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Game Plan for Retaining
for Retaining By James Sowers and Sarah Wooddy
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Talent
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In the competitive labor market, electric utilities need to see retention as a threepart strategy. PictureQuest
he most important corporate resource over the next 20 years will be talent: Smart, sophisticated businesspeople who are technologically literate, globally astute, and operationally agile. And even as the demand for talent goes up, the supply of it will be going down.” So warned “War for Talent,” a McKinsey & Company report, published in 1997. It encapsulates the dilemma that faces companies across the country today. And as more and more baby-boomers retire in the coming years, the challenge will become even more daunting. How do you keep your most astute and agile employees fulfilled and not looking for other opportunities or seeking early retirement? Even though many Americans are retiring later, most job projection estimates show that the generations moving up through the workforce are not large enough to replace the generations that precede them. The Bureau of Labor Statistics projects a 14.8-percent increase in the number of available jobs between 2004 and 2012. During this period, there will be around 21 million new jobs with only 17 million new entrants to the workforce. The growing offshoring trend will help alleviate this shortage, but 1 million jobs will still go unfilled. For this reason, a skills shortage may be more likely than a labor shortage.
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The flight of key talent and low recruitment rates have become disturbing trends across almost all industries during the last decade, but the war for talent will become increasingly intense due to the shrinking workforce talent pool. While many signs of this phenomenon are visible in the electric utility industry, the full brunt of the crisis is yet to be felt. Many utilities are thriving today, but their workforce management and retention processes are not. A recent Conference Board survey of utilities outlined three key challenges for the industry: recruiting young talent, creating incentives for baby-boomers to stay beyond their retirement, and finding ways to pass critical knowledge from one generation to the next. To boost recruitment and retention efforts, industry leaders consider three factors as the most critical, according to research by the Corporate Executive Board: ■ flexibility of company programs to give employees more decisionmaking power when it comes to changing a business model—during a business process transformation strategy or when reorganizing a function or department; ■ ability to provide competitive compensation packages, both cash and noncash rewards as well as long-term equity participation; and ■ availability of career development opportunities for employees who have critical skills or who are close to retirement but have skills that must be passed on to the next generation. The issues of flexibility, compensation, and development of critical skills are to the main issues in managing the workforce. Individuals demand greater flexibility in their career paths, and organizations need greater flexibility from employees. People must connect across businesses, divisions, and regions in ways that promote high-quality decisions and fast execution. Succeeding in today’s workplace means that companies must offer more than a good paycheck. The Develop-Deploy-Connect Model It comes down to the critical workforce—your “talent.” This group is the proportionally small population of employees who carry out the majority of strategic tasks and/or who have skills that are vital to a company’s long-term strategy. For a utility, such talent might be a group of first-line supervisors with 20 or more years of experience who have the ability to train and mentor new recruits. For leaders who want to identify the critical talent that an organization needs to succeed, the questions are basic. ■ Which strategies, skills, and capabilities are crucial to the company’s current and future success? ■ What workforce trends (e.g., supply and demand of engineers) will have an impact on your ability to deliver value? ■ Who supports your critical pools of talent within their network? Are these supporting people difficult to replace? ■ Within your critical workforce segments, who possesses the greatest current and future potential? James Sowers is the leader of, and Sarah Wooddy is a senior consultant with Deloitte Consulting’s organizational and people performance practice. 48
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Connecting this talent across generations will allow organizations to provide young talent with hands-on training and give experienced workers a way to pass on their expertise, thereby keeping their knowledge in the institution. Indeed, knowledge management and the development of young talent are impossible without creating an environment where workers can connect and collaborate. Providing incentives as well as the means for cross-generational knowledge sharing may even facilitate improvement of best practices as future generations are able to use new technologies more effectively. Many companies place too much attention on acquiring talent and spend less effort on developing it. In fact, some industries almost expect talent to develop itself. But with the high replacement cost and long lead time required to train a new employee, that can be counterproductive. While many companies rely on indicators like turnover rate to judge their success, such data do not explain why employees leave, nor do the data offer actionable information to help retain critical talent that is planning to leave. If you focus on the end points of the employee lifecycle—and not how you develop and use the employee in between—you risk losing your best talent. The dissemination of best practices and retention of institutional knowledge will likely be unsuccessful; and expertise amassed by the baby boomers will disappear. It’s critical to concentrate on the things that employees care about most: developing their capabilities, being de-
Knowledge management and the development of young talent are improved by creating an environment where workers can collaborate.
ployed in ways that engage their heads and hearts, and connecting to people who will help them achieve their objectives. If you focus on these three things, attraction and retention largely take care of themselves. Developing Employees To “develop” is to provide the real-life learning that employees need to master a job. This doesn’t mean just traditional classroom or online education—it means hands-on, challenging new experiences that stretch employees’ capabilities and provide learning opportunities from peers, mentors, and others. Rather than push more information onto employees through conventional training, it is more important that they learn how to learn. Jim Hunter, director of the International Brotherhood of Electrical Workers’ utility department, pointed out that it’s impossible to hire someone off the street and expect him to be as experienced as a line crew member. “From hiring to journeymen’s level, it’s a minimum of five years,” says Hunter. “To get to lead level, it takes ten.” Plugging employees (and especially new hires) into the network of experienced talent will give them the opportunity to gain the knowledge that’s sometimes not documented in manuals and procedures. In the learning cycle, “who” you know is often more important than “what” you know. Given that utility companies depend on highly specific knowledge and expertise, the value of a co-worker network is extremely high. For example, one large energy company saw the value of information technology (IT) in preventing knowledge loss. In collaboration with human resources (HR), the IT group went through a skill-gap analysis and created a leadership development program focused on new talent. Company universities of learning and development also offer programs specific to various employee development needs as well as targeted professional training and an opportunity for exchanging ideas and expertise. In a nod to the importance of hard-earned and often homegrown knowledge, they often attract retired engineering faculty to develop professional and job-specific courses to train and “re-tool” new recruits as needed. In 1988, there were about 400 corporate universities; now there are more than 1,600. Several years down the road, it’s possible that corporate universities could outnumber traditional ones, which currently total around 3,700. One of the most famous corporate universities is GE’s Crotonville Management Development Institute. Crotonville’s mission is simple: Someone, somewhere, has a better idea. GE tries to find who has it, learn it, and put it into action— quickly. Employees from all over the company and the world come to learn, communicate, brainstorm, and network, all in an effort to build best practices in one of the world’s largest companies. It’s a real, 52-acre campus with classrooms, living space, dining, fitness, and recreation facilities, and
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1 FIGURE 1 THE DEVELOP-DEPLOY-CONNECT MODEL
Finding assignments where people can grow and build the relationships they need to succeed; and providing them with capabilities (tools, resources, and learning) to achieve personal and business goals.
DEVELOP
Capabilities
Networks
RETENTION DEPLOY CONNECT Providing employees with the experiences that will give them the opportunity to perform at the best of their abilities and reach their full potential.
Experiences
Focusing on the networks people form to do their jobs and the quality of interactions with each other.
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about 10,000 “students” a year—from new college hires to GE’s chairman. Classes at Crotonville last from a day to three weeks, and cover issues facing the company (and business in general) during seminars, lectures, and roundtables. Generally, however, when it comes to training and development programs that aim at documenting and closing skill gaps, many companies do it in an ad hoc manner and without a clear plan. According to a 2003 Conference Board survey of 150 HR managers, the respondents indicated that the majority of top executives across industries do not have a clear picture of future skill requirements. Of the companies, ■ 66 percent do not have an age profile of their workforce; ■ 63 percent do not have an inventory of the skills available internally; and ■ 49 percent do not have an assessment of their company training and development needs. Deploying Employees Deployment matches the correct candidate to an important job or project. Sometimes skills or positions that are critical today may not have existed just a few years ago—this is particularly true in energy companies that work in a deregulated environment. If people learn the most in jobs that stretch them, they perform best when they can discover and define the role that will tap their desires and skills. Even after people have assumed their responsibilities,
Companies must provide critical employees with the tools and guidance they need to build social networks that enhance individual performance. Corbis
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companies must continuously focus on their critical talent to ensure that their skills, interests, and capabilities evolve in line with strategic objectives. At times, this may mean reevaluating the design of the job. It also may mean redefining the conditions of the job by offering telecommuting privileges and flexible schedules. As many utilities expand their operations across state lines, some employees will be asked to relocate. This change is not always welcome, especially by mid-career employees for whom moving has never been a requirement of their job. In addition, some young recruits may not like such disruptions to their independence. A good balance between providing opportunities for employees to find the right fit for their skills and respecting their personal priorities is not always possible. But as the organization hones its talent deployment strategy and approach, it becomes an easier task to provide the right job for the right employee. Many utilities are exploring nontraditional approaches to ensure that the companies retain and capture knowledge and identify and support critical talent. Knowledge transfer programs not only connect young and experienced talent, but also offer new recruits an insight into a company’s op-
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erations and help them find a place in the organization that matches their aspirations. But for knowledge to pass on effectively, the new crop of recruits must be capable of absorbing it and using their own talents to take it to the next level. So, a successful workforce management program must run from the beginning to the end of the employment cycle. Using testing to determine the best placement, using detailed job descriptions, and hiring for trial periods may reduce the taking on and perhaps forced retention of under-qualified workers or poor learners. Creation of competency models and measuring a worker’s progress against them could help identify high performers and build bench strength to replace baby-boomers in senior management positions. Connecting Employees To “connect” is to provide critical employees with the tools and guidance they need to build networks that enhance individual performance and improve the quality of their interactions with others. You need a methodical approach to connect developing employees with workers that have the knowledge and skills the developing employee needs. This not only requires a formalized approach, but also depends on the cooperation and commitment of both parties. Rather than leave such connections to chance, organizations can do a lot to initiate them, to maximize the quality and frequency of the knowledge transfer, and to ensure that the process
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is viewed in a positive light. Encouraging “communities of practice,” self-organized groups that form around a common mission or interest, is one such method. Writing the process into job descriptions and grading people on their performance in accomplishing the task is another. A good example of this is the company that conducted a senior design project at a leading university’s mechanical and nuclear engineering department. A team of the company’s engineers worked with the students one day a week for six consecutive weeks, and each engineer worked with three to six students on a specific real-life task. Each project was concluded with a summary report and a presentation by each team. This program helps the company identify future recruits, improves the students’ skills, and prepares them for the challenges of their future profession. (See the sidebar, “Where Have All the Professors Gone?”)
Winning the War for Talent An improvement in one area of the develop-deploy-connect cycle often leads to an improvement in another. For example, people develop better skills when they are deployed in stretch assignments and connected with others from whom they can learn and grow. Likewise, effective deployment occurs when people have the knowledge, skills, networks, and relationships they need to succeed. Finally, effective connection happens when people are deployed in work that engages their curiosity and satisfies their professional aspirations. In these circumstances, they are more likely to learn from and teach others. Such workforce management concepts aren’t new to HR practitioners, but ne large “knowledge transfer” problem is the fact that a significant number of profesthey haven’t always been embraced or sors in technical disciplines (such as electrical engineering) will soon retire—and many effectively deployed. Moreover, specific colleges are not currently planning to replace them. So, even if the number of students solutions depend on each company’s enrolled in engineering programs increases, many schools may not have the ability to educate unique situation. But, by using the dethem properly. And there is no velop-deploy-connect model, an orgaquick fix for this problem—a nization can capture its institutional declining number of engineering knowledge and transfer it to the new graduates for the past two decades generation before it’s lost. has now translated into fewer The stakes are high in the “war for candidates presently qualified to talent”—those who cannot compete replace retiring faculty. risk losing their best people and, as ■ Since 1986, the number of ena result, jeopardizing earnings and gineering bachelor’s degrees has the ability to meet investor expectadeclined 19 percent, according to tions. Competitive advantage is hard data from the Engineering Workto achieve by using a standardized apforce Commission of the American proach, especially when it comes to Association of Engineering. talent management and employee de■ By 2012 the number of electrivelopment. By helping their employees cal and electronics engineers will develop their own business skills and decline almost 11 percent according to the Bureau of Labor Statistics. potential as well as deploying them to ■ Universities now graduate fewer than half as many people in nuclear engineering as they assignments that stretch their abilities did 10 years ago. The Nuclear Energy Institute reports that recent enrollment figures are more and let them grow as leaders, employencouraging: The number of students enrolled in nuclear engineering programs rose from fewer ers will find it much easier to attract than 500 in 1998 to 1,300 in 2003. and engage their talent. ◆
Where Have All the Professors Gone?
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