(December 2010) Steven Specker joins Southern Company board; Chesapeake Utilities names Michael McMasters CEO; Ethics inquiry leads to dismissals and new president at Duke Indiana; plus...
Baby Boom Blues
A series of articles, reviews, and strategies for the anticipated utility workforce shortage.
it made sense.
Thus, competitive forces had the side effect of squeezing utilities’ workforces in the demographic era right after the baby boom generation. In 2010, middle-aged technicians and professionals would have represented a trough in the workforce, even without the baby boomer retirement sinkhole.
Also through the 1990s, as independent power companies were taking over the power-plant construction business, many utilities scaled back or eliminated the engineering and construction departments that built the postwar generating fleet. Likewise, regulatory affairs departments shrank, as utilities refrained from advancing rate cases in an era of diminishing investment needs and soft power prices.
“All of a sudden some companies are waking up and finding their expertise in cost-of-service ratemaking and utility economics has atrophied,” says Philip Mihlmester, senior vice president and managing director of ICF Consulting’s energy and resources practice. “Companies are facing rate cases for the first time in 10 years and finding they don’t have the skills in house to do that work.”
Similarly, utilities’ nuclear aspirations are resurging just as their nuclear experts are getting ready to hit the golf course. “In the nuclear power industry, the median employee age is 47,” says S. Gary Snodgrass, Exelon Corp.’s executive vice president and chief human resources officer. “A mass of retirements is anticipated in the next five years. Critical roles include nuclear engineers and process computer system managers.”
The same trends are affecting executive and management areas. In general, utilities reduced middle-management headcounts through the 1990s, which left fewer up-and-coming managers to fill senior positions in the early 21st century. Companies are finding their succession plans include more people from outside the company, and indeed outside the industry, than they would prefer.
“Utilities have to look for non-traditional sources for talent, but the success rate is a major challenge,” says Shelly Fust, a senior client partner with Korn/Ferry International in Los Angeles. “It’s a challenge to bring in an individual who doesn’t have deep experience in the utility industry, and doesn’t speak the industry’s language.”
Bridging the Gap
The utility industry’s regulatory compact makes maintaining a first-rate workforce a critical strategic issue. Indeed, it becomes even more critical as reliability and security imperatives increase, and utilities adapt to dynamic market forces.
“Companies like ours are challenged to ensure there is a steady pipeline of incoming skilled, diverse talent, as well as to retain critical knowledge workers,” Snodgrass says. “There is an emerging war for talent, and we intend to win it and ensure our platform for future growth as we experience continued changes in the energy and utility sectors of the U.S. economy.”
There’s little question utilities will do what is necessary to keep the lights on and the fuel flowing. But what costs and consequences ratepayers and shareholders will incur as a result will depend largely on how effectively utilities plan and execute their workforce-development and succession plans today.
This is much more difficult than it sounds, because no easy solutions exist to bridging the talent gap for all utilities in all situations. Simply opening up extra positions ahead of time, for