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A retirement surge, clean energy, a smart grid and other trends in utilities industries demand urgent attention to workforce planning.
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Here’s one natural disaster the nation’s utility executives can see coming: a tsunami of retirees that could swamp the economy. The electric power industry estimates 30 percent to 40 percent of its 400,000 workers will be eligible to retire by 2013. From executives to plant managers, and from engineers to skilled craft workers— who literally keep the lights on—the retirement deluge threatens to create a chasm between supply and demand for workers.
Human resource leaders in every utility have known about this exodus for at least five years. The recession gave them a reprieve. Yet, few have used the practice of workforce planning to determine strategic direction and ensure that the right people are in the right place at the right time and at the right price.
The results of inaction are alarming. With some exceptions, HR and other executives at most utilities don’t know enough about what skills they’ll need—or when. They aren’t hiring fast enough to fully train replacements, they can’t find enough science- savvy high school graduates for apprenticeships, and the industry does not do enough to promote itself. What’s more, North American utility managers aren’t doing enough to capture information in retirees’ heads—tacit knowledge that could be washed away like flotsam.
Last year, the National Commission on Energy Policy in Washington, D.C., set up the Task Force on America’s Future Energy Jobs. The task force includes leaders from industry, unions, education and training. Its report sounds this alarm: “The United States is facing a critical shortage of trained professionals to maintain the existing electric power system and design, build and operate the future electric power system. … The ability to maintain a highly reliable, economically affordable electric power system while modernizing the nation’s generating infrastructure to support an advanced, low-carbon technology portfolio is in serious jeopardy.”
There’s clearly opportunity—seized by only a few so far—for utilities’ HR executives to prove their strategic value through workforce planning.
Lucky Break Squandered?
The electric worker shortage is not a new story. Neither is the similar situation at natural gas utilities, employers of 106,000 U.S. workers. What’s new: Utilities caught a break when many workers postponed retirement because pension funds took a hit during the recession. However, HR professionals at those utilities typically didn’t use the time to prepare for a surge in retirements. “The workforce challenges facing utilities [are] real. The severity of the problem may be slightly exaggerated but, if so, not by much,” says Scott B. Manning, a partner at ScottMadden Inc. in Atlanta who consults with power companies. “Utility labor supply and demand fundamentals remain a looming issue. Most utilities have failed to take advantage of this brief reprieve.”
The Center for Energy Workforce Development in Washington, D.C., a nonprofit consortium of electric, natural gas and nuclear energy utilities and their associations, conducted a survey in 2008 of 56 electric and natural gas companies that employ 267,800—46 percent of the nation’s electric and natural gas workers. In five categories, up to 49 percent of workers will need to be replaced by 2013. On the bright side, companies had stepped up hiring, mainly one-to-one replacements. Here’s a spot check of three companies:
Besides retirements, utilities must plan for the new skills required by clean energy and the smart grid, says Barbara Hins-Turner, a member of the Task Force on America’s Future Energy Jobs, and executive director at the Center of Excellence for Energy Technology at Centralia College in Centralia, Wash.
Demographic shifts also need to be factored in as ethnic groups become more dominant in the population and among candidates for utility jobs, adds Alan Hardcastle, senior research associate with the Extension Energy Program at Washington State University in Olympia. “We see ethnic minorities, Latinos in Washington, who are underserved in education,” he says, adding that they will need more education to be as productive as the utility workers they replace.
Missing an Opportunity
Not every HR professional and executive in every North American utility faces crises. Chelan County Public Utility District, a rural hydroelectric utility in Wenatchee, Wash., found that retirement among its 636 workers was of immediate concern in only a few job groups. Corporate leaders learned this through rigorous workforce planning analysis.
“There is still a three- to six-year window within which most utilities can solve their aging workforce issues using optimally efficient solutions. After that, solutions may become very expensive,” predicts Randy Stedman, the former Chelan HR executive who launched workforce planning initiatives there. He’s now principal of Workplace Practices Group LLC in Lake Oswego, Ore.
The process of workforce planning for utilities and other industries goes like this: Understand the business strategy, determine the talent needed for the strategy, and prioritize needs. Figure the net number of people and skills that will be needed; identify gaps and priorities for closing them based on strategic value and urgency. Decide on actions and investments to align overall strategy, HR strategy and talent management processes with business requirements.
But unlike at Chelan and a few other places, utility executives tend to be reactive, except when planning for capacity.
Knowledge Capture: One Person at a Time
The nation’s utilities need more workers like Jerry Richards and Justin Wilhelm.
With 42 years of experience, Richards is lead instrumentation and controls engineer at the Fermi II nuclear power plant in Newport, Mich. Like other engineers approaching retirement, he has knowledge to share. “People like me want to leave knowing that the effort here is going to go on seamlessly and bump-free,” he says.
Richards, 63, mentors Wilhelm, 26, as part of Fermi’s mentoring program.
While earning an engineering degree at the University of Michigan at Dearborn, Wilhelm participated in Fermi’s cooperative education program and became a full-time engineer in 2007. He’s “excited about the knowledge transfer.”
Together, the two men are switching over the control instruments to new digital gear. Wilhelm is learning about the original analog equipment and the control room Richards helped design.
“We have unique problems and unique tools to solve those” problems, Richards says. “Justin has been immersed in our unique problemsolving techniques.”
Richards has also imparted soft skills for dealing with maintenance workers.
“Everyone talks about how to transfer knowledge,” says Kate Herwick, director of corporate human resources for DTE Energy Corp. in Detroit, owner of the plant. “It is through this one-on-one relationship.”
Utility officials are trying a number of approaches to retaining knowledge:
The process helps break down a job into hard and soft skills.
“That’s the culture. They are really good at solving a problem when it occurs,” observes consultant Bob Grant, vice president of operational excellence at KEMA Inc. in Burlington, Mass.
“Workforce planning is not about hiring in the next six months, but what should my workforce look like in three to five years,” explains Katherine Jones, chief executive officer of Independent Consulting Services in San Mateo, Calif. In 2008, she surveyed 290 companies in various industries and found that 56 percent were doing some sort of workforce planning, most in the planning to plan stage. So, utilities aren’t the only laggards.
Workforce Planning in Action
Larger utilities are more likely to embrace workforce planning. Southern Co. in Atlanta, with 26,000 employees and electricity customers in four states, began the process years ago.
“We’re trying not to be just reactive,” says Marsha Johnson, senior vice president of HR and chief diversity officer. “This retirement challenge provides an opportunity to look at the business strategy. It calls on HR to be closer to the business than ever.”
Historically, utilities had low attrition rates and few reasons to plan. “I can’t recall when our turnover was greater than 6 percent,” she says. “You don’t worry about a lot of volatility in your workforce, but you don’t invest in a lot of forward-looking stuff either. Now, we are focusing on short- and long-term results around workforce planning.”
Johnson’s staff applies workforce analytics to the problem. “With each year, we’ve added more rigor and discipline,” she says. “Historically, our average retirement age is 59. Over the next five years, significant numbers are turning 59. Predictive modeling requires us to go way beyond that fact.”
Last year, Southern Co.’s turnover was 5 percent, giving recruiters breathing room. “We used the year to develop deeper layers of understanding about the work and the replacement situation. This calls on HR to understand what employees are doing and to ask questions more directly than we’ve asked before,” Johnson says.
Replacement hiring is only part of the equation, she adds. “Workforce planning is an integrated process that helps determine what the work is, whether it will change, what resources are needed and the best way to provide the human resources.”
As a result of planning, Southern Co. has stepped up longtime efforts in cooperative education and hiring from the military and has launched initiatives to revamp benefits and improve employee engagement.
Small utilities also benefit from workforce planning. At Chelan County Public Utility District, Jennifer Taylor, SPHR, organization development manager, analyzed the retiree problem and is now developing a plan for skill sets and training needed in three to five years.
Using spreadsheets, Taylor and the compensation and benefits manager built a statistical model based on age, tenure, historical retirement data, turnover rate, recruiting metrics, time to train hires and differences among three retirement plans. They concluded that the retirement issue was not seriously urgent because “projected” retirement age is later than the “eligible” age and because process improvements have reduced the number of replacements needed.
Among 33 occupational groups, five hot spots caused immediate concern: technicians, system operators, control system engineering, water and wastewater operators, and operations management. Managers were already aware of them. “They had the foresight in 2005 to do an analysis—mostly through anecdotes— and got permission to hire apprentices,” Taylor says.
Hire Ahead—or ‘Holy Cow’
Then, the recession put advanced apprentice hiring on hold. “We had a bad year financially in 2009. Where we know we have gaps, we wanted to do some hiring but are holding off,” Taylor says.
Measuring the gap is important but not the final goal, Stedman says. “Filling the gap requires solutions be developed and investments be made. Just when Chelan determined the dimensions of its workforce development challenges were manageable with then-existing resources, the recession reduced the resource pie.”
Ideally, utility executives would step up hiring now because new employees need a few years to be trained to fully replace retirees. But hiring in advance is a hard sell to executives and utility regulators—even though the 5,000-worker regulatory profession also faces a retirement surge, according to the National Association of Regulatory Utility Commissioners.
Utility executives rarely blink at multimillion-dollar power plant upgrades, “but if you need to plan, hire and develop workers, building capabilities that will cost a million dollars, it comes from a different budget and they have a different perspective,” says Brad Kamph, president of Interliance Consulting Inc. in Santa Ana, Calif.
“Like most utilities, we’re not doing a lot of hiring ahead,” says Curt Meyers, director of staffing, learning and development at PacifiCorp, an electric provider to six Western states. “The month when 50 retire, people will say, ‘Holy cow—maybe we should have listened.’ I’m anxious for that to happen and then we’ll finally do something.”
Grant says commissions don’t often approve rate increases for hiring ahead: “The utility can only afford to bring on so many trainees because it can’t get rate reimbursement.”
Sometimes, it can: Ave Lethbridge, vice president of organizational effectiveness at Toronto Hydro, an electricity distribution utility, has hired more apprentices due to coming retirements. First, she had to convince management, and then the Ontario Energy Board. “You have to disclose all your assumptions and facts. Success lies in HR partnering with operations.”
At Fermi II, DTE Energy Corp.’s nuclear plant in Newport, Mich., Kristina Ward, a workforce planner, used nuclear power regulations to make the case for strategic hires. “We are required through regulation to have a certain number of people to do certain tasks,” Ward says. “So we know where the gaps are, especially for the required qualifications.”
After identifying 34 positions in six high-risk categories, “We went to the board of directors and were able to get some money to do strategic hiring,” she says. The relationship she built with the plant’s comptroller was key to moving ahead on this.
Workforce planning at Fermi II was a pilot project. DTE Energy, owner of Detroit Edison Co. and Michigan Consolidated Gas Co., plans to launch the practice across the company, says Kate Herwick, director of corporate HR.
Education and Marketing
Like other industries, utilities’ recruiters suffer from a lack of high school graduates with the necessary science, technology and math skills to train for the jobs. Filling the supply pipeline with adequately educated young people remains a serious challenge.
Puget Sound Energy Inc. in Bellevue, Wash., with 2,800 employees, has 49 apprentices—the most since 1972—but struggles to fill slots. Troy Nutter, manager for training and apprenticeships, says only 10 percent of the applicants pass the entrance test on basic algebra and electricity. A four-year apprenticeship costs $420,000 in wages, benefits and training, so Puget Sound Energy needs recruits who are likely to succeed, Nutter says.
Workforce planning can illuminate the problem, but state, regional and national efforts are required to solve it. Nationally, the Center for Energy Workforce Development has launched some initiatives. With collaboration among industry, unions and educators, Washington is ahead of most states.
Nutter, for example, serves on a statewide group determining skill sets for electricity jobs and helping school officials design curricula. And the Centralia center of excellence develops and disseminates energy curricula to state community colleges. Since 2005, it has expanded energyrelated training from five colleges to 19. In 2009, 593 students were in or had just graduated from these programs.
If the U.S. could solve its science and math problem today, it would make scant difference because few people want to work for utilities. The industry lacks appeal.
“One challenge is to make sure the business stays attractive to young people. We don’t tell our story effectively,” Johnson says. Southern Co. has numerous relationships with high schools, technical schools and universities.
“The industry has never done a good job of promoting itself,” Hins-Turner says. Green energy offers an avenue, though. “It is a purpose, a cause. Kids feel like they’re doing something for the environment and cleaning up the mess.”
Washington high school students must explore several careers. At 11 skills centers across the state, they get hands-on experience in energy and other areas, Hins-Turner says.
If utility careers had a better image, more kids might recognize they don’t need college to get good jobs and understand the importance of math and science. “Seventy percent of our jobs in energy need more than high school but less than college. How do we get people into that mind-set?” Nutter asks.
Here’s one suggestion: Imagine an Army-style “Be all that you can be” TV ad for power line work. It could extol the technical acumen and physical stamina required and tout the rewards of teamwork and the occasional heroic opportunities to keep the lights on—not to mention pay and benefits that are well above average.
If an ad like that ever airs during televised football games, the nation’s utilities could be on their way to building a new image among youth—and perhaps solving their workforce crisis.
The author is contributing editor for technology at HR Magazine.
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