Effect of Workforce Age on Quantitative and Qualitative Organizational Performance: Conceptual Framework and Case Study Evidence

Abstract

Field studies linking workforce age to performance tend to treat performance as one-dimensional and often focus on individual, not organizational performance. To analyze the effects of workforce age on organizational performance, we suggest treating performance as multidimensional with at least two output dimensions: quantity and quality. We provide a novel conceptual framework that borrows insights from multiple disciplines to better under-stand aging phenomena in organizations. In particular, we build on psychological and medical studies showing that individual age has different effects on different cognitive capabilities. As a result we argue that workforce aging may affect various performance dimensions, such as quantity and quality, in different, often opposite ways. In our empirical part we examine a unique dataset containing detailed court data over a time span of 19 years. We find that average workforce age is linked negatively to quantitative organizational performance but positively to qualitative organizational performance. Our findings suggest that future organizational studies should decompose performance at least along the quantity-quality dimension. Our theoretical framework helps to understand the different types of aging effects and to derive itemized implications for changes in organizational performance. It also helps to reconcile contradictory findings of previous studies and to derive important managerial implications for task assignments, career policies, and company strategies in view of upcoming demographic changes in many developed countries.

Keywords: ageing workforce, demographic change, organizational performance, age productivity effects

JEL Classification: J1, M51, J7