The Wakeup Call Has Sounded
The United States Department of Labor claims nearly half of the energy utilities workforce consists of Baby Boomers. As many will be reaching retirement during the next 10 years, a manpower shortage looms. Forward-thinking energy utilities have the opportunity to plan initiatives now to address this impending problem in the future, while separating themselves from sheer tactical competitors. This article offers an overview of critical issues… and some possible approaches.

The aging workforce in the energy utility industry has been well documented, and the fear of losing skilled labor is very serious and real. According to the United States Department of Labor, the energy utility industry averages the second-highest average employee age among 54 industries studied. Nearly one-fifth (19.2 percent) of industry workers are within five to seven years of retirement. Perhaps the most alarming statistic involves age distribution, as illustrated in the chart below. The average age of an energy utility employee is steadily rising; since 1995, the number of industry workers aged 55 and older has increased by 225 percent.

How did this happen?
With the threat of new competition at bay, deregulation spurred a movement for consolidation of operations throughout the industry. Organizations employed cost reduction tactics such as hiring freezes and downsizing. Efforts to recruit college graduates and early- to mid-level employees ceased while natural downsizing favored more experienced, longer tenured employees. In addition, the industry experiences little voluntary turnover as a whole. Promotions are often made from within, and oftentimes years, if not decades, of on-the-job training are invested in each senior employee.

I guess this is goodbye…?
The first concern that comes to mind is loss of physical headcount. Average age, average tenure and age distribution statistics indicate that energy utilities are either not actively recruiting or retaining young talent successfully. Certainly, public perceptions of an “antiquated” industry do not aid these efforts. Customers don’t perceive the industry to lead in technological innovation—after all, power is power, and it is a commodity, so what has changed about it over the years, right? And, issues such as pollution and high or increasing energy price rates tend to project the image of industry staffers to be the unenviable equivalent of an Internal Revenue Service agent.

On the positive side, once an individual is employed by an energy utility, he/she stays. Promises of frequent promotion potential and competitive pay and benefits packages tend to keep employees on board. In 2006, the energy utility industry boasted a median tenure of 10.4 years—the highest average by more than three years among industries analyzed by the United States Department of Labor, Bureau of Labor and Statistics.

On the flip side, longer tenure signifies a higher capacity for industry-specific skill sets and critical intellectual capital that individuals possess. It is the loss of this technical know-how and critical knowledge that dominates the minds of executives—more so than the dwindling of sheer manpower numbers. In addition to addressing a potential labor shortage, energy utilities must find ways to collect retiring workers’ institutional knowledge before that knowledge leaves the organization entirely.

Forward-thinking energy utilities have the opportunity to plan initiatives now to address this looming problem in the future, while separating themselves from sheer tactical competitors. Through strategic re-branding efforts and technological investment, energy utilities can obtain, mentor and train the young, technically savvy talent saviors from Baby-Boomer retirement doom.

Extreme makeover
Hiring young talent offers the most potential for addressing this issue. But, there is a major barrier: young workers today have little desire to work for energy utilities. Indeed, these younger generations view the industry as old, antiquated, and archaic. They seek vibrant cultures, challenging opportunities with tremendous upward mobility potential, diverse environments, and cutting-edge ideas and technology usage. Many don’t equate a utility company with a place where they can obtain that kind of working environment.

Have you ever seen the show Extreme Makeover? Welcome to the “energy utility” episode. If they are to overcome these built-in biases, the industry must address its image problem by looking in the mirror and changing virtually everything that does not appeal to Millennials. Or, at least, it must change Millennials’ perception of the industry.

The banking industry offers an appropriate role model for this effort. In an industry once known for stodgy, pale colored interiors and as a career destination for “lifers” who never expected to change jobs or climb the corporate ladder, pioneering banks took some key steps. They made things fun and lively, promoting diversity, collaboration, and career development. They changed everything from the career model to the physical structure to appeal to young talent. A prime example of creating such an environment is Umpqua Bank’s exceptional growth from a 40-person community bank to a 128-branch entity with a strong western United States presence.

In his book Leading for Growth: How Umpqua Bank Got Cool and Created a Culture of Greatness, Ray Davis (co-written by Alan Shrader) explains how his creative leadership approach facilitated this success, including hiring a cutting-edge design firm to revamp the retail layout and modernize its appeal.

Employees were required to answer the phone with a cheery “World’s Greatest Bank,” which invoked a fair amount of criticism amongst industry counterparts. However, this gesture was just one small step in the transition into a positive, winning corporate culture. Far from the conventional methods for training bank tellers, Davis sent his employees to Ritz-Carlton to learn customer service. His appreciation for employees and dedication to change re-defined the retail banking world. While this is an industry-specific example, the basic premise behind Davis’ approach was to challenge the current thinking, find new ways to motivate employees and, ultimately, attract customers.

Energy utilities will also need to address the Millennials’ dedication to preserving the environment. Millennials are passionate about saving the Earth. One recent study shows that 78 percent of Millennials believe that companies have a responsibility to join them in efforts to better the environment, and nearly 80 percent of Millennials want to work for a company that cares about how it contributes to society.

Energy utilities must promote their investments in technologies that preserve the environment, not to mention their efforts to generate an increasing portion of their energy portfolio through renewable sources. Millennials may at first dismiss the notion of such companies contributing to a greener planet (and can you blame them with the historic dependence upon fossil fuels?), but they can be convinced. If they want to dedicate themselves to a job where they can contribute to the environment, then they can become a utilities team member who builds business cases to increase investment in renewable energy sources.

Can’t we all just get along? Bridging the gap
Once young talent has been recruited, they must be retained and a massive transfer of technical- and industry-specific knowledge must occur before the Boomers retire. Ideologies, preferences, motivations and general attitudes differ greatly between Millennials and Baby Boomers. Closing this divide is critical to successfully transitioning key information.

Management must nurture a close-knit interaction between the two groups, and career-hungry Millennials will need to pick the brains of Baby Boomers. Without a doubt, facilitating a dynamic, new culture will require a serious change management effort.

This change effort must increase the awareness of differences between Millennials and Boomers, enable each group to appreciate the strengths of the other, and manage the differences effectively. For Millennials, companies may consider redesigning office space to encourage collaboration, assigning projects to groups of employees who are evaluated as a group for reaching a goal, and establishing a mentoring program. At the same time, companies must continue to connect with boomers through steps such as emphasizing the importance of respect, facilitating face-to-face conversations, and re-teaching the corporate history to all employees.

Millennials are eager to absorb industry knowledge. With a newly created comfort level between the two groups as well as some coaching, they can effectively drill in to the business processes and key “secrets” of the Boomers’ daily operations, thus capturing industry knowledge before the mass retirement movement.

The future is technological empowerment
Once Millennials and Boomers have bridged the gap, the company can extract core and previously undocumented business processes from workers’ minds and then analyze and streamline them to reduce costs and create efficiencies. Tools such as enterprise content management applications can help to preserve intellectual capital, socialize process changes, and bring other advantages to the table.

New technologies also back up companies’ commitments to preserve the environment:
 

• Smart Grid consists of a transformed electricity transmission and distribution network that uses two-way, communications, advanced sensors and computers to improve the efficiency, reliability and safety of power delivery and use.
• AMI is a system to measure, collect and analyze energy usage, from advanced devices such as electricity meters, gas meters and/or water meters, through various communications media on request or on a predefined schedule. Among other benefits, it reduces gas emissions by requiring fewer trucks dispatched to read meters.
• Renewable energy solutions have become popular as concerns rise about the exhaustion of fossil fuels, as well as environmental, social and political risks associated with continued extensive use of fossil fuels and nuclear energy. Efforts to extract oil from even deeper reservoirs are increasing and the costs of renewable energy technology have been shown to fall with increased investment and capacity expansion.

Alternative solutions
Consolidation with similar organizations also provides a path for addressing aging workforce issues. While it does not offset the need to recruit and retain young talent, consolidation gives companies the opportunity to address the loss of utility-specific labor and intellectual capital by pulling the best parts from multiple entities—lessening the blow of the retirement boom.

In fact, the industry currently is experiencing some consolidation due to rising fossil fuel prices and increased competition brought about by deregulation. But, every major industry player faces aging workforce issues; even if one company acquires another and doubles the size of its employee base, it is essentially doubling its amount of Boomers and its potential for mass retirement.

A final option is importing young talent from beyond domestic borders. If young local workers do not want to work in the energy utilities industry, then the only other opportunity to add young talent is through broadened international initiatives. On a global scale, the opportunity to work for a U.S.-based corporation continues to be a very attractive one, regardless of industry perception, and advantages exist with lower salary expectations, at least in some cases. This strategy, however, presents the same need to “bridge the gap” that exists with Millennials—and combining potential cultural issues with political attitudes in this traditionally conservative industry means the gap could be as wide as the Grand Canyon.

Close the drain, and fill the sink back up!
All signs point to a mass retirement movement within the energy and utilities industry, but top-tier organizations have an excellent opportunity to minimize the exodus of industry-specific talent and critical knowledge. Those that maintain a strategic vision to integrate intelligent solutions into their core operational procedures, prepare their people to succeed in a new environment, and maximize technology to support the enterprise will be in the best position to face and overcome these looming obstacles.

About the Author
Kevin McCarty, co-Founder and Executive Vice President of West Monroe Partners, offers more than 15 years of global business and technology consulting experience across multiple industries. He serves clients as a Solutions Executive and Architect combining strategy, financial, people, process, and technology elements to deliver technology-enabled business change. West Monroe Partners helps organizations address cultural changes and prepare workforces to achieve business objectives. For more information, please contact Kevin McCarty, kmccarty@westmonroepartners.com.