnel is equal to the marginal cost it brings, this is the time when the optimal level of personnel is reached at that age.

When we know the average marginal contribution of a firm's personnel, we can calculate the reasonable number of people needed for the firm. In the following, we examine the optimal level of the number of people required by a business in terms of the marginal contribution margin of the business as a whole. Let's take four enterprises as an example:

From the above table, we can see that in the case of the same enterprise data, while the total number of people in the company is different, comparing company A and company B, we can easily find out that company A is overstaffed, and the number of people in company B reaches the optimal level. From the above table, we can get a conclusion: in order to improve the efficiency of business operations, first, improve the overall marginal contribution rate of the enterprise, then how to improve the overall marginal contribution rate of the enterprise? The simplest way is to measure the marginal contribution rate of talents at each age, and reduce the proportion of talents with low marginal contribution rate to increase the marginal contribution rate of the company as a whole; secondly, to reduce the cost. In fact, a simple way to reduce costs is to hire young people or create a flexible compensation mechanism.

From the table above, when we compare Company A and Company D, we can similarly see that Company D has too few people, and that adding more people could improve the company's profits. Their difference is only that Company D has a lower cost per capita, which may stem from their higher percentage of young people or from the fact that their cost per capita is just going to be lower, while the latter brings us a challenge of how we can retain high-quality talent at low cost, which is a major problem in front of the company and will not be discussed here.

At this point in the article, the conclusion of our research has basically been revealed clearly, the epilogue to do some simple additions.

In the past, we have emphasized countless times a point of view, for most small and medium-sized enterprises, they have a "gold mine" to be mined - management, we call it "management of the dividend! "Just most managers are not clear about where it comes from, this article tells us that part of it - structured management of human resources can bring us a huge management dividend, the essence of this part of the management dividend is "human capital dividend". This part of the management dividend is essentially a "human capital dividend".

By the conclusion of the previous section, we should be clear about the value of human resource management. In fact, human resource management is now facing the urgent pressure of transformation, and this article provides a direction for the transformation of human resource management - like the management of capital to manage human resources.

Where does the pressure to transform our human resource management come from now? We are facing a real problem, and this real problem precisely highlights the importance of structured management of human resources: currently our country is in a stage of demographic transition - the population is aging. Therefore, some scholars (Cai Fang) believe that China's demographic dividend is disappearing. But in fact, what is disappearing is the "labor dividend", not the "demographic dividend". In fact, "demographic dividend" should include two aspects: labor dividend and human capital dividend. Although the "labor force dividend" is disappearing, but the "human capital dividend" but there is a huge mining space - China is in a from the labor force dividend to human capital dividend The first step in the process is to make sure that you have the best possible chance of getting the best out of it.

Therefore, for most enterprises, they should seize this opportunity to obtain the human capital dividend. To obtain the human capital dividend, we can start from two aspects:

The first aspect is brought from the outside. We can enhance the internal talent structure of the enterprise by introducing a large number of high-quality graduates. As pointed out by Liu Fanglong and Wu Nengquan (2013), the Chinese government's investment in education in the past has shaped a large number of high-quality general human capital for China, while the general talent quality structure of our enterprises is relatively low. We statistic 6 home appliance enterprises in the home appliance industry from 2005-2016 personnel composition status: the average proportion of personnel with college and below is 80.47%, and the proportion of personnel with less than college is 62.42%. Therefore, the quality of talent is generally low;

The second aspect is internally generated. We can optimize the internal talent structure, age structure is one of the aspects. The "human capital dividend" brought by this optimization has been clearly analyzed in the previous article, and will not be repeated here.

Based on the above conclusions, this article can introduce another conclusion, which constitutes an overall idea of this article: companies can improve business performance by optimizing the overall age structure of employees. However, it is worth noting that age explains only 45% of the measurement of human capital, i.e. there are other aspects of human capital, as Eric Hanushek and Ludger Wassmannin have used: math, science, and reading scores, which have an explanatory power of 75%. The reason for emphasizing this point is that we want to go beyond the age structure dimension in our human resource management.

Another shortcoming of this paper is that we have not further researched nor been able to determine what is the most appropriate average age of a firm's personnel. For example, as far as we know, the average age of Vanke's employees is 28-29 years old. Each industry and each company will have differences and may have its own requirements for a variety of reasons, as explained here.

However, for an enterprise, looking at and analyzing the age of its employees from a longitudinal perspective, from history to the future, and observing the changes in the age of its employees and the direction of the enterprise, should be able to produce direct and valuable management information. For example, in Gujia, its president will be very concerned about the age range of the newly promoted into the management, and set a basic standard, for example, in 2017, in principle, not to promote employees before 1984 to be a manager, while in 2018, in principle, not to promote employees before 1985 to be a manager, so as to ensure that the overall cadre age to remain at a reasonable level.

Of course there are special circumstances, not everything is cut, but only the establishment of standards, the special circumstances will become less, otherwise, everywhere at all times are special circumstances, management is also a mess.