Report 2008-605 Summary - March 2009

High-Risk Update—Human Resources Management: A Significant Number of State Employees Are Beginning to Retire, While Certain Departments That Provide Critical State Services Lack Workforce and Succession Plans


Our review of the State's progress in improving human resources management revealed the following:


The State is currently facing, and will continue to face, the retirement of a significant number of today's workers in both leadership and rank and file positions. An aging workforce, coupled with an average retirement age of around 60, suggests that 42 percent of today's state employees in leadership positions—nearly 13,000—may retire over the next seven years. Given that these potential retirees likely have critical experience and institutional knowledge essential to running various departments, the State needs to adequately plan for these retirements and ensure that such knowledge is not lost. However, its ability to replace retiring leaders will probably be difficult since many rank and file employees— more than 20 percent, or over 38,000 employees—may also retire in the next seven years. Although these employees are near or at retirement age, it is unknown whether the developments in the worldwide and national financial markets and the State's actions to solve its budgetary problems will affect state employees' retirement plans. Regardless of the precise timing of these retirements, the fact remains that these employees will eventually retire and planning for these retirements is prudent to ensure continued delivery of state services.

Unfortunately, California is just in the beginning stages of such planning efforts, and our review found that other states have done more to develop their workforce and succession plans. For example, some states have instituted planning requirements and developed standardized planning tools to aid departments in their planning efforts. In 2008 California's Department of Personnel Administration (personnel administration) started providing guidance as some departments began planning for the retirement of their workers. Further, the State Personnel Board (personnel board) currently offers a one day introductory class for developing workforce and succession plans, but enrollment in this class has declined over the years. Finally, although California is working to streamline its hiring process to better ensure it can bring new employees into state service, these efforts are not expected to conclude until fiscal year 2014-15. Thus, any resulting improvements may not be realized until many workers have already retired.

While large numbers of retirements and filling vacancies with quality staff present challenges to the State, these challenges are an even more immediate concern for certain departments that provide critical services. For instance, the majority of employees in leadership positions—and nearly half of the employees in rank and file positions—at the five departments we reviewed were age 50 or older as of June 30, 2008. Of greater concern is that most of the departments we reviewed generally believe it will be difficult to replace experienced employees due to a variety of factors, including the State's lengthy and complicated hiring process and lower salaries in the public versus the private sector.

Despite this, none of the departments we reviewed have developed workforce and succession plans that address all of the steps in personnel administration's workforce planning model, and some are just beginning to undertake formalized efforts to ensure they are retaining qualified staff and cultivating employees' skills to develop future leaders. Although state departments are not required to follow personnel administration's model, the planning steps outlined in this model present a thoughtful approach that considers factors such as the department's strategic plan, future staffing requirements, and how it will attract the people necessary to meet those requirements. Current fiscal constraints may make pursuing workforce and succession planning more difficult, however, some departments we reviewed are using cost effective strategies to address future retirements. For example, the Department of Social Services (social services) has instituted quarterly question and answer meetings between senior leadership and those representing rank and file employees. Social services explained that the results of these meetings have improved communication and morale. Such efforts can lead to better employee retention and promote knowledge transfer.

Further, the Department of Transportation uses rotational assignments for its entry level engineers, explaining that such assignments develop staff and serve as a key recruitment tool. Finally, state departments might consider taking steps to preserve institutional knowledge by routinely taking minutes at important meetings, updating procedure manuals, and videotaping experts as they demonstrate how to perform critical tasks.