Demographic dynamics driving industry's human capital management

01/01/2001

Click here to enlarge image

Michael Wright

More applications for ICs have led to the need for more fabs, more equipment, more materials and more people. However, fewer people are available with interest in our industry and the skill sets we need. How many young engineers are going after degrees in electrical, electronic, chemistry, physics, mechanical, or industrial disciplines versus IT and "dot-com"-related disciplines?

That sucking sound you hear from the IT and dot-com world is getting louder as job growth rates and outlandish, lottery-like compensation packages attract talent like a gold rush town. The IT sector of the economy grew 10 times faster between 1988 and 1996 than the general job market. I haven't heard of it slowing down anytime soon. And the sucking sound is liable to get louder. According to the US General Accounting Office, 95,000 new IT workers are needed each year. Barely 24,000 graduate with IT degrees.

If you were a bright, young person with a science bent choosing between the gold rush of the new millennium and the manufacturing sector, which way would you go? If you were a seasoned manager, computer literate, still looking to contribute and have flexibility in your lifestyle, might you also be looking to move out of the industry?

The skills and enthusiasm for an ever-changing industry must be developed and recruited in the midst of three major shifts in our markets. We are moving from focusing on time-to-market to time-to-volume; from process development by customers to suppliers; and from a large supplier base to a few solid and predictable suppliers.

Time-to-volume requires speed. Rapid learning, knowledge distribution and logistics skills are essential to speed. Process development involves research, innovation, invention and resource management skills. A predictable supplier base calls for seasoned management running companies with sufficient Spinal Infrastructure [1] (i.e., people, plants, property and profits) and the scope and scale to support rapid ramps and precarious downturns. All of these skills take time to develop. There are increasingly fewer motivated people and this shortage will not go away soon as the following statistics illustrate:

• During the next decade, we will see the US as a whole resemble Florida demographically. Someone will turn 50 every eight seconds. In Europe and Japan, the aging growth rate is even faster [2].
• During the 1990s, the number of younger workers available declined 14%. Meanwhile, the US workforce has grown 1.5-2.0%/year over the past 20 years or 15-20%/decade.

If you were a bright, young person with a science bent choosing between the gold rush of the new millennium and the manufacturing sector, which way would you go?Click here to enlarge image

Put these facts together and you get a 30% shortfall and a demographic dynamic exacerbated by market conditions that will continue to affect our industry. The American Electronics Association's 17 regional councils in the US unanimously reported that its member companies identified worker shortages as their most pressing problem. The Semiconductor Industry Association forecasts a shortfall of 25,000 workers over the next three years.

The scary truth is that we are not getting better at generating more qualified people. Just over one third of 25-34 year olds earned any degree beyond high school. About 27% achieved bachelor degrees, and another 8% earned an associate degree [3].

About 12% of young people were high-school dropouts; an additional 6% received GEDs, not high-school diplomas. Put another way, 57% of the available labor pool has a high-school education that has not significantly improved the market readiness of the human capital pool. In fact, the US now ranks 18th in the world for math and science [4].

In 1997, the unemployment rate in California's Silicon Valley was 3.1%. It was 1% for engineers. By 2005, the US Department of Labor projects the number of engineers and scientists in high technology fields will grow ~90%.

Women make up 45% of the working human capital pool (HCP). Fewer than 10-30% of programmers, engineers and managers are women; this varies by industry. A 1994 study, conducted over a 7-year period, noted that women are 15 times more likely to leave the HCP. This brings up a huge retention issue — women are 51% of the undergraduate population, yet only <3% earn technical degrees, according to the US Department of Commerce.

Competition with our customers for critical talents is intensifying. Equipment and materials companies need people with the same skill sets as their customers to support increasingly automated and complex tools and processes.

In especially short supply are skilled applications and field service personnel. With this fierce competition for people, the industry is likely to resemble a major league sport dealing with free agency (but without salary caps).

Training, technology, automation, education and importing more workers will only help fill some gaps. Relocation of production to denser population regions won't be a cure either.

What can we do? We need to retain older workers longer. We have to increase the speed to productive output of our younger work force with technology and training. We have to tailor our incentives, rewards and recognition programs to the individual.

The retention of seasoned professionals who have the accumulated knowledge, managerial capabilities and desire to contribute will come with rapidly increasing costs in predominately two areas: the direct expense of healthcare and the indirect expense of extended personal time. Both are directly linked to productivity. Companies must change their viewpoint from managing a work force to leveraging human capital worldwide.

For younger workers, intense training and retraining will require investments in time and technology implemented at greater speed. We will have to recruit the best and the brightest wherever they may be. We will have to develop ways to accelerate the building of trust across racial loyalties and cultural boundaries, which will require more face-to-face time. Voice mail, e-mail, video conferencing, and telephone calls help identify issues and positions, but do not establish core relationships that build trust.

Consider some specific trends that can be leveraged:

• Perfect telecommuting. Predictions show that one third of the US population will be working remotely at least one day/week by 2003. If set up properly, we could support "7 x 24" globally, with flexible time for younger workers and work from second homes for older ones [5].
• Make computer-based training easy, efficient, and exciting.
• Make knowledge readily available by creating forums, networks, collection mechanisms, and incentives for sharing information and learning.
• Develop the ability to perform versus actual experience performance as the core competence of individuals. Concentrate on attitude and potential versus time in grade or function.
• Identify future workers at the high-school level.
• Develop cross-cultural management that invests heavily in cultural education and relationship building, including mandatory second language capability.
• Rethink the alignment of employee goals with company goals — the "personal, financial and professional goals" model versus the "professional, company goals" model.
• Concentrate on the number one job priority for people searching for work — an emotionally rewarding and intellectually stimulating environment (followed by increased pay, increased benefits, increased options and better bosses) [6].
• Redefine tenure to fit people retiring earlier rather than later. Get more contribution from people for a longer time by changing the on-site and in-place requirements for contribution.
• Leverage the use of part-time people. Having half of the human capital available beats the alternative.
• Learn very quickly how to get more performance from fewer people at greater cost.

While each segment of our industry will no doubt respond and address the dynamics that shifting demographics bring, one thing is certain: How we employ and deploy our human capital will constitute the most strategic challenge we face over the next three decades.

References

1. "Spinal Infrastructure" is copyrighted by Michael Wright.
2. US Dept. of Commerce, US Bureau of Labor Statistics.
3. M. Ewell, "Tech Worker Shortage?" San Jose Mercury News, April 1998.
4. M. Mendoza, "Fewer Students Get Technical," AP, April 26, 2000.
5. "Executive Edge," Tomorrow's Technology: Social Studies, Gartner Group, June-July 1998.
6. Bernard Haldane Associates quoted in the Worcester Business Journal, May 1998.

Michael Wright is executive VP of business development and corporate marketing at Entegris Inc., 3500 Lyman Blvd., Chaska, MN 55318; ph 952/556-3131, fax 952/556-4480, [email protected].