Management & Operations

3 Key Strategies for Transit Agencies to Survive the Retirement Cliff

Posted on August 6, 2019 by By Chris McCarthy

erhui1979/Signature/GettyImages
erhui1979/Signature/GettyImages

The public transportation sector is facing a significant human resource challenge: its own aging workforce. Experts across industries have warned about the “retirement cliff,” when a large portion of the workforce is eligible to receive pension benefits and retire. For the public transportation sector, these predictions are coming true now. According to a 2017 report from the University Transportation Research Center, up to 50% of the current U.S. transit workforce will be eligible for retirement in the next 10 years.

Exacerbating the retirement cliff is the declining use of public transportation, which is exerting financial pressures on agencies across the U.S. The American Public Transportation Association found that ridership declined two percent in 2018 from the year before, resulting in the lowest ridership since 2006.

The convergence of these two trends poses a monumental challenge to public transportation agencies. Not only do they need to find an answer to their current staffing challenges, but many need to find creative ways to reverse years of ridership declines. Fixing the former issue is a first step toward solving the latter problem.

How we got here
Retiring workers would not be a significant problem if public transportation agencies were successfully recruiting younger workers. But they are not. There is a mismatch between the value proposition the agencies offer and the preferences of millennial and Gen Z workers.

Retiring workers would not be a significant problem if public transportation agencies were successfully recruiting younger workers.

In the past, public transportation agencies competed for talent by offering stable employment and attractive retirement benefits. For previous generations, these advantages were enough to make up for lower pay relative to careers in the private sector. Today, however, younger workers don’t accept jobs expecting to stay with a single employer for the duration of their career. According to a 2018 study from Gallup, 60 percent of millennials are regularly open to new job opportunities. That figure is 15 percentage points higher than non-millennial workers who say the same.

In addition, when organizations force workers to save a portion of their pay now for the promise of a very good match at retirement — a common structure for today’s public sector retirement plans — they lose their edge with younger workers who don’t view future retirement income as a compelling benefit. And they certainly don’t want to take a pay cut now to invest in a future match.

The tight job market also presents hiring challenges. When the economy is strong and talent is scarce, employers typically improve their packages and incentives to find people. That is easier for private employers than public or quasi-public sector agencies, as changes to pay or bonuses, creating new opportunities for professional growth and approving flexible work arrangements can be fraught with hurdles and take longer in bureaucratic environments.

There is no quick fix for the retirement cliff, but public sector transportation agencies can find more effective ways to cope with the talent shortage, like making strategic investments in three areas: culture, recruiting and professional development.

Embrace generational shifts
To attract younger workers, it is important to recognize and embrace generational differences, from how they communicate, to what they expect from a career and the flexibility they desire from employers. The nature of public sector jobs may offer fewer opportunities for flexibility compared to the private sector, but many agencies haven’t made any meaningful steps toward positioning themselves for success with millennials and Gen Z.

Public perception is not just something that impacts the ridership and revenue of transit agencies, it also affects their ability to attract and retain workers.

  • Every agency should have a compelling and inspiring brand message that communicates its values, perspectives and ideas to prospects and employees. This is especially important for millennials and Gen Z, who want their work to have meaning and purpose.

Every agency should have a compelling and inspiring brand message that communicates its values, perspectives and ideas to prospects and employees.

  • Building purpose into an organization is first a communications challenge. The process should begin with surveys to determine how internal (and external, if possible) audiences view the agency, as well as what they would change. Then action must follow.
  • Employees need to see that their voices are being heard, even if the change is incremental. That doesn’t necessarily mean ping pong tables, bring-your-dog-to-work days or other benefits that are commonly — and often erroneously — associated with younger workers (as nice as those might be). Research shows that younger workers value flexible schedules, opportunities for career development, parental benefits and premium health insurance. These benefits are more likely to help retain workers than nice-to-haves that may result in a short-term spike in satisfaction but have little lasting impact.
  • Ideally, the process of surveying employees, communicating change and then querying them again becomes a constant loop of feedback and improvement that cultivates a perception that the organization values the opinions of employees and is ready to adapt.

Public transit agencies are not known for being agile, but even gradual change — if it is consistent and informed by employees — can begin to shift the perception of an agency from the inside out.

Recruiting and onboarding must evolve
Too many public transportation agencies still have arcane hiring processes that drive would-be workers away. How candidates apply and how they are evaluated for positions is one area that organizations should review when assessing why they are not able to attract qualified applicants.

Too many public transportation agencies still have arcane hiring processes that drive would-be workers away.

  • By digitizing tests and aligning them with the day-to-day responsibilities of various positions, transit agencies can test candidates for multiple positions simultaneously, deliver and grade tests electronically, and provide scores to applicants before they leave a testing center. Speeding up this process helps to accelerate hiring. One transit agency that implemented a program like this decreased its time-to-hire from more than nine months to about two months.
  • Using internal or external recruiters to look for talent is another route that agencies should consider, borrowing a tactic that is more typical of private companies. Recruiters are valuable because they stay focused on the most qualified candidates. They also can focus their time on recruiting candidates who are just entering the job market and evaluating their career options. Hiring recent graduates has the benefit of acquiring people who don’t have engrained training practices from other organizations.
  • The focus on engaging and hiring the next generation of transit workers shouldn’t stop when a candidate accepts a position. A proper onboarding program reminds employees of all the reasons they made a good decision for their career and lifestyle. Job readiness and training will always be important components, but onboarding should also drive employee engagement and retention starting their first day.

Invest in professional development
Research consistently finds that millennials want opportunities to expand their skillsets and advance professionally. The organizations that empower employees to do this are better positioned to attract younger workers and retain them over the long term.

  • Public transit agencies should take a cue from the private sector, which is investing heavily in reskilling programs to keep up with technology and help older workers adapt to shifting job roles, as well as meet the professional development expectations of younger workers. Amazon, for example, announced in 2019 that it will invest $700 million in upskilling its U.S. workforce.
  • Professional development programs should be personalized: specific enough for employees to gain actionable insights, but flexible enough so they can define their own career goals and receive tailored advice. Leadership and management training programs for high achievers, for example, can help launch mid-level employees into their next role within an agency and open up opportunities for others to move up, too.

As the public transportation industry confronts the retirement cliff, agencies must make bold decisions to redefine themselves for today’s workers. Those that take the time to listen to existing employees, accept generational shifts and take action will be better positioned to succeed now and over the long term.

Chris McCarthy leads the Transportation Practice for North Highland, a global consulting firm. He has 25 years of experience in the transportation industry working with private and public sector clients.

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