By 2018, we can expect 25 percent of the current insurance workforce to retire, creating 400,000 open positions for which there are no ready replacements.

That is the first takeaway of the 2016 Insurance Industry Talent Trends report by the Jacobson Group, a report that would be more alarming if it did not confirm much of what we have long known about the state of the insurance talent pool: Insurance industry leaders are retiring and taking with them huge amounts of institutional—and industry—wisdom.

Many are still perplexed about how to engage the young professionals that will necessarily replace retiring leaders. Thanks to endless analysis, we are all intimately familiar with the quirks, habits and workplace challenges of the young adults labeled “millennials.” Generation Z, the youngest American generation and latest to garner a label, is close on their heels. According to the New York Times, members of Gen Z are defined by their diversity and their native comfort with digital technology, which has been part of their lives since birth.

In truth, as today’s young professionals, these two generations have many more commonalities than differences. Much of that is reflected in how they like to be led versus their colleagues older than 35. For today’s insurance leaders, the ability to guide and lead young professionals is a required competency. Attracting, retaining and developing younger insurance professionals requires an understanding of their professional needs, as well as talent management best practices and innovation.

Attracting Younger Generations

The effects of young professionals on the workplace have perhaps been an overhyped issue, but they have traits and expectations that set them apart from their older colleagues. Unlike the infamous “latchkey” kids of Gen X, they experienced a great deal of structure in school and family life. They have been taught to pursue a lifestyle that seamlessly blends work, personal life, leisure and values. Companies will need to make it clear they share these values through benefits such as flex time and paid family leave.

If the rise of socially conscious businesses has shown us anything, it is that young people are dedicating their lives to finding meaningful work. They want to understand how their tasks and job descriptions fit into a larger picture and to make a substantive contribution to work that matters. In order to attract them, the insurance industry will need to make the case for its broader social meaning and the good it does in the world. The industry certainly shares young professionals’ commitment to community and charitable causes. But those young professionals want to go beyond attending fundraisers and volunteering once a year; social consciousness must be part of company culture.

Young professionals are goal-oriented, focused on reaching milestones along the path to something bigger. Concise and frequent feedback helps them track progress toward their goals. If they feel they cannot reach those goals at a particular company, they will leave. Defined career paths and structured competency achievement will allow for quicker promotions and will discourage that behavior. They dislike hierarchy and the long decision-making process that comes from entrenched bureaucracy. They may benefit from structures that allow them to provide leadership and guidance to their older colleagues. Since the insurance industry must recruit from other industries to fill vacancies, younger professionals may bring to a company and the industry a relatively novel and useful set of skills and competencies.

Talent Management: The Big Picture

I think it is fair to say millennials aren’t the workforce boogeymen they have been made out to be. Plus, Generation Z is just entering the workforce. Continually working toward understanding the values, skills and expectations of young professionals can help us attract and retain them. Many of these characteristics can be put to positive use in the insurance workplace. To do so, we must have a willingness to innovate and a solid grounding in talent management best practices.

As we have watched these generational changes unfold, we have also created important changes in how we conceptualize and approach leading people. We can manage things, but we must lead people. As a business function, talent management takes an organizational approach to leading people by building culture, capability and capacity. Common aspects of talent management include acquisition, performance management, team and individual development, succession planning, organizational development, career planning and retention. Metrics associated with each assist in decision-making for the business.

This happens on a micro and macro level. You have to know business goals and how business is going to expand in order to understand what skillsets will be needed from talent, strategically planning for new skillsets and those you will not need anymore. This ties into succession planning. If you know you will have two C-suite positions to fill in the next three to four years, you must ask today: What do I need, and how does this affect the people I have? What’s my talent inventory? How are we going to develop that talent along paths so we’re ready for retiring leadership?

Applying Performance Management Practices

Performance management is the granular, day-to-day aspect of talent management. It informs succession planning and organizational development while also developing individuals and teams, and it allows for the retention of the best talent. It addresses medium- and short-term goals for employees to align them with business goals, strengthening their engagement, connecting them with the big picture and putting them in control of their own development.

Though we have classically conceptualized careers as “climbing the corporate ladder,” “scaling the rock wall” is a more apt metaphor for contemporary career development. Employees make their own routes toward their goals through lateral moves and incremental steps, each one an achievement in and of itself. Thus, performance management is a cyclical process, rather than a linear trajectory.

This cycle takes employees and managers through four stages:

• Expectations. Managers review with each employee the business’s goals to develop individual, day-to-day goals and co-create development plans that build employees’ skills and competencies for the near and long term.

• Feedback. Gone are the days of the yearly performance review. Shorter, documented feedback sessions that are two-way and driven by the employee should occur at least quarterly. In this way, both the manager and employee can understand if they are aligned with expectations and make an adjustment if needed in terms of business needs, performance results and career goals.

• Evaluation. It’s no longer about simply assessing performance. In a talent management context, evaluation realigns an employee’s development with their career goals and the company’s goals.

• Recognition. Reward employees for their good work. On a macro level, this takes the form of merit-based raises and bonuses, but each milestone is an opportunity for a small moment of recognition that is nonmonetary and can be made as milestones are achieved.

This cycle meets many of the needs of young professionals identified above: structure, working in a meaningful context, recognition of reaching milestones, etc. Plus, when executed skillfully, this cycle translates to better business results. If each employee’s goals are aligned to business goals, every person and department is working together for the common good.

Our industry faces considerable recruitment and retention challenges that will continue to manifest over the next few years. Taking an innovative approach to talent management will be more important than ever as we attract and develop the next generation of insurance industry professionals.

Our business is being disrupted regardless of what we are doing to invite, engage and hang on to young talent. We can either meet the future with the competencies that will enable us to grow and innovate or risk becoming irrelevant altogether. Don’t make talent planning the last change you make—by then it will be too late. Healthy growth and innovation within our industry is what is at stake.