knowledge drain will hit utilities hard

Ed Cohen, Plateau Systems

The first wave of the 76 million so-called “baby boomers” will turn 60 this year, and a renewed sense of urgency over the graying of our workforce is washing over the business world. This is particularly true in the power industry because, according to industry research, the expected knowledge drain will strike first and hardest in the government and regulated industries such as power. Forrester Research estimates that by 2010, 30 percent of the U.S. workforce will be over age 65 and 52 percent will be between the ages of 55 and 64.

“Most enterprises don’t realize the magnitude of this problem or the force with which it will hit businesses during the next five years,” said Claire Schooley of Forrester in a 2005 report in the changing workforce series titled, “The Retiring Workforce is Creating a Knowledge Void in Government and Regulated Industries.”

In the utility industry, those figures are even more daunting. According to industry estimates, 45 percent of the workforce in electric and natural gas utilities is expected to reach retirement age in the next several years. A recent study by the American Public Power Association (APPA) indicates that one-third of utility employees are currently between the ages of 45 and 54.

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Without a doubt, the talent crunch is acute for electric and power utilities. The average age of utility workers is almost 50, several years older than the national average. This is partly due to massive hiring freezes and downsizing in the 1990s, as the industry prepared for deregulation and focused on cost-cutting measures to make operations leaner in the face of new competition. In addition, there is little turnover in the industry as a whole, and promotions are often made from within, after years, or even decades, of on-the-job training.

According to the APPA research report, “Work Force Planning for Public Power Utilities: Ensuring Resources to Meet Projected Needs,” the loss of critical knowledge and the inability to find replacements with utility-specific skills are the two biggest challenges facing the industry. As a result, the utility industry will be hit very hard, very quickly by this shortage of skilled and seasoned workers.

creative strategies and targeted action

Fortunately, companies can undertake proper planning and implement proactive, targeted strategies today to minimize the future impact a maturing workforce will have on their organizations. Utility companies, especially, can position themselves for growth and success by identifying and tapping the next generation of workers early on.

Strategic planning, combined with an investment in new technologies and employees, can transform the expected exodus of retiring workers into an opportunity to groom new talent in the workforce, laying the foundation for tomorrow’s leaders. To succeed, utilities must develop comprehensive plans for the entire enterprise, involving managers at various levels, from all divisions, including CEOs, CFOs and VPs of sales, marketing and HR.

However, the APPA study found that most utilities do not have a formal plan in place, nor have they outlined strategies or tactics for meeting projected workforce needs through the next decade.

The pending labor shortage is forcing utility companies to think creatively about recruiting and retaining workers, and collecting and passing on retiring workers’ institutional knowledge before it leaves the organization. Electric and natural gas companies are already challenged to fill positions such as line workers, power plant operators, HVAC technicians and information technology specialists, according to the Utility Business Education Coalition (UBEC). The amount of time required to develop expertise, through apprenticeships and on-the-job training, is significant: It can take up to seven years to master the functions for highly skilled jobs such as power station engineers. The challenge is only expected to escalate within the next five years.

defining competencies, recruiting the next generation

In preparation for this demographic shift, multinational corporations spanning various industries, and in particular, energy and utilities, are recognizing the long-term benefits of adopting a strategic, proactive plan built around the following key considerations:

Identify specific jobs that are essential to your organization, like “front line” positions that involve critical functions. Conduct a jobs assessment to develop a formal knowledge management and succession planning strategy to transfer knowledge in each position.

Establish career development plans and take a proactive role in mentoring, offering incentives to mentors and direct benefits to protàƒ©gàƒ©s.

Identify successors earlier in their careers and accelerate their readiness through targeted training and development programs.

Adapt work practices to accommodate flexible work schedules for partial retirees, and put plans in place to capture crucial knowledge.

Technology can play a critical role in each of these processes. Succession planning tools are available that allow organizations to drill down on positions to identify strong candidates and promising successors by capturing their learning experiences, work history and competency assessments. In addition, career planning solutions can offer assistance in career management, a tool that can prove tremendously helpful with employee retention. And as any utility company manager knows, while recruitment is important, retaining good workers is far more cost-effective.

BC Hydro’s performance management tools

BC Hydro, which supplies power to 94 percent of British Columbia’s population, has undertaken the task of defining the competencies of its 10,000 technical and field services jobs. The goal is twofold: to ensure every employee knows exactly what is expected of him or her, and to capture and ultimately transfer the unique knowledge of key veteran employees headed toward retirement.

Using performance management tools, BC Hydro has gained valuable insight into the strengths and weaknesses of its labor force. The solution has also allowed BC Hydro to staff critical positions while enabling employees to identify skills for targeted jobs and browse career paths. Integrating this with learning and development improves the readiness of candidates to assume future roles. In this way, the company has been on the leading edge of harnessing performance management tools to anticipate and fill the workforce gap.

BC Hydro is also using the solution to identify competencies, manage talent and maintain a pipeline to fill critical positions. The solution identifies crucial roles, determines staffing needs, performs best candidate analyses, and assigns learning and development initiatives to employees to improve their readiness to assume a targeted role. The solution also measures progress and ensures that BC Hydro is on target to meet staffing needs.

compiling a workforce report

Recently, the industry as a whole has recognized the urgency and challenges associated with a maturing workforce and has begun taking proactive steps to minimize its impact. Six months ago, UBEC formed the Utility Workforce Planning Network to develop best practices for dealing with the expected knowledge gap, focusing particularly on recruiting at technical schools, inner-city high schools and partnering with community colleges to develop model curricula. Other initiatives include creating centers of excellence to set standards for recruitment and retention.

At Xcel Energy, managers have implemented a comprehensive workforce planning process, conducting thorough job assessments and generating detailed workforce assessments for its 10,650 multi-state employees. For the past five years, Xcel managers have compiled a workforce report reflecting demographic data segmented by business area, job family and operating company. The purpose, said Steve Boettcher, director of recruitment, selection and workforce planning at Xcel, is to provide detailed data for planning purposes for retirements and turnover forecasting.

“Our workforce planning process has proven invaluable to managers,” said Boettcher. “As a result of these processes, we feel fairly confident we’ll be able to meet the challenges ahead.”

Xcel has created a leadership development program to generate supervisory candidate pools for mid-level and senior managers. Forecasting a shortage of managers, the company renewed its commitment to worker development, investing heavily in programs designed to cultivate management and business skills. The company has also implemented formal and informal mentoring programs to close the skills gap.

“Retention and development are the areas where we can have the most significant impact,” said Boettcher, an industry leader who sits on UBEC’s workforce planning committee.

partial retirement as an option

Utility companies can also consider “partial retirement” scenarios. Surveys by Merrill Lynch and AARP have found that 75 percent of baby boomers plan to continue working in some capacity after retirement, pursuing their passions for personally rewarding work or flexible schedules that allow more leisure time.

To cultivate engineers and managers who wish to remain on the job, organizations must devise flexible work schedules to accommodate them and foster the productive coexistence of a multigenerational workforce. There are tremendous benefits in allowing younger, less experienced workers to shadow veterans, especially in the power and utility industries, where they have amassed a wealth of formal and on-the-job expertise in plant operations and field services.

driving results in the workforce

A commitment to workforce planning can greatly mitigate the impact mass retirements will have on the enterprise. By implementing a combination of the strategic measures suggested here, tailoring succession planning programs for each business unit and cultivating the next generation, the pending skills gap can be closed. A well-executed strategy also requires time and resource commitments, from C-level executives to plant managers and field supervisors, to ensure that the end goal-a highly skilled, well-developed workforce-is within reach.

Ed Cohen, chief technology officer, Plateau Systems, regularly speaks at international e-Learning seminars and is a frequent contributor to major e-Learning and HR publications. Contact Ed at ed.cohen@plateau.com.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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