March 15, 2007

Focus on O&M (March 2007)

WORKFORCE MANAGEMENT

Aging workforce challenges

The aging of its workforce is one of the biggest challenges facing the electric utility industry. Most proposed solutions to the problem stress the importance of capturing the expertise of older workers before they retire, so that knowledge can be passed on to the next generation. An equally vexing problem is where that next generation will come from. The replacement problem is as big as the brain drain, but it isn't addressed as often and it appears to have no obvious solution.
 

The traditional approach

The prevalent organization of craft workers in the energy utility sector is the apprentice-to-journeyman structure. A typical maintenance organization is delineated two ways—vertically by skill set, and horizontally by skill level in each skill set. Each skill set is a shop, with varying levels of expertise (apprentice to journeyman) in each shop. This method was used in the U.S. through most of the post-depression era up to the 1980s. It proved very successful at creating qualified workers for what were then relatively new industries.

But the approach has drawbacks, and one of the biggest is required staffing levels. The level of a craft shop's staffing is driven by the maximum workload demand it can expect. The production pressures of planned and forced outages (especially at baseload plants) cause maintenance managers to staff for the "100-year flood." The analog in resource planning is building enough capacity to meet peak demand, which occurs only once a year.

As a result, staffing levels can far exceed the day-to-day demand on the workforce. There are both short- and long-term economic consequences of using this staffing model. The short-term effect—the underutilization of staffing resources on a daily basis—makes it very difficult to achieve excellence in O&M in the modern utility environment. The long-term effect is much more pervasive.
 

Legacy "assets"

Working for the local "power company" has long been considered a wise career choice because it offers job security and good benefits. The fact that many utilities are staffed by "legacy" employees has been very beneficial for utility assets. Veterans know the idiosyncrasies of equipment and systems and have developed tried-and-true methods for optimizing their operation and maintaining them in ways that extend their life. Over time, legacy employees acquire enough expertise in just the right areas that they require little continuing training, which benefits a cost-cutting utility's bottom line.

This stability has a costly flip side, however. As more legacy employees retire, it has become financially crippling for utilities to continue paying for their excellent benefits for years or decades to come. Capital-intensive industries have been among the hardest hit by the costs of "legacy benefits." Coping mechanisms have varied by type (bankruptcies, layoffs, restructuring) and level of success. The current trend among utilities is to offer employees buy-outs and early retirement as a way of quantifying legacy costs going forward. But legacy costs represent only a subset of the tangible costs of the aging workforce. A major intangible cost is the difficulty of replacing retirees' expertise, as mentioned at the top.
 

Replacing legacy workers

Several factors complicate the task of replacing workers and their experience. The first is the changing nature of utility employment. Once considered so stable that "pensioners and orphans" invested in them, electric utilities had to restructure themselves to comply with state programs that introduced retail competition in the 1980s, and the instability shattered that image. Another factor is the nature of the work: Coal-fired facilities are dirty, and restoring service following a storm entails long hours of physical exertion under daunting conditions. The travails of Entergy (post-Katrina), and Nebraska Public Power District (earlier this year, see story) are good examples.

A major obstacle to finding replacement workers is the nature of the younger workforce's expectations. Members of the millennial generation are tech-savvy and much more comfortable with a joystick and a mouse than with a hammer and a box wrench. They also expect a collaborative work environment, which is not what the traditional apprentice-to-journeyman shop structure offers. In this model, you are expected to work your way up from the bottom.

Another challenge is competition for technically skilled workers in general. The U.S. economy is transitioning from being dominated by manufacturing to increased reliance on service jobs (which is why graduating lawyers now outnumber graduating engineers). The service economy places a premium on the skills of post-baby boomers, and its work environment more closely matches their expectations.