For certain industries, most prominently energy, no current concern outweighs the looming loss of huge portions of veteran personnel. Turnover has been historically low in that industry, and with the baby-boomer generation now starting to retire, companies face a potentially devastating shortfall of well-qualified engineers and line workers over the next few years.
PPL Corp., the $12 billion electric utility based in Pennsylvania, expects to lose 50 percent of its domestic work force (it also has a large U.K. operation) within the next six to seven years. “A lot of the folks that are retiring helped design and build our power plants and lines decades ago,” says Paul Farr, finance chief at PPL. “Those people are aging right along with the assets.” It’s one of the company’s largest risk factors, warranting significant attention from the CFO.
Multiple strategies are under way to overcome the threat. For one, PPL and other energy companies are working with high schools, colleges, and vocational schools in the areas where they operate to bolster the pipeline of potential future employees. That outreach takes the form of both financial support and campaigns to make schools and students aware of the burgeoning availability of jobs at the companies.
“Many of our jobs are very technology-driven and specific, like control-room operators for nuclear-power plants, substation engineers and transmission planners,” says Farr. It’s crucial to the industry to identify students with the aptitude to perform such roles and to stimulate their interest in doing so.
There’s also a lot of activity going on to document equipment-maintenance and construction procedures, knowledge of which has historically been locked inside veteran workers’ heads to a far greater extent than was prudent. Some of that comes down to video-recording work being done with particular types of equipment, especially those that are important but not numerous around the company.
Farr works with PPL’s chief information officer to organize such information in repositories and knowledge-sharing tools used for training programs. That work is necessarily ongoing, as the work force needs to be continually updated on, for example, technology and specification changes by equipment manufacturers.
The company has an intranet site that makes such information accessible to field workers, who can bring up schematics on an iPad and understand in real time what they need to do to safely repair or replace something, or ensure they don’t do something that would make a plant or power line go off line.
Efforts are also directed at instilling in new hires the size of the opportunity available to them. Farr himself meets with virtually all new-employee orientation groups. “I tell them that if they are willing to step up, take risk and show capability, getting promoted is not going to be a challenge,” he says. “They are going to find opportunities to learn things more quickly in the heat of fire, if you will, than they would in many other industries.”
Of course, where there is a shortage of skills, one way of dealing that is to attract talent with high wages. Farr says PPL is doing that. Still, Peter Cappelli, a labor economist and professor at the University of Pennsylvania’s Wharton School of Business, told CFO in 2011 that there is no such thing as a skills shortage. When companies and industries perceive such a shortage, it simply means they are underpaying for people with the skills they need. Raise the pay, and people will get the training they need to earn it.
Cappelli also has criticized companies for grousing about skills shortages yet expecting everyone but themselves – meaning schools and governments – to provide relevant training and apprenticeship programs, as companies that needed skilled workers did routinely decades ago.
“Companies abandoned training and instead began hiring people away from competitors,” he told CFO two years ago. “Once you start doing that, you’ve got a public-goods kind of problem: You don’t want to train people because you’re afraid you’re going to lose them. Instead you should think about training in ways to ensure you’re going to keep the talent. You can’t just send them off for a month of formal training without raising their wages.”
In a Wall Street Journal article he wrote later that year, Cappelli argued that companies are simply too fussy and inflexible about whom they hire and how much they’ll invest in them. Executives “need to drop the idea of finding perfect candidates and look for people who could do the job with a bit of training and practice,” he wrote.
Farr, for his part, says that while he doesn’t know the dollar amount the company is spending on internal training, it’s more today than it had been in the recent past. For example, the company offers a four-year, line-worker apprenticeship program. Participants practice on non-energized lines, such as those that are taken out of service, but also get to work on lines “while energy is flowing through them.”
PPL’s largest business unit actually provides power in the United Kingdom, but the skills issue is less pronounced there because restructurings and downsizings there have left ample workers for the remaining business, Farr says.