Adapting to an Aging Society: The Role of Knowledge Management

The Aging Society and Its Impact on Businesses in Japan

Japan is facing an unprecedented demographic shift, entering an era of super-aging society. As of 2024, individuals aged 65 and older account for 29.3% of the population (Statistics Bureau, “Elderly Population”). This demographic trend is increasingly evident in the workplace, where the average age of employees is steadily rising. A 2020 survey of 1,792 listed companies found the average employee age to be 41.4 years old—the highest on record. Meanwhile, corporate leaders are also aging, with the average age of CEOs reaching 60.5 years old in 2023. Amid this demographic shift, knowledge management emerges as a critical tool for businesses to retain expertise, ensure continuity, and adapt to the challenges of an aging workforce.

The Aging Workforce in Different Countries

Japan is not alone in grappling with these challenges. South Korea is aging even faster; while its elderly population was 19.2% in 2024, it is projected to surpass 21% by 2026 and overtake Japan as the most aged country in the world by the early 2040s. Similarly, China is witnessing rapid aging, with 21.1% of its population aged 60 or older as of late 2023—a first for the country. According to a 2022 report by the State Council, the percentage of seniors in China will exceed 30% by 2035, peaking around 2050.

Aging is not only a societal issue but also a pressing challenge for businesses. Some companies face the stark reality of halving their workforce within the next decade. Efforts to encourage older workers to remain in the workforce are gaining momentum, with the employment rate for those aged 65 and over reaching 25.2% in 2023 in Japan—an increase of 5.1 points over the past decade. However, merely increasing the employment of seniors is not enough to mitigate labor shortages. Businesses must adopt countermeasures, such as leveraging knowledge management systems, to prepare for the challenges posed by an aging workforce.

Challenges for Businesses in an Aging Workforce: Knowledge Transfer

In an aging society, retaining and passing on organizational knowledge and expertise becomes a critical issue. Knowledge and know-how are vital assets that sustain a company’s competitive edge, but traditional methods of knowledge transfer often fall short.

The Barriers of Tacit Knowledge

In many companies, operational knowledge resides with individual employees as tacit knowledge, which is neither formalized nor easily shared. As more employees reach retirement age, the risk of losing this invaluable, experience-based knowledge grows.

Limitations of Conventional Knowledge Transfer

Traditional knowledge transfer methods—such as memos or verbal explanations—are often inadequate. Common challenges include:

• Time Constraints: Retirees often lack sufficient time to thoroughly pass on their knowledge.
• Incomplete Communication: Documents and verbal instructions fail to convey nuances, the big picture, or decision-making frameworks.
• Continued Dependence on a person: Successors often need to start from scratch to rebuild expertise.

Workforce Decline Accelerates Handover Problems

As workforce numbers dwindle over the next decade, knowledge transfer challenges will only intensify. Employees may find themselves inheriting responsibilities from multiple retirees, thus making it nearly impossible to maintain continuity using conventional, individual-centric methods.

The Solution: Implementing Knowledge Management Systems

Amid the dual pressures of workforce aging and decline, knowledge management (KM) systems offer a way to collect, share, and utilize organizational knowledge effectively. By implementing KM solutions, businesses can maintain operational stability and efficiency, even with fewer employees.

Building a Framework for Knowledge Sharing and Utilization

Introducing knowledge management tools enables organizations to:

• Digitize Knowledge: Convert individual expertise and know-how into formalized documents and databases accessible across the organization.
• Streamline Knowledge Transfer: Eliminate reliance on individuals by creating structured, universally accessible repositories.
• Ensure Sustainable Knowledge Retention: Build systems that preserve knowledge for use long after employees retire.

Expected Outcomes

Adopting knowledge management solutions equips companies to address the challenges of an aging workforce effectively. Key benefits include:

• Operational Stability: Digitized knowledge allows organizations to function seamlessly despite employee turnover or reductions.
• Increased Productivity: Faster access to essential information enhances workflow efficiency.
• Cost Competitiveness: Reduced workforce requirements lead to significant cost advantages over competitors.

The Urgency to Act

Digitizing and preserving knowledge is not an overnight process. With mass retirements looming, businesses must act now to implement knowledge management systems. These systems form the foundation for maintaining stability and achieving maximum results with limited resources.

In a rapidly aging business environment, companies need to prepare for a future where efficiency and resilience are paramount. Knowledge management is not just a solution but a necessity—an essential step toward thriving in an era defined by aging populations and shrinking workforces.