Is age variety the key to organisational productivity?

Today’s workforce is becoming increasingly more age-diverse – due in part to a growing proportion of older workers who are working longer than ever before (The Treasury, 2015), and the entry of the newest cohort of workers – generation Z (Strategic Finance, 2017).
As a result, there are already greater demands placed on organisations to recognise more appropriately, and address, the needs of their age-diverse workforces. To continue meeting these demands, organisations are increasingly seeking to understand the relationship between the age composition of a workforce and organisational productivity.

Age diversity at work is often seen as a double-edged sword. On the one hand, age diversity has been shown to yield positive benefits, due to increased knowledge sharing and complementarities. On the other hand, age diversity has also been linked to negative outcomes, a result of age-related differences in values, opinions and attitudes that may reduce group cohesion. It is therefore unsurprising that, while there has been a large body of empirical research into the performance effects of age diversity, much of this research has produced competing and inconclusive results (e.g. Grund and Westergaard-Neilsen, 2008; Kunze et al. 2011).

So what conditions lead to increased or decreased organisational productivity? De Meulenaere, Boone and Buyl (2016) from University of Antwerp, Belgium, found that it boils down to the type of age distribution in the workplace. In essence, they found that workforces with an even spread of ages do better than workforces with polarised and distinct age groups. Their findings suggest that we must look beyond statistics on age range or average age when seeking to improve organisational outcomes through age diversity.

Aim

To examine when age diversity has positive or negative effects on organisational productivity, the researchers examined two types of age diversity: age variety (see Figure 1, top left) which refers to the heterogeneity of ages in an organisation, and age polarisation which refers to age being separated into distinct groups in the workforce (see Figure 1, bottom left). In addition, the authors also wondered whether the impact of age diversity on organisational productivity may depend on the environmental context that employees operate in. To test this idea, the authors examined whether firm size or job security affected the extent to which positive or negative productivity outcomes were realised.

Figure 1. Research model from De Meulenaere et al. (2016) study.

Method

The researchers drew on a large sample of 5,892 observations from 1,983 Belgian firms. Anonymised employee and organisational-level data (e.g. demographics) were collected for the period between 2008 and 2011, while financial data was collected from the annual reports published by each Belgian firm. Productivity was measured as each firm’s gross value, divided by the number of employees.

Findings

The results revealed that the impact of age diversity on organisational productivity is different depending on the age distribution of the workforce. The size of the organisation and, to a smaller extent, perceptions of job security also have an impact on the relationship between age diversity and productivity. Taking a closer look at the research findings:

The relationship between age diversity and organisational productivity

The findings revealed that age diversity can have both a positive and negative relationship with productivity depending on the type of age distribution. Whilst age variety increases productivity, having a polarised age distribution decreases productivity. The results suggest that when there is a heterogeneity of ages represented in a workforce, this age variety enhances or encourages synergies and knowledge sharing – ultimately driving improved productivity. However, in organisations or teams where there is age polarisation, the differences between groups are more salient, thereby decreasing cooperation and negatively impacting productivity.

The role of firm size

Findings also revealed that the positive and negative impacts of age polarisation were stronger for larger organisations than in smaller organisations. Put simply, the authors explained this finding with the observation that age differences are amplified in larger organisations. With a larger number of employees, age differences become more prominent, enhancing their positive or negative impact on productivity.

The role of job security

The effect of job security on the age diversity-productivity relationship was only partially supported. Consistent with what was expected, the authors found that increased job security – which tends to increase cooperation amongst employees – enhanced the positive effects of age variety. However, strong job security was not enough to overcome the negative impact of a polarised age distribution in the workplace.

Implications

As the age composition of the contemporary workforce continues to change, the findings from this study provide an evidence-based guide for organisations as they seek to understand the complex impact of age diversity, and maximise organisational productivity. More specifically, the findings suggest that when analysing age diversity in organisations, the distribution of this diversity should be examined in further detail. Leveraging the findings from this research, organisations should consider the following points:

Workforce analytics. Consider workforce analytics that allow for a deeper dive into the age distribution across business units/departments/teams to understand the dynamics that may be occurring between generations

HR policies. Develop strategies for the recruitment, retention and engagement of an age-diverse workforce to reduce the risk of polarised organisations and to optimise organisational and team-based productivity

Inclusive team behaviours. Identify teams where age polarisation may exist and develop inclusive strategies (e.g. coaching, reverse mentoring) to involve age diverse team members

Employee engagement. Establish employee engagement approaches that progress beyond job security and appeal to the spectrum of ages in the workforce such as well-being, flexible working arrangements, career/development planning and open talent strategies (e.g. such as rehiring alumni that retire or resign in a different capacity such as contracting)

 

 

To read the full article, see De Meulenaere, K., Boone C., Buyl, T. 2016, ‘Unraveling the impact of workforce age diversity on labor productivity: The moderating role of firm size and security’, Journal of Organizational Behavior, vol. 37, pp. 193-212.

For more information, contact Monica Pham or Olivia Tsen – Human Capital (Organisational Transformation & Talent) – Melbourne, Australia.

References:

Balbi, A. 2015, ‘Next-generation job candidates: Generation Z, born between 1990 and 1999, is preparing to enter the workforce, and their expectations are high’. Strategic Finance, viewed May 30 2017, https://www.highbeam.com/doc/1G1-432064689.html

Grund, C., & Westergaard-Nielsen, N 2008, ‘Age structure of the workforce and firm performance.’ International Journal of Manpower, vol. 29, no. 5 pp. 410–422. DOI: 10.1108/01437720810888553

Kunze, F., Boehm, S., & Bruch, H 2011, ‘Age diversity, age discrimination climate and performance consequences: A cross organizational study’. Journal of Organizational Behavior, vol. 32, pp. 264–290. DOI: 10.1002/job.698

The Australian Treasury 2015, 2015 Intergenerational Report Australia in 2055, viewed 30 May 2017, http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2015/2015%20Intergenerational%20Report/Downloads/PDF/2015_IGR.ashx

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