I have blogged extensively over the past few years about some of the workforce challenges that utilities especially in the developed economies are facing. These are often related to the aging workforce and in some countries to a shrinking workforce.
I have blogged about the shrinking workforce in countries around the world like Japan and Germany, where there have been declining populations. The shrinking workforce is acting as a brake on the German economy. Recently Germany liberalized its immigration laws and for the first time in a decade the population of Germany is actually increasing.
In the U.S. because of its policy of encouraging immigration, the shrinking workforce is not the result of population decline, but the result of a decreasing participation rate. One explanation for the decline is the aging workforce. Boomers are retiring at an increasing rate. This has created a serious problem for many utilities where it has been estimated that over half the work force will be eligible to retire in the next few years. But there is another trend that tends to mitigate this, the percentage of older workers who remain on the job post-retirement is trending upwards. For the age group 65 to 74 the proportion of workers still working is nearly twice what it was in the 1990s. In the long term the problem remains, finding young workers to replace the older workers when they retire.
A recent report from PricewaterhouseCooper's (PwC) Human Resource Services practice based on data from 29 utilities representing nearly a quarter of a million employees identifies some very interesting workforce trends, some new, in the power utility industry.
First of all the PwC research indicates that utilities are losing workers at an accelerating rate. The voluntary turnover rate increased by a full percentage point between 2010 and 2012, and for high performers and early tenured employees the rate of separation was especially high.
The research also shows that the turnover of utility employees in their first year was significantly higher in 2012 than in 2011 pointing to a retention problem. As the economy continues to strengthen PwC anticipates that first-year turnover will continue to increase. This is a new experience for many utilities because in the past working for a utility was seen as a job for life. With the new skill sets for smart grid and releated technologies requiring increasing IT skills, utilities are having to compete with other sectors for IT savvy workers. PwC reports that other industries have been experiencing intense competition for workers for some time and are better equiped to attract and retain new talent.
Accelerating executive retirement
The PwC research also found that while the number of employees currently eligible or due to become eligible over the next 3-5 years for retirement appears to have stabilized, retirement eligibility rates for executives have continued to increase. From 2011 to 2012 there was a 50% jump in the number of executives currently eligible for retirement.
Perpetuating a culture that discourages innovation
PwC found that by forcing older employees either to delay retirement or to remain in place as contractors, the recession has helped perpetuate a conservative culture that has inhibited innovation in the industry. Older, experienced workers are unlikely to push for changes when they have only a few more years until retirement and in a aheavily regulated industry there is little incentive for these workers to innovate because of the potential of creating risk for themselves and their employer.
Critical knowledge loss
There is also a tendency for older utilities workers to communicate information orally rather than documenting it in a database. When these workers leave, critical knowledge leaves with them. This impacts productivity and creates risk for the utility, especially when they leave before replacements can be effectively on-boarded typically through a mentoring process.
Younger workers tend to be much more tech savvy. This is critical for the electric power industry as it moves toward the smart grid. As I have blogged about frequently, younger workers' expectations with respect to technology are also higher. Sitting a younger worker who has been brought up on 3D technology down with a CAD application to create and print a 2D paper construction drawing risks losing him or her to more technically progressive utilities or to other industries.
PwC suggests that there three key areas where there is potential for improvement:
- Knowledge Retention & Succession Planning
- Technology & Processes
PwC recommend that utilities organizations need to adapt rapidly to these technology, resource and demographic trends. In particular, they need to evolve an efficient and effective approach to succession planning and knowledge transfer. PwC forecasts that the rate of process and technology change is likely to accelerate as smart grid adoption picks up. It also projects that a culture of continous improvement will become more typical in the utility sector than it has been in the past.
Operational effectiveness is critical for utilities, but with a static or even decereasing workforce, productivity has to improve and continue to improve. This means the adoption of new technology. PwC points out that an ageing workforce, deeply knowledgeable but prone to resist change, can significantly inhibit operational improvements unless these workers are fully integrated participants in the change effort. In my experience older workers can be just as and even more enthusiastic about change if they can see that it simplifies their work, eliminates tedious redundant and manual paper-based processes, and improves the quality of the final deliverable.
Technology & Processes
Driven by goals of improving productivity and improving the quality of their decision making through data-driven analytics, utilities are recognizing the importance of understanding their core business processes and implementing standardized, streamlined IT systems for these processes. PwC recommends that as a first step these processes need to be documented (before the knowledge about them walks out the door) to safeguard core institutional knowledge as part of change management practices.