In association with Aerospace Industries Association American … · 2010. 8. 19. · 1!!!!! 2010...

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2010 Workforce Study

In association with Aerospace Industries Association

American Institute of Aeronautics and Astronautics National Defense Industries Association

July 20, 2010

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2010 AVIATION WEEK Workforce Study Advisory Board Marion Blakey CEO Aerospace Industries Assoc. Marshall Larsen Chairman and CEO Goodrich Anthony Lawson President HITCO Richard McNeel President The Lord Corp. Lee Palmer Managing VP-Aerospace and DoD, Hitachi Consulting Rick Stephens SVP Human Resources and Administration, Boeing Chairman – AIA Workforce Task Force

Robert Stevens Chairman and CEO Lockheed Martin Corp. Ed Swallow National Security Science & Technology Workforce Chair National Defense Industries Association William Swanson President & CEO The Raytheon Co. David Thompson Chairman and CEO Orbital Sciences Corp. and President-AIAA Greg Hamilton Publisher AVIATION WEEK Strategic Media Anthony L. Velocci Jr. Editor-in-Chief Aviation Week & Space Technology

* * * * * * Carole Rickard Hedden AVIATION WEEK Project Leader – Workforce Study President, The Write Stuff

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Advisory Board Recommendations

1. Assure adequate investment in research, development and innovation to attract best and brightest to the industry and to facilitate the creation of high-‐priority jobs as well as the economic foundation provided by product export.

2. Assure that front-‐line supervisors and leaders understand the pivotal role and appropriate processes to attract and retain employees.

3. Assure the value of aerospace and defense as an economic driver is understood by the breadth of stakeholders, and that future-‐generation employees understand the opportunity and challenges provided by the aerospace and defense enterprise.

4. Work with higher education institutions to assure adequate exposure to work applicability of curriculum through class, lab, and intern/co-‐op experiences, as well as appropriate and relevant research and basic science investigation.

5. Continue to forge alliances and collaborative efforts across the economy and society to assure the future workforce has the competencies required for future innovation, production, and delivery of services in support of mobility, communication, security/defense, and exploration.

Specific actions identified include

Coordinate a forum to further the discussion of attracting/retaining employees to the aerospace and defense sector.

Work to identify opportunities for transition for employees across the enterprise to retain industrial base talent, despite shifts in budget/market requirements.

Compare results of this study to other industry sectors to provide adequate benchmarking to participating organizations.

Extend study to global base as many of the participating businesses have operations outside the United States.

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Executive Summary AVIATION WEEK launched its workforce review in 1997 to share information about compensation and job/career opportunities across the aerospace and defense industry in the United States. In the ensuing 14 years, the study has grown to include a demographic reflection of the workforce and to identify key issues that impact the ability of the industry to attract, retain and develop a talented workforce. Partners in this effort are the Aerospace Industries Association, American Institute of Aeronautics & Astronautics, the National Defense Industries Association and AVIATION WEEK. The primary objective: to provide a single source of A&D industry workforce data. At its most simplistic, the study is designed to provide a single source of credible, reliable and current data for the use in developing policy and dynamic workforce strategies. AVIATION WEEK and the partner associations share an interest in the success of the industry and have agreed it is to their mutual benefit to conduct this research effort. The 2010 effort provided adjusted refinements to the compensation definitions and job categories (including the addition of supply chain and test/evaluation personnel). Retirement eligibility continues to be a focus of concern and is reflected in the data collection. Key findings of this year’s study include:

The industry posts a decline in the number of open and funded job requisitions for the year, and projections for out-‐years are also lower (all below 20,000).

The percentage of retirements actually fell, from 5.7% of the workforce in 2008 to 2.06% in 2009.

These first two points are disturbing in that this indicates a drop in the ability of the industry to hire new college graduates unless a change is made in the number of campus hires allocated.

While the average age of the workforce appears to have aged up one year with no other change, the average age among engineers dropped one year. This links directly to several large organizations increasing the number of college campus hires, despite a decline in the number of openings.

Diversity continues to be a confounding issue for the industry as a whole with no real gains in any under-‐represented category of personnel. However, note that there are areas of significant diversity, based on the size of the organization and the job category.

There were a significant number of companies who reported changes to education policies tied to the economic environment in late 2009 – these changes are NOT reflected in the data reported for 2009.

The voluntary attrition rate (employees choosing to leave) reported this year was 6.71%, down from 9.7% a year ago.

However, the voluntary attrition rate varies wildly among age cohorts and varied sizes of organizations, resulting in an overall voluntary attrition rate among young professionals that exceeds 20%.

It appears that smaller organizations are combating the escalating rise in voluntary attrition in key jobs (enterprise information technology and engineering specifically) with an increase in promotions for those areas.

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The average base pay increase for 2009 dropped from 2.37% to 4.32%; however, note that in 2008 many merit pay increases were waived entirely due to the economy. Companies responding to the study also indicated that performance bonus payouts were reinstated in 2009 and that these varied from 10% to more than 30% in some instances.

Just over 37% of the companies invited to participate in the survey responded; together they employ more than 550,000 employees or better than 85% of the workforce. This is up from 76% of the workforce covered in the study a year ago.

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Participation The 2010 AVIATION WEEK Workforce Study was distributed to members of Aerospace Industries Association as a cooperative venture between AVIATION WEEK and AIA. Leaders from AIAA and NDIA recommended to member organizations that they participate. The survey was provided electronically to those for whom leadership emails were available. The survey was sent via U.S. Postal Service to those for whom a personal email address was not available. Follow-‐up phone calls were made to the distribution list of 117 organizations. The response rate for 2010 was 37%, compared to 36% in 2009. The data reported in 2010 covers more than 550,000 employees on a base of 644,200 (as reported by AIA in December 2009). Organizations responding to the study include: Aeroframe Aerojet Aerospace Corp. Analytical Graphics AmSafe ATK Aurora Flight Science BAE Systems Ball Aerospace B&E Tool Bell Helicopter The Boeing Co. Curtiss-‐Wright Eaton GAAS Goodrich Hamilton Sundstrand Harris Corp HITCO Honeywell L-‐3 Communications LMI Aerospace Lockheed Martin Lord Corp Marotta Controls MITRE Northrop Grumman Orbital Sciences Parker Hannifin Raytheon Rockwell Collins Rolls-‐Royce NA RTI Intl Metals SAIC Spirit Aerosystems ULA Note: this data and report do not reflect the Defense Dept., NSA, Dept. of Homeland Security or NASA aerospace and defense employees.

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Demographics The responses for the 2010 AVIATION WEEK Workforce Survey represent 85% of the employment of the U.S. based aerospace and defense industry. This report does not include responses from NASA, the Defense Dept. or other government agencies. Among the major concerns in previous years was a gap in the workforce age span, specifically in the age between 36-‐44. There has been some smoothing to this trend, though it remains an issue, particularly within some organizations. Workforce by Age Range

The slight dip in the 45-‐49 age group to 17% of the workforce will provide a completely different picture with regard to retirements in another decade (see Retirement Data) when the double-‐digit retirement eligibility rates fall dramatically. Overall, the average age for the workforce remains at 45 years, despite the passage of another calendar year. This number has held for the past three years. The average age among engineers remains 43, again for the third consecutive year. The four job categories posting the highest average ages include: business development, 49.04 yrs; Supply Chain, 47.39 yrs; Research and Development, 46.91 yrs; and Program Management, 46.79 yrs. The average age for Program Management actually dropped by a year during the past 12 months. The two largest employee segments across the industry remain Engineering and Non-‐Exempt Touch Labor, which make up 23.9% and 30.59% respectively. Engineering dropped from 27% of the total, while Non-‐Exempt Touch Labor increased from 25% of the workforce a year ago. This data point reflects a transition of major platform programs into production.

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Diversity While the aging of the workforce cannot fight off the passage of time, the face of the workforce is a different matter. More than 20 years has passed since the first Diversity Awareness programs were introduced in the aerospace and defense industry, and despite the well-‐intentioned efforts the face of the industry has not changed in a dramatic way. Yes, there are women and people of color in key leadership positions, an absolute necessity in encouraging younger workers to view the industry differently.

Women

Under Represented Minorities

2010 2009 2005 2010 2009 2005 Engineering 11.29 12 11.7 16.8 18 14.9 IT 23.44 22 20.3 17.18 22 18.1 Program Mgt 18.71 22 10.6 10.64 14 8.20% R&D 11.53 11 7.9 19.48 15 8.1 However, by examining the numbers according to size of organization, a slightly different perspective emerges. In organizations of 10,000 to 49,999 employees, better than 55% of the finance workforce is comprised of women, while the supply chain workforce exceeds 30% female for every size of company. Women account for 25% of the program management workforce in organizations with more than 100,000 employees. The one job category where women continue to have a weaker presence is engineering, regardless of the organization size. Under-‐represented minorities are defined through the EEO definitions. While the data looks fairly stagnant when examined for the industry as a whole, there is more clarity provided – as was the case with women – by looking at the data by organization size. For engineering, large organizations exceeding 100,000 employees include better than 22% under-‐represented minorities, while Tier 2 companies with an employee population of 10,000-‐49,999 have the highest percentage of under-‐represented minorities in the Research & Development job category (25.6%). Beyond the scope of this study, AVIATION WEEK examined the breakout demographics of the Under-‐Represented Minorities cohort in the Young Professionals Study. In the data from this report, it was noted that 30% of the professionals under the age of 35 in the industry are women, and that while there has been no statistical change in the number of African-‐American young professionals, there has been an increase in the percentage of Hispanic heritage professionals under the age of 35. (The Young Professionals’ study focused on those in the Engineering population).

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Retirements The final area of concern with regard to demographics relates to aging and retirement. In the early years of the 21st century, several sources cited a retirement eligibility data point of more than 25%. While we could not validate this fact, we did begin tracking the rate of retirement eligibility within the industry as well as the actual retirement ratio. It should be noted that several compensation actuarial sources have indicated that the ratios are now moving toward a base of 100% retirement at age 70, versus age 65 in the past. For the purposes of this study, the term “retirement eligible” was defined by one of two criteria: 1) eligible according to corporate policy and defined benefit; or 2) qualified for Social Security benefits in part or fully. For 2009, 12.99% of the workforce was eligible for retirement with just 2.06% actually taking retirement. Respondents to the survey indicated that the economy has played a role in the decision by an individual to take retirement. More than half of the study’s respondents believe the economy played a role in the decision by individuals concerning retirement. In looking at the data by organization size, and in terms of projections, a slightly different picture emerges.

Smaller organizations had higher rates of retirement eligibility in 2009 among finance and business development employees.

For mid-‐sized companies, retirement eligibility in the near-‐term hits hardest in the areas of business development and research & development.

For the largest organizations, the highest rates of retirement are in the production workforce and program management.

There is wide variance in the retirement eligibility numbers, depending on size of organization. The largest employers have the highest rates of retirement eligibility, climbing above 30% by 2012 and up to 40% in most job categories by 2014. It is important to keep in mind that actual retirements seldom match the eligibility. In addition, the numbers would shift dramatically to the left if the fully qualified Social Security retirement age notches up to age 70.

Retirement

Ave % Eligible Retire 2008

% Retired 2008

% Eligible Retire 2009

% Actual Retired 2009





Overall 12.99 2.06 17.9 22.84 Engineering 8.3 2.4 10.43 1.35 14.5 15.37 17.4 18.29 R&D 15.3 14.9 18.11 3.47 21.1 21.07 24.8 26.54 Test & Eval 14.17 2.07 21.29 29.38 Enterprise IT 10.8 4.5 11.2 1.68 14 15.37 16.4 19.93 Engineering Tech/Aides 13.1 3.9 13.38 1.17 18 18.43 22.9 24.95 Prog Mgt 13.8 5.3 11.38 1 16.7 17.49 25.3 22.68 Financial 12.5 7.4 11.61 1.76 15.5 15.83 19.7 20.15

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Analysis Business Development 18.8 7.5 16.28 3.33 20.5 18.96 26.4 26.41 Supply Chain 14.14 1.29 21.09 29.41 Non-‐Exempt Touch Labor 11.4 6.1 13.54 1.67 16.5 19.69 20.2 25.11 Reported in 2009 The study also queried about how the industry is maintaining contact with retirees, an area of concern in terms of knowledge management. Interestingly, just less than 40% are tracking work history for retirees and less than a quarter of the respondents are tracking what the retirees are currently doing. Given the need to maintain contact with critical skill experts, this may be an area of evaluation as organizations move toward a transition-‐style retirement that allows employees to remain partially employed for longer periods of time.

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Hiring While corporations fought to retain new grad hiring across the country, the realities of the economy and the significant slow down in new program starts played out in hiring across the industry. Just two years ago, respondents to the survey projected job growth of 5%, falling to 3% in 2009 and 2010. However, the data show that hiring for the coming years remains fairly stable. Note also that advisory board members indicate the hiring outlook in 2010 is much changed from 2009 with upswings linked specifically to the resurgence of production on the commercial transport side, as well as emerging requirements surrounding security and cyber security (related to defense, but also to national security, infrastructure security, and corporate security). Similarly, organizations are looking for a combination of technical skills and business skills. The challenge, as reflected in the attrition segment of this report, is to assure that when hiring for a critical skill such as critical thinking, the individual is then tasked in the area of critical thinking. Respondents indicate that an average 11.28% of these positions will be hired from the university campus. That departs from what two major corporations – Lockheed Martin and Northrop Grumman – have indicated in several of the businesses where hiring managers plan to focus in excess of 20% of their hiring on college campuses. Clearly there is disconnect between data reported and interviews. Better than 58% of the jobs will require some type of security clearance. The most critical skills listed as required by hiring managers include systems engineering, mechanical and software engineering, and aerospace engineering. In years past, the study found that electrical, software and mechanical engineering were the top critical demand skills. However, the demand for production/manufacturing labor was nearly twice the demand for any critical engineering skill. Sample Hiring For Some Organizations

Category

Open, Funded as of April 1,

2010 Plan for 2010

Plan for 2011

Plan for 2012

Aerospace Engineering 1078 476 303 115 Chemical Engineering 2 0 8 0

Computer Hardware Engineering 333 262 65 28

Software Engineering/Development 1755 7942 1203 599

Electrical/Electronic Engineering 867 579 763 354

Industrial Engineering 283 205 331 453 Materials Engineering 95 107 893 110

Mechanical Engineering 1011 490 475 143 Nuclear Engineering 21 0 35 0

Systems Engineering 3591 1525 1693 1028 Applied

Mathematics/Statistical Analysis 76 50 52 50

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Chemistry/Materials Science 31 20 41 10

Operations Research/Process Mgt 231 256 512 166

Physics 13 16 86 0 Business Development 384 104 63 63

Program Mgt 765 160 741 122 Non-Exempt/Touch Labor 3272 1562 6093 908

Supply Chain 640 463 444 454 Other 11849 1252 236 272 Totals 26297 15469 14037 4875

Note the disparity in some of the numbers. For instance, as of April 1 there were more than 1,000 open and funded requisitions for aerospace engineers, despite a plan that calls for hiring just over 400 aerospace engineers. If the “plan” figure is followed, there has been a drop in job availability compared to a year ago when hiring plans called for just over 20,000 positions required. The adjusted figures may reflect, to some degree, the hold on retirements noted in this report. Note also that while 153 slots for supply chain management were posted as of April, the forecast is for 400 supply chain management positions per year. It would appear that the organizations know there is a need for supply chain expertise, but the specifics of that hiring remain to be defined. Hiring Effectiveness Corporations also began developing more critical metrics of their hiring practices. The four most prevalent measures listed by respondents were:

1. Length of time to fill position 2. % offers extended that accepted 3. Cost to fill 4. % positions filled by employee referral

Where We’re Hiring Corporations continue to focus on improving the spend and effectiveness of campus recruiting. The AVIATION WEEK survey does not attempt to qualify the selection of universities for hiring. Rather, we look only at the volume of hiring – where corporations indicate they prefer to hire. For this year, the list includes:

1. California Polytechnic 2. Georgia Institute of Technology 3. Penn State 4. TIE Virginia Tech and Massachusetts Institute of Technology 5. Purdue University

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The key rationale provided for selection of universities focuses on the academic reputation of the institutions coupled with the success of previous hires from the school by the corporation. Note that this is the first time since this question was added to the survey that MIT has made the listing.

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Attrition There was a time when voluntary attrition within the A&D industry hovered dangerously low. More than a few organizations boasted of attrition below 1%, which makes the induction of new employees difficult and the ability to refresh dependent upon separating lower-‐level performers. Despite an economy that would indicate a limited opportunity for employees to leave, the voluntary attrition rate remained at a healthier 6.7%, down slightly from 9.7% a year ago. Of more concern, however, is the rate of attrition within specific job categories and within specific age profiles. Two years ago, the AVIATION WEEK Workforce Advisory Board expanded this study to look specifically at attrition within age profiles based on growing concern that the industry was attracting but not keeping young professionals. Based on the 2009 results, the advisory board has indicated the need to determine whether those who choose to leave an employer are doing so to go to a new opportunity within the aerospace and defense enterprise or leaving to change industry sectors entirely. For 2010, AVAITION WEEK partnered with NASA and Aerospace Industries Association to investigate the Young Professionals demographic further. The details of this research are reported separately. However, it is clear that the attrition rate among those with 0 to five years of experience remains higher and continues to escalate. The average voluntary attrition level among young professionals spiraled to 21.85% for 2009, up from 15.7 a year ago. Of particular note were the attrition levels for young professionals in engineering (16.29% and among young manufacturing/production workers, at 19%.) We also gathered voluntary attrition data for employees with 6 to 10 years of service, with 11 to 15 years of service, with 16 to 20 years of service and for employees with more than 20 years of service. These numbers remain under 5% for all categories with one exception – enterprise information technology where there is a bump in attrition for the experienced employees with 16 to 20 years of service. This was also the case a year ago. When analyzing numbers by size of organization, it appears that the larger organizations have much lower voluntary attrition rates and that the numbers for smaller organizations are double and sometimes triple that of the larger entities. This would appear to be normal in the engineering ranks as many employees begin their careers with smaller organizations and join larger firms as their experience increases. In addition, employment does follow programs. The advisory board members noted that as the industry has become more program-‐centric, the transition of talented personnel within organizations has become increasingly complex. Many organizations are re-‐examining their efforts to assure that employees have a “home” organization, regardless of the phase a program may be in (start-‐up/design/production/sustainment/termination).

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Compensation Organizations define compensation as a combination of base pay, performance bonuses and benefits. However, to employees it means their annual increase. And in 2009, the average pay increase was 2.37%, down from a reported 4.3% in 2008. The reality is much different. Most firms put annual pay increases on hold in 2008 and put furloughs and shutdowns into effect as a means of controlling costs. So the 2.37% could be interpreted as a significant improvement. Employees most likely will not view it this way, particularly given the financial performance of most of the industry in the past 12 months. To balance out the basic pay increase, most of the aerospace and defense industry turns to performance bonuses – either for individuals, teams, or business units. Nearly 90% of A&D corporations use some type of performance-‐based bonus system. Compensation also includes additional benefits, which range from flexible spending accounts and dependent care to the more traditional healthcare benefits. Nearly three-‐quarters of the responding organizations offer some type of telecommuting capability, while 77% offer flex hours to employees. In 2009, employees paid, on average, 21% of the cost of healthcare. This is on par with prior years; in 2007 employees paid 19% of the cost of healthcare. The cost of healthcare continues to be a major issue for the industry, and several of the respondents indicated they would be introducing additional initiatives to control the growing costs. The AIA Compensation Committee continued to advise the AVIATION WEEK Workforce Study in terms of defining job categories and levels. AVIATION WEEK is reporting the average pay per level and job category.

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Reported Annual Pay 2010 vs. 2009 Source: Respondents to 2009 and 2010 AVIATION WEEK Compensation Study

Level 1 Average Annual

Pay Level 2 Average Annual


Pay Level 4 Average Annual Pay 2010 2009 2010 2009 2010 2009 2010 2009

Aero Eng

$59,064.00

$56,663.00

$69,586.00

$70,480.00

$85,306.00

$85,670.00

$101,862.00

$102,068.00

Chem Eng

$55,405.00

$53,790.00

$69,928.00

$71,535.00

$84,180.00

$86,041.00

$102,090.00

$103,622.00

Hardware Eng

$60,878.00

$58,390.00

$72,449.00

$67,393.00

$93,381.00

$87,705.00

$113,269.00

$103,798.00

Software Eng

$58,558.00

$60,148.00

$70,040.00

$73,718.00

$88,882.00

$89,778.00

$106,474.00

$105,346.00 Electrical/Electronics Eng

$61,436.00

$59,414.00

$69,446.00

$70,672.00

$84,988.00

$85,556.00

$100,911.00

$104,521.00

Industrial Eng

$55,460.00

$53,660.00

$62,624.00

$66,218.00

$75,511.00

$79,762.00 $93,326.00 $95,521.00

Mats Eng

$56,367.00

$57,248.00

$67,398.00

$68,704.00

$78,381.00

$83,407.00 $94,978.00 $98,702.00

Mech Eng

$57,745.00

$58,463.00

$67,869.00

$68,856.00

$80,398.00

$84,087.00 $97,386.00 $99,092.00

Nuclear Eng

$59,843.00

$58,824.00

$85,074.00

$82,170.00

$99,166.00

$94,512.00

$103,612.00

$120,836.00

Systems Eng

$60,925.00

$62,426.00

$70,527.00

$73,630.00

$84,355.00

$89,123.00

$104,972.00

$107,686.00 Applied math/statistical analysis

$57,557.00

$62,322.00

$69,433.00

$72,679.00

$91,423.00

$95,494.00

$109,076.00

$107,654.00

Chemistry/Materials Science

$56,051.00

$42,865.00

$65,942.00

$71,767.00

$83,212.00

$95,216.00

$100,951.00

$106,981.00

Physics

$62,517.00

$66,055.00

$78,008.00

$80,091.00

$95,632.00

$98,773.00

$111,963.00

$119,706.00 Business Process Mgt

$51,807.00

$53,879.00

$64,497.00

$66,145.00

$74,352.00

$85,880.00 $91,171.00

$103,535.00

Program/Project Mgt

$58,594.00

$61,795.00

$70,095.00

$76,174.00

$87,025.00

$93,386.00

$104,437.00

$114,874.00

Business Dev

$54,566.00

$56,148.00

$72,864.00

$68,991.00

$90,371.00

$88,802.00

$107,482.00

$108,527.00

Supply Chain Mgt

$46,248.00

$56,952.00

$68,190.00 $85,869.00

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Compensation Tables Continued

Level 5 Average Annual


Pay 2010 2009 2010 2009

Aero Eng

$125,865.00

$124,248.00

$160,152.00

$152,012.00

Chem Eng

$124,602.00

$124,581.00

$155,749.00

$155,991.00

Hardware Eng

$140,919.00

$124,940.00

$152,259.00

$173,524.00

Software Eng

$127,049.00

$127,398.00

$153,603.00

$151,713.00 Electrical/Electronics Eng

$128,501.00

$119,648.00

$145,665.00

$145,783.00

Industrial Eng

$108,231.00

$115,735.00

$132,708.00

$139,095.00

Mats Eng

$117,337.00

$118,373.00

$142,549.00

$147,670.00

Mech Eng

$117,685.00

$119,680.00

$142,784.00

$139,133.00

Nuclear Eng

$119,005.00

$105,890.00

$127,228.00 NA

Systems Eng

$127,097.00

$120,391.00

$153,777.00

$151,741.00 Applied math/statistical analysis

$123,329.00

$136,734.00

$154,053.00

$171,417.00

Chemistry/Materials Science

$122,366.00

$133,022.00

$139,828.00

$162,000.00

Physics

$133,969.00

$138,147.00

$163,642.00

$177,424.00 Business Process Mgt

$114,724.00

$125,755.00

$145,138.00

$168,297.00

Program/Project Mgt

$122,211.00

$131,118.00

$148,558.00

$167,405.00

Business Dev

$126,828.00

$131,355.00

$163,325.00

$148,722.00

Supply Chain Mgt

$100,194.00

$139,276.00

• This was the first year data was collected on Supply Chain Management • Pay for Nuclear Engineering Level 6 was not statistically relevant in 2009

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Technological Challenge Technological challenge remains one of the leading criteria used by aerospace and defense employees when making career decisions. They value the environment that supports innovation, the leadership of innovation, the reward of innovation, and the ability to work beside the individuals who created or who are expert in specific technological areas. It was noted during the 2010 AVIATION WEEK Executive Summit that a method used to evaluate innovation capacity or technological challenge was eliminated by the Defense Dept., making it difficult to add another dimension to this evaluation – the innovation index required as part of the DoD review. In discussions taking place over the last 12 months, leaders of technology and innovation struggled with creating an index. The final decision made during the Executive Summit is not what the organization measures relative to innovation and technological challenge, but that it DOES measure something. To evaluate the ability of specific organizations to meet this important criterion, the study looks at several factors that are measured in a fairly consistent way across all organizations. These include the percentage of individuals in the C-‐level payroll who hold technical/engineering degrees, the investment level in organic research and development, the investment made into innovation and design tools and supporting technologies, the numbers of patents awarded and the value the organization places on technical workforce as is evidenced through training and promotions. The organizations leading the Technological Challenge Category for 2009 are:

1. TIE – Aerospace Corp. and Analytical Graphics Inc. 2. TIE – Aurora Flight Sciences and Orbital Sciences 3. TIE – General Atomics Aeronautical Systems and Raytheon

The A&D industry continues to do well in the area of technological challenge, expanding data mining capacity, the introduction of new materials, the development of alternative energy sources and the expansion of integrated technologies manifesting in systems that support exploration, mobility, defense, communication and security. However, the data should give pause to the need for recovery in several key areas once the economy rebounds further. Exclusive of federally funded research laboratories, 6.28% of revenues were invested in organic R&D. This ranged from a high of 22% of revenues for one organization to below 2% of revenues for another. The average remains below the 10% of revenue levels that were more common a decade ago. A&D firms were awarded an average of 179 patents each in 2009, down from an average of 478 in the previous year. For the first time, the survey asked for the percent of revenues spent on tools and technology used to support the design/engineering processes; the industry recorded 3.42% of revenues investment in tools. The majority of this funding fed design and engineering functions specifically, with an additional 32% of the total investment going toward laboratory upgrades and another 30% toward supply chain integration systems and technology. Just fewer than 15% of the total investment went toward manufacturing technology and upgrades. The study also asked for information relative to standardized innovation processes. A full 74% of the respondents reported they use some type of formalized innovation process. The preponderance of

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those reporting a system indicated it consists of go/no go reviews for investment in specific technologies or processes. Approximately 50% of the respondents report conducting innovation around basic science, 52% report having some type of brainstorming process, and 36% report having metrics for innovation that are visible and reportable to the organization. In terms of leadership, right at 50% of the executives leading aerospace and defense companies hold technological or engineering degrees. Promotions for engineering workforce dropped to 7.79% in 2009 from 12.7 of the workforce in 2008; 5% of the R&D workforce was promoted this year vs. 5.3% of R&D workers in 2008. We also incorporated the age of the R&D and Engineering workforce into the calculus of this category: an average of 43 years for engineers and 46.9 on average for research and development employees. However, in several companies the average ages in these categories were under 40 years of age.

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Learning/Career Development One of the hallmarks of the A&D industry has been the continued investment in learning and career development throughout each organization. The 2010 survey looked at this closely, in light of economic pressure on the investment in learning and training. The industry as a whole invested 1.77% of revenues in education and training during 2009. And while this amount held relatively steady during the economic downturn, a number of companies did announce changes to their educational policies. Most of these shifted from paying from any course of learning to specified and approved courses. In all, 40% of the responding organizations reported changing their learning plans in some way during the year. Learning and education, as with technological challenge, is one of the primary criteria employees look at when assessing their future with an employer. To determine which organizations do best in this criterion, the study looked at overall investment in education and training as a percent of revenues, the percentage of employees enrolled in some type of tuition reimbursement or payment program, whether the company reimburses for all degrees or for specified degrees, the average hours spent in education training per employee per year, evidence of career planning and the percentage of employees who saw learning and education translate into a promotion. The organizations ranked most highly in terms of learning and career development for 2009 are:

1. Hamilton Sundstrand 2. TIE – The Boeing Co. and Rockwell Collins 3. TIE – Mitre and Bell Helicopter Textron

Of the responding organizations, more than 70% offer tuition reimbursement. Of these, 34.29% cover all degrees in terms of reimbursement; this is down from 42% paying for all degrees a year ago. Another 51.43% pay for specified degrees. In all, 6.54% of the professional employees were taking part in some type of tuition reimbursement program. In addition, employees spent 19.22 hours per year on average in education and training; this fell from 25.3% a year previous. And of these, 41% cover tuition for any degree. Nearly 8% of employees are enrolled in tuition reimbursement programs. While numerous organizations reported that employees spent an average of 40 hours per year in training/development, the industry-‐wide average is 25.3 hours per employee The training most sought by employees was technical or skill-‐based, followed by leadership education and development of program management skills. The result of ongoing development and training is progression of the career. Promotions slowed in 2009 versus 2008. The one area that did see an increase in promotions was enterprise IT, which continues to struggle in losing experienced personnel to voluntary attrition.

% PROMOTED 2010 2009

Engineering 7.79 12.7 R&D 5.08 5.3 Test/Eval 6.8 NA Enterprise IT 9.39 8.9 Eng Tech Aides 5.86 6.5 Program Mgt 9.21 9.9

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Finance 9.34 11.4 Bd 8.57 9 Supply Chain 13.87 NA

NonExe Touch Labor 4.89 6.8

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Valuing the Individual The third criterion considered most frequently by A&D professionals when making career decisions is the degree to which the organization values the individual. This is statistically difficult to determine because the most important of these factors is the relationship between the employee and her/his immediate supervisor. However, for the purposes of this study, we looked at several key factors:

Diversity as evidenced in the presence of women and under-‐represented minorities in the workplace

Pay increases Share of health care costs borne by the employee Hours of training and development Voluntary attrition and years of service The presence of work/life balance benefits

For 2009, the organizations ranked most highly in terms of data reflective of Valuing the Individual are:

1. TIE – Harris Corp. and Goodrich 2. TIE – Analytical Graphics and SAIC 3. TIE – Parker Hannifin, United Launch Alliance and General Atomics Aeronautical Systems

As noted in previous sections, the demographics of the workplace have not changed significantly in the past two decades, despite tremendous efforts. What has changed is the support of individuals in the workplace and the focus on respect for the individual as opposed to valuing and nurturing diversity. Pay increases during 2009 were made on a more individual basis, and the average merit increase dropped to meet the economic challenges. The share of health care cost borne by the employee remained stable, despite significant increases to cost. It remains to be seen what impact the recent changes in U.S. healthcare policy will bring about. One shift for sure is that dependents will continue to be carried on employee policies beyond high school or college graduation with the new standard of 26 years of age. Also considered in this category is the effort expended to assure mentoring programs are in place, that career paths are visible and open for discussion, and that there are regular reviews in place. It was noted that the key payoffs for succession planning have been employee satisfaction and less disruption during changes.

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Knowledge Management Due to the complexity of A&D industry programs and the longevity of our products, managing knowledge and intellectual property carries a heavy burden. For the past two years, the AVIATION WEEK Workforce Survey has looked at several aspects of knowledge management – the tools being used and what organizations are doing to maintain contact with retiring employee experts. It is worthwhile to look at the section in this document concerning retirements and how retirees are being tracked as this relates directly to the ability of the organization to maintain contact with key alumni and tap into their expertise on an as-‐needed basis. Data for this year indicates an increasing reliance on apprentice-‐like relationships in the workplace to assure transition of knowledge from one generation to another. Social media are being used within organizations to maintain contact among special-‐interest communities, but more prevalent was the use of micro sites to assure teams have access to members and to knowledge being shared across the program or project (65.7% of respondents indicated this as a key capability in managing knowledge). Webcasts, conferences and employee resource groups also were cited. One response indicated a pilot use of Yammer. This is a micro blogging tool used to track responses to a single question: what are you working on? Just as important as the tools, however, is the ability of the organization to instill a culture of managing data and knowledge across all organizations and within projects and programs. Respondents to the survey indicated that 77% instill this culture via knowledge management training, while another 57% deploy processes and technology systems that change the way people look at managing knowledge. 40% of respondents report they use employee goals/objectives to drive home the point, while just 17% report they have no knowledge management efforts under way. The most prevalent technologies used to encourage knowledge management and collaboration include and are used by these percentages of respondents: Unification Portals 40% Wikis 40% Blogging 28.5% Social networking 25.7% Team and project micro sites 65.7%

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Running the Numbers The 2010 AVIATION WEEK Workforce Survey was aggregated and formulated by Development II, the same company that assisted AVIATION WEEK in moving the informal job openings/compensation survey into a more statistically relevant and thorough effort. Development II, inc. is a business consulting and market research firm that specializes in problem solving, using customer satisfaction measurement as a primary tool for analysis. Located in Woodbury, Connecticut, Development II was founded in 1989 by Robert L. Brass and Steven W. Lewis. They focus on providing the most effective and results-‐oriented services for their clients. They have recognized the pitfalls of many widely used market research techniques, and have responded with client-‐specific programs that uncover information which may otherwise be unable to obtain through traditional research methods. Their customized programs deliver accuracy upon which strategic plans may be confidently directed. Their experience conducting Executive Interviews includes a methodology to extract and prioritize customers’ problems. When solutions are directed toward solving customer problems, successful new products and service improvements occur. Development II focuses upon helping their clients fully realize the impact that each part of their business relationship has on their customers' satisfaction, purchasing behavior, retention, and long-‐term business partnerships. They have worked with clients around the world in dozens of countries, languages, and cultures to improve clients’ products, marketing programs, sales activities, and strategic business processes.

Hitachi Consulting

As Aerospace & Defense companies deal with increased pressure to improve program performance, they must innovate, reduce costs and deliver on tight schedules. Operating under financial scrutiny that demands high asset utilization (from an asset-intensive industry) companies must also make efficient use of resources through “lean” strategies.

Dedicated to our clients’ success, Hitachi Consulting has solutions to the most pressing problems facing the Aerospace & Defense industry. Hitachi Consulting is working with prime contractors and suppliers to optimize their engineering workforce, enhance program capture and execution, and improve internal operations. Additionally, we ally with prime contractor customers in a collaborative strategy to gain program capture on Navy, Army and Air Force Programs.

We are performance-driven and operate with a balanced understanding of our client’s strategy, while executing with operational nuances in mind. We understand that managing the details can make the critical difference in executing soundly, efficiently and consistently.

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Addendum – Looking at the Numbers by Organization Size During the review meeting for the AVIATION WEEK Workforce Data, it was noted that several of the data points did not accurately reflect the position of the largest organizations. Because the study data is an average of the respondent input – not an average weighted by employee population – it was possible for a data point to not tell the full or even most accurate story. With that in mind, the data has been reviewed according to size of organization, as indicated by the respondent when submitting data. Where the sample size was too small to protect the confidentiality of the organization(s), we indicate insufficient data to make any formal comparisons. Following are the findings of this second examination of the data. AVERAGE AGE

Size of Organization 100-‐499

Employees 1,000-‐9,999 Employees

10,000-‐49,999 Employees

50,000-‐99,999 Employees

100,000+ Employees

Average Age Overall 43.37 46.3 45.78 45.85 46.19 Average Age Engineering 40.55 44.7 44.7 44.6 45.17 Average Age R&D 39 48.63 47.67 NA 47.4 Average Age Test & Evaluation 44.18 45.45 46.71 NA 46.84 Average Age Enterprise IT 40.42 44.16 45 45.5 47.42 Average Age Engineering Tech Aides 27 47.08 45.72 49.7 46.81 Average Age Program Mgt 39.68 48.06 47.77 51.4 50.37 Average Age Finance 46.35 45.69 44.28 42.9 43.17 Average Age Business Dev 51.15 48.95 47.36 51.1 49.9 Average Age Supply Chain 51.42 47.09 46.41 47.8 47.24 Average Age Production/Non-‐Exempt 40.73 47.17 45.77 48.8 48.38

Insufficient data prevented reporting for organizations with employee headcount in the categories of 1-‐99; 500-‐999.

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AGE DISTRIBUTION As noted in the main portion of this paper, the issue of age distribution is used to project requirements in terms of hiring and replacement based on trends in retirement and voluntary attrition. The data below reflects the age distribution based on size of organization. This reflection of the data illustrates the lower age of the smaller organizations. It also provides an accurate accounting of the data regarding the surge of retirements anticipated for those who are between the ages of 50 and 59 – a situation that every size of organization will confront.

Insufficient data prevents us from reporting on organizations with populations of 1 to 99 employees or 500 to 999 employees.

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DIVERSITY Diversity was probably the most interesting data when broken out by size of organization. The percentage of the workforce that is female changes dramatically, particularly given that the largest organizations have the most significant numbers in many instances. For instance, the organizations with 100,000-‐plus employees have percentage-‐female data exceeding the average in a number of categories, including enterprise information technology; engineering technical aides, and program management. Fully 50% of the financial workforce among large organizations is comprised of females. On the negative side, the percentages of women in the engineering workforce remain below 17%, regardless the size of the organization. For Under-‐Rreprsented Minorities (as defined by EEO standard), the situation is similar but also shows some improvement. For instance, 24% of the enterprise information technology workforce for large organizations is comprised of under-‐represented minorities. Test and evaluation, engineering, finance and supply chain also have populations exceeding the general population.



10,000-‐49,999 Employees

50,000-‐99,999 Employees

100,000+ Employees

% Workforce Female Engineering 9.25 10.38 13.07 16 15.03 Research & Development 5.66 8.84 13.28 NA 19.75 Test & Evaluation 13 14.99 18.87 NA 16.87 Enterprise Info Tech NA 20.23 29.8 24.5 27.73 Engineering Tech Aides 17 16.35 24.46 22.4 27.05 Program Mgt 15.92 17.13 20.26 15 24.93 Financial Analysis 42.23 46.58 55.69 49 50.94 Business Development 19.77 18.79 25.73 19.8 24.9 Supply Chain 44 38.61 38.65 41.9 43.69 Production/Non-‐Exempt 15.39 23.79 27.61 38.5 22.98



10,000-‐49,999 Employees

50,000-‐99,999 Employees

100,000+ Employees

% Workforce Under-‐Represented Minorities Engineering 15.5 16.3 17.34 24.3 22.31 Research & Development 10.53 15.46 25.6 NA 17.96 Test & Evaluation 35.45 16.41 21.02 NA 25.21 Enterprise Info Tech NA 16.7 19.24 23.1 24.09 Engineering Tech Aides 25 19.01 14.91 25.5 20.4 Program Mgt 17 10.11 11.4 11.2 13.03 Financial Analysis NA 17.22 15.88 23.3 22.37 Business Development 24.27 7.84 15.05 14.1 18.02 Supply Chain 14 16.46 21.6 23.5 21.48 Production/Non-‐Exempt 49.1 27.48 24.45 36.7 29.26

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PROMOTIONS Employees indicate that the opportunity to advance or take on new challenges is an imperative when making career decisions. The following data indicates that smaller companies are making efforts to offset voluntary attrition by increasing promotions in critical skill areas.



10,000-‐49,999 Employees

50,000-‐99,999 Employees

100,000+ Employees

% WF Promoted Engineering 4.7 7.72 8.16 21.4 7.53 Research & Development 1.75 6.37 5.28 NA 3.57 Test & Evaluation 8.7 8.53 4.7 NA 8.03 Enterprise Info Tech 25 9.25 6.42 17.2 5.6 Engineering Tech Aides NA 7.41 3.09 9.5 8.29 Program Mgt 18.6 7.03 9.52 15.6 6.2 Financial Analysis NA 9.27 6.46 26.7 8.47 Business Development 25 5.57 9.73 18.8 6.75 Supply Chain 25 17.77 5.4 23.8 15.4 Production/Non-‐Exempt 4.69 5.82 2.83 6.1 4.27

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RETIREMENTS The data with regard to retirements indicates that the largest companies will experience high rates of retirement through 2014. After that time, based on the age distribution, retirements should fall off considerably.

Size of Organization 1,000-‐9,999 employees

10,000-‐49999 100,000+

Eligible Actual Eligible Actual Eligible Actual Overall 14.2 1.94 18.46 2.22 19.44 1.14 Engineering 10.35 1.19 15.07 1.95 16.92 0.94 Research & Development 16.42 0 24.46 5.83 20.97 1.66 Test & Evaluation 7.94 1.27 21.4 4.23 19.3 1.25 Enterprise Info Tech 10.66 1.98 13.04 1.98 20.39 1.02 Engineering Tech Aides 9.65 0.99 17.81 1.74 19.8 0.83 Program Mgt 10.48 0.73 17.23 1.52 22.93 1.25 Financial Analysis 10.31 1.05 15.61 3.86 15.43 1.07 Business Development 14.18 4.38 16.77 2.5 21.13 2.99 Supply Chain 10.51 0.48 18.27 2.08 21.24 1.77 Production/Non-‐Exempt 10.78 1.5 20.77 2.52 25.78 1.93

Insufficient data to report on organizations under 1,000 employees or between 50,000 and 99,9999 employees 2012 Projected Retirement Eligibility

Size of Organization 100-‐499 1,000-‐9,999

10,000-‐49,999

100,000+

Overall 3.42 15.63 27.53 30.32 Engineering 6.1 10.38 22.71 26.6 Research & Development 9.54 27.07 31.89 Test & Evaluation 10.65 30.94 30.7 Enterprise Info Tech 9.07 20.43 31.59 Engineering Tech Aides In

sufficient

data

9.97 26.43 31.13 Program Mgt 4.17 10.3 26.87 37.53

Financial Analysis Insufficient data 11.3 22.71 24.46

Business Development 25 14.13 24.654 36.12

Supply Chain Insufficient data 15.09 27.8 32.24

Production/Non-‐Exempt 8.63 12.87 31.47 39.07

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2014 Projected Retirement Eligibility

Size of Organization 100-‐499 1,000-‐9,999

10,000-‐49,999

100,000+

Overall 5.02 19.88 34.7 39.72 Engineering 5.55 13.35 29.2 35.55 Research & Development 9.7 37.74 40.67 Test & Evaluation 14.9 41.11 40.63 Enterprise Info Tech 11.6 28 40.78 Engineering Tech Aides In

sufficient

data

15.23 34.06 40.97 Program Mgt 8.33 12.83 36.3 50.17 Financial Analysis 12.5 14.37 28.97 31.67 Business Development 33.33 18.39 33.58 47.88 Supply Chain 25 19.5 35.66 42.14 Production/Non-‐Exempt 11.36 16.82 39.32 49.54

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ATTRITION Voluntary attrition measures the percentage of the workforce choosing to leave an organization and seek employment elsewhere. It’s clear from this data, when looked at through the lens of size, that smaller organizations are losing needed talent at a rate higher than the larger organizations. During the coming year, AVIATION WEEK will conduct additional research to determine whether the loss within small companies is a loss within the industry and the natural flow of following programs/contracts or if the individuals are choosing to leave the industry.

Size of Organization (headcount) 1,000-‐9,999 10,000-‐49,999 100,000+

Overall 6.05 5 3.21 Engineering 6.6 4.07 1.49 Research & Development 1.3 4.24 1.55 Test & Evaluation 1.84 6.33 1.04 Enterprise Info Tech 2.8 6.08 1.84 Engineering Tech Aides 1.51 5.65 1.9 Program Mgt 4.61 5.1 1.04 Financial Analysis 3.82 7.16 1.23 Business Development 2.25 6.26 1.5 Supply Chain 4.64 3.15 1.71 Production/Non-‐Exempt 1.85

0-‐5 Years Service Voluntary Attrition


Overall 28.25 4.59 3.78 Engineering 21.16 4.53 2.17 Research & Development 0.9 4.28 5.26 Test & Evaluation 12.06 6.08 1.64 Enterprise Info Tech 22.28 6.38 3.34 Engineering Tech Aides 15.64 3.76 3.72 Program Mgt 13/44 6.15 2.42 Financial Analysis 20.42 5.01 1.75 Business Development 25.98 6.36 4.51 Supply Chain 21.07 6.16 3.35 Production/Non-‐Exempt 27.18 2.97 3.66

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Attrition/6-‐10 yrs service


Overall 4.79 1.87 1.2 Engineering 4.78 2.44 1 Research & Development 0.4 4.6 1.64 Test & Evaluation 14.41 3.8 1.12 Enterprise Info Tech 1.52 3 1.25 Engineering Tech Aides 19.15 1.8 1.25 Program Mgt 11.18 3.6 0.86 Financial Analysis 5.2 3.5 1.01 Business Development 14.15 5.05 1.69 Supply Chain 5.18 2.06 1.71 Production/Non-‐Exempt 7.39 6.86 1.13



Overall 3.38 1.23 0.52 Engineering 3.43 2.04 0.47 Research & Development 0.97 2.43 0.97 Test & Evaluation 6.31 2.18 0.47 Enterprise Info Tech 8.24 2.48 0.71 Engineering Tech Aides 13.03 1.24 2.23 Program Mgt 9.29 1.9 0.8 Financial Analysis 0.99 1.38 0.52 Business Development 1.25 2.77 1.75 Supply Chain 3.51 2.74 0.32 Production/Non-‐Exempt 3.97 0.48 0.64

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