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The Talent Bubble
As Baby Boomers near retirement age, utilities face the challenge of preparing the next generation of leaders.
Human resources managers at many utilities are sounding alarm bells about an impending shortage of skilled personnel-even amid flat industry growth and high unemployment rates.
The cause is demographics. The oldest Baby Boomers (born between 1946 and 1964) will turn 58 this year. Within a few years, the first of this group of nearly 80 million Americans will begin retiring. And with only 46 million Generation-Xers waiting to take their place, the nation's talent bubble is about to deflate.
"We are looking at 30 percent to 40 percent of our workforce becoming eligible for retirement in the next three to four years," says Kathy Haake, manager of human resources at Salt River Project (SRP) in Phoenix.
SRP is fairly typical; nearly half of the utilities participating in a study published last year by the American Public Power Association (APPA) 1 said that 15 percent to 50 percent of their workers would become eligible for retirement by 2006. The shortages will affect a broad range of key positions, from front-line operators to senior executives. But management, administration, and technical positions face the greatest challenges, according to the APPA study (see Figure 1).
The situation is compounded by a shrinking supply of engineering graduates entering the utility industry. According to the IEEE,2 barely more than 500 undergraduate degrees are awarded annually in power engineering, compared with nearly 2,000 per year in the 1980s. 2 Given the likely preponderance of Baby Boomers among the current pool of 23,000 registered power engineers, the lack of graduates entering the workforce will exacerbate the problem.
"There's a whole generation of talent out there that doesn't know us," says Mark Griffin, executive director and chief of staff at the Midwest Independent Transmission System Operator (Midwest ISO) in Carmel, Ind. "We will be challenged when people start retiring in a disproportionate way."
With such challenges in mind, many utilities are developing internal leadership-development programs, and stepping up recruitment and outreach.
"Succession planning needs to be addressed on a higher level, as part of an organization's strategy," says Jeff Tarbert, APPA senior vice president. "It won't become a crisis for companies that make sure they are in a good position to deal with it."
The Brain Drain Begins
The Baby-Boom-related brain drain will affect the entire U.S. economy, possibly in dramatic ways. For example, output will suffer. The Employment Policy Foundation projects the labor shortage could reduce the nation's gross domestic product (GDP) by as much as 17 percent. This will result in a lower per-capita income and arguably a lower standard of living. Furthermore, payroll taxes and benefit costs will balloon to finance increasing retirement and healthcare benefits.
Within this bleak macroeconomic landscape, the trends are particularly troubling for certain industry sectors, including utilities.
"We might feel a disproportionate impact because of the technical skills required in our business, and the fact that our workers have had longer tenures in their jobs and may be a little older on average," Tarbert says.