An Oracle White Paper November Three Demographic Mega-Trends to Transform the Aerospace and Defense Workforce

Transcription

1 An Oracle White Paper November 2010 Three Demographic Mega-Trends to Transform the Aerospace and Defense Workforce

2 Executive Overview Three demographic mega-trends promise to transform the composition of the aerospace and defense workforce. The first major demographic trend is the retirement of the Baby Boom generation. This cohort of people, born between 1946 and 1964, are expected to retire over the next 20 years precipitating the next transformational economic change in the United States. The second major demographic trend is the assimilation of the Echo Boom generation (essentially the children of the Baby Boom cohort) into the workforce. The third major demographic trend is the impact of the Globalized Talent Market, which by many accounts, is already reshaping workforces in a variety of industries. These trends are beginning to play out already, driving imbalances that are rippling through a number of talent markets. Leading companies have positioned for volatility in the talent market and expect to be able to meet their needs despite shortages, imbalances and other challenges as markets adjust to these shifts. Aerospace and defense companies that will thrive in the coming years will take an active role in driving the transformative impact of these changes on their workforce. One thing is for certain, understanding the short-term and long-term implications on business commitments, is a prerequisite for every aerospace and defense company to adequately respond to this new operating environment as it unfolds over the years to come. Specifically, aerospace and defense companies can benefit from understanding how they get the right people on the right work at the right time. Companies need to focus on supporting both top-down and bottom-up resource request and staffing processes, giving managers across the organization the platform to easily communicate their requirements and decisions throughout the lifecycle of projects in aerospace and defense. Oracle s Primavera Enterprise Project Portfolio Management (EPPM) solutions for aerospace and defense provide essential resource management capabilities to help managers gain visibility into workforce and staffing issues impacting customer commitments and long-term business priorities. Resource management functionality from Oracle Primavera is seamlessly integrated into enterprise project and portfolio management capabilities, helping managers collaborate together to maximize the use of the available talent pool, while planning for workforce needs they will face in the future.. 1

3 Aerospace and defense companies that thrive in the coming years will harness the demographic changes to transform their workforce. Understanding the changes and the nature of the impact on their business is a prerequisite for action. Transformative Demographics Playing Out Three demographic mega-trends create an environment where aerospace and defense companies stand to benefit from deploying systems that provide enterprise visibility into staffing and workforce issues. First, the Baby Boom generation, a group which is disproportionately represented within the Aerospace & Defense industry is expected to retire over the next 10 to 20 years, creating a large impact on the available workforce in the industry. Second, the Echo Boom generation-effectively, the children of the Baby Boom generation-who are quite different from their parents in their outlook on work, are widely expected to be the next major generation with transformative impact on the workforce in nearly forty years. Finally, the global phenomenon of the Globalized Talent Market is reported to be another significant demographic shift having an impact on the aerospace and defense workforce. The first major demographic trend is the retirement of the Baby Boom generation. This cohort of people born between 1946 and 1964 are expected to retire over the next 20 years precipitating the next transformational economic change in the United States. 1 It has been widely reported that some 58% of the North American workforce in aerospace and defense are above the age of In fact, recent press releases from two leaders in the industry suggest 50% of their workforces will be eligible for retirement in the next ten years. Moreover, a recent Aerospace Industries Association survey also found that the thirty or so companies responding to the survey would need to hire over 129,000 employees in various positions over the next five years. Several other forward-looking indicators suggest that industry growth and impending retirements will require the industry to actively manage the exodus of employees who previously formed the primary talent driving the innovation and leadership in many of these companies. 1 Goldman Sachs, Demographic Dynamics (Aug. 2010), available at 2 Aerospace Industries Association, Launching the 21st Century American Aerospace Workforce - A Special Report (Dec. 2008), available at 2

4 With 58 percent of the workforce over age 50, the majority of aerospace workers are heading to retirement. The rate of retirement for 2007 was 2 percent of workers eligible. This equates to the loss of 12,846 individuals. The number eligible for retirement is of more concern. 13 percent, which equals 83,499 individuals. Aerospace Industries Association, Launching the 21 Century American Aerospace Workforce (Dec. 2008) The second major demographic trend is the assimilation of the Echo Boom generation into the workforce. The Echo Boom is the group of individuals born between 1982 and 1995 and represents the next major generation following the low birth years between 1965 and While many of the Baby Boom generation came of age in a Sputnik-era period of stable expansion in the aerospace and defense industry, the Echo Boom, in contrast, come to the workforce, having witnessed the dislocations in the industry caused by the end of the Cold War, the subsequent period of industry consolidation along with the increasingly globalized world where jobs in manufacturing have migrated to the lowest cost country. It is no surprise then, that the trend among students over the last decade and a half has been away from science, technology, engineering and math-oriented degrees and professions, with the National Science Board finding recently that for every Ph.D. in engineering, the United States produces 18 new lawyers and 50 new MBAs. A third significant demographic trend is the Globalized Talent Market, which by many accounts is already playing out in reshaping the way companies operate across a variety of industries. By one estimate, upwards of a billion people will join this group by Needless to say, this group of individuals represents a significant enlargement of the global workforce and will come from countries like China, India, and Brazil but also from countries like Egypt, Philippines, Indonesia and Mexico. This demographic trend is widely expected to transform the shape of the global economy representing a sea change in the options available for sourcing talent in the future. In the short run, however, the growing talent mismatch is a major driver as companies in different industries, economies and countries adjust to the flat world. Manpower reports that as economies rebound globally with businesses and governments continuing to demand more specific skills, many employers are struggling to find the right talent in the right place at the right time. In a report involving 35,000 employers in over 36 countries, Manpower found that almost a third of these employers are struggling to fill positions due to the lack of availability of talent in their markets. Although the 2008 economic slump put more people in a position to be seeking work, there continues to be a growing talent mismatch playing out with not enough of the right skills in the right places at the 3

5 right times. Of particular interest to aerospace and defense employers, the top three jobs appearing in a list of the top five most difficult jobs to source were skilled trades, technicians and engineers. 3 Manpower found no evidence that this imbalance will correct anytime soon. Aerospace and defense companies that want to thrive in this environment will need to embrace these transformative changes and drive visibility into staffing and workforce issues to position themselves appropriately. These companies should be aware that understanding the impact on the workforce is a prerequisite for action. Having the right set of skilled professionals is indispensable to deliver on customer commitments and meet long-term business objectives. To do this well, companies need to have an adequate understanding of their existing resource capacity, their future needs based on strategic and business considerations, and how they plan to fill the gap between their resource footprint today and the resource demands they will have in the future. World Class Companies Poised For Volatility in Talent Markets Leading companies have positioned for volatility in the talent market and expect to be able to meet their needs despite shortages, imbalances and other challenges as talent markets adjust to these major demographic shifts. Multi-nationals are leading the charge, with many already having to face the plurality of issues on the global stage and several having deployed the systems and processes necessary to manage the complexity of a global resource pool. Aerospace and defense companies can benefit from these examples to gain insight into how they can position for the impact and diversify their workforce through the changes ahead. Harvard Business Review recently reported on the approach by multi-nationals towards managing talent and found that the best companies use workforce forecasts to analyze turnover, succession planning, and business opportunity data to identify potential shortages or excesses of key capabilities long before they happen. 4 The authors describe the example of Dow Chemical navigating the volatile business cycles of the chemical industry. Dow Chemical engages in what if scenario planning, taking into account internal variables like promotion rates and external variables like political and legal considerations. The article explains, Workforce forecasts can be used to staff up in key growth areas or identify knowledge management risks for retiring employees before they are clear to managers. Meanwhile, new economy companies like Google recognize the importance of retaining talent once they come in the door. With its global footprint in emerging markets like India and China and a rigorous hiring process, Google knows that it cannot afford to lose even its lowest 5% of performers. 3 Manpower, 2010 Talent Shortage Survey (May 2010). 4 Thomas H. Davenport et al., Competing on Talent Analytics, Harvard Business Review (Oct. 2010). 4

6 Google recognizes the possibility that their lowest performers may be mismanaged or misplaced. The company offers appropriate avenues for finding the right skill and engagement fit to help these employees boost their own performance and ultimately help the company meet its objectives. Other commentary has suggested ways of managing the transition and generational differences between the Baby Boom and Echo Boom, as one generation scales down and the other scales up in the workforce. The generational differences include communication styles, work expectations, attitudes about work-life balance, comfort with technology, and views regarding loyalty and authority. Companies in the oil and gas and utilities industries, for instance, face similar challenges to those companies in aerospace and defense in this regard. These companies find that older employees in their workforce have sophisticated knowledge of their systems and have a lot of technical and institutional knowledge to share. Meanwhile, the Echo Boom generation is eager to participate in decision-making, desires mentors, tends to be skeptical and values fairness and ethical behavior. Some aerospace and defense companies have taken the lead on these issues and are experimenting with mentoring programs; flex schedules and changes to workspace arrangements such as deploying open areas instead of cubicles. Additionally, companies are aware of perceived short-comings in work-life balance and are working to make changes more attractive to the incoming Echo Boom generation. As one aerospace and defense leader noted, the shift between the professional and the personal happens in real-time and companies in this industry need to provide a more fluid transition between them for its employees. Resource Management Braces Companies for Transition In this environment, aerospace and defense companies need to better manage how they get the right people on the right work at the right time. Companies need to focus on supporting both top-down and bottom-up resource request and staffing processes, giving program, project and resource management staff the platform to easily communicate their requirements and decisions throughout the lifecycle of projects. Solutions need to provide robust analysis of resource and role utilization to successfully manage the global workforce in a dynamic environment. Managers need to see where resources are being used across all programs and projects as well as what is the forecasted resource utilization. This visibility into resource demand for both current and proposed projects ensures organizations have sufficient time to address resource capacity and maximize utilization. Additionally, managers need to make requests and assignments of resources for early scoping of work, ensuring a view of future demand even if detailed project planning has yet to take place. As projectspecific needs are more finely tuned, more detailed resource allocations can be made based on bottomup planning. Managers also need to track supply and demand of resources and roles, understanding shortfalls or over-allocations across the organization. Managers need to see utilization of existing resources based on current, as well as forecasted demand. The global resource pool can be divided into discrete resource teams, enabling managers to determine who is over-allocated or under-allocated at the organizational, team and individual levels. 5

7 Moreover, managers need to easily see requirements for roles and skills on forecasted project work, as well as the availability of those roles over time. They need to see which roles and skills are in high demand and which are not needed. Companies can then plan their hiring and training programs based on this detailed skill and role analysis. Companies can better align their talent supply chain to match present and future needs. Oracle s Primavera Enterprise Project Portfolio Management (EPPM) solutions for the aerospace and defense industry provide essential resource management capabilities to help aerospace and defense companies gain visibility into workforce and staffing issues. Resource management functionality from Oracle Primavera is seamlessly integrated into enterprise-level project and portfolio management capabilities, helping managers collaborate together to maximize the use of the available talent pool while planning for the future. Additional Oracle Primavera EPPM capabilities allow program managers and individual contributors to record and retain best practice information gleaned through the knowledge and experience that emerges from successful program delivery. This information can benefit the broader workforce in subsequent programs the company tackles because it is made easily available for use from the system already in place. In this way, Oracle Primavera s EPPM capabilities provide the additional benefit of mitigating the loss of institutional knowledge in the face of a workforce quickly approaching retirement. With Oracle Primavera, aerospace and defense companies can manage their people to ensure the right people are on the right projects at the right time. Companies can have a holistic view of resource usage and projected usage across projects regardless of size. Additionally, managers can conduct what-if analysis to understand the workforce implications of committing to one set of high-level decisions over another. Moreover, Oracle Primavera s additional EPPM capabilities allow companies to record and retain best practice information for improvement of future program delivery. Finally, Oracle Primavera helps companies plan for future needs by helping companies incorporate strategic and business considerations in to forward-looking resource and capacity planning activities. Oracle Primavera provides the key capabilities aerospace and defense companies need to understand and plan for the transformational changes in the talent market that lay ahead. Conclusion Three demographic mega-trends promise to transform the composition of the aerospace and defense workforce. The retirement of the Baby Boom generation, the assimilation of the Echo Boom generation and the addition of a significant group of qualified but geographically dispersed talent all represent major trends that every aerospace and defense company needs to understand in order to successfully manage the changes ahead. In the face of these trends, companies need to better manage how they get the right people on the right work at the right time. Oracle s Primavera Enterprise Project Portfolio Management (EPPM) solutions for aerospace and defense provide the resource management capabilities seamlessly integrated into enterprise-level project and portfolio management 6

8 capabilities. Oracle Primavera EPPM solutions help aerospace and defense companies maximize the use of the available talent pool, understand their existing resource usage and their future needs and conduct the gap analysis required to stay atop the transformative changes playing out in the talent market. 7

9 Three Mega-Trends to Transform the Aerospace and Defense Workforce November 2010 Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA U.S.A. Copyright 2010, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners. Worldwide Inquiries: Phone: Fax: oracle.com AMD, Opteron, the AMD logo, and the AMD Opteron logo are trademarks or registered trademarks of Advanced Micro Devices. Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation. All SPARC trademarks are used under license and are trademarks or registered trademarks of SPARC International, Inc. UNIX is a registered trademark licensed through X/Open Company, Ltd. 0410