Pipeline & Gas JournalPipeline Opportunities Conference

Workforce DemographicsAddressing a Potential Crisis

Houston, TXMarch 26, 2007

Chad FletcherEnginuity, LLC

2

Agenda• Workforce Issues – Is There a Crisis?• Workforce Statistics• The Education Gap• Knowledge• Strategies• INGAA Foundation Initiative• Resources

Is there a crisis?

Workforce Issues

Global Talent Shortage

“There is already a talent shortage in many areas of the global labor force, a situation that will grow more acute and more widespread across more jobs over the next 10 years – and could threaten the engines of world economic growth and prosperity.”

Source: Confronting the coming talent crunch; What’s Next?, Manpower Inc., 2006

Shortages?The U.S. Bureau of

Statistics estimates a shortage of 12 million qualified skilled workers by 2010 rising to 20 million by 2020 in the United States.

Source: W. Atkinson, Confronting The Coming Labor Shortage, Public Power, November – December, 2005.

Industry Pain?

“Industries currently feeling the greatest pain in terms of skills shortages are oil, gas, energy, healthcare, and government.”

Source: Managing the Mature Workforce – Implications & Best Practices, Morton, Foster, & Sedlar, The Conference Board, 2005

CrisisProportions?

“In certain sectors, these (skilled worker) departures are nearing crisis proportions. In the oil and gas industry, for example, the average employee age has risen dramatically – current estimates suggest that roughly 60% of experienced managers will retire by 2010.”

Source: Strategies for Preventing a Knowledge Loss Crisis, Parise, Cross & Davenport, MIT Sloan Management Review, Summer 2006

Workforce Statistics

Workforce Statistics& Projections• From 1950 to 2000, the U.S. labor force

grew 1.6% per year.• Over the next decade, the annual

growth rate is projected to drop by 1/3 to 1.1% per year

• By 2010, the number of 35-44 yrs old will decline by 10%

• By 2010, the number of U.S. workers age 45-54 will grow by 52%

• If Boomers retire at historical rates, there will be a significant skilled labor shortage

Source: Managing The Maturing Workforce, The Conference Board, 2005

Workforce Statistics& Projections• 20% of employees currently

eligible for retirement

• By 2012, almost half the workforce will be eligible for retirement

• Critical skill loss occurs at nearly twice attrition, or over 60% over next 10 years

Source: Interliance Management Consulting, Changing Workforce Demographics: Is the pipeline industry in a crisis?, Houston: INGAA Foundation, Inc., April 2006.

US Average Workforce

0%

5%

10%

15%

20%

25%

30%

35%

40%

16-19 20-24 24-34 35-44 45-54 55-64 65+

Age Group

US Total Utilities Industries

Source: US Bureau of Labor Statistics, APPA 2004 Survey

Skills vs. Attrition

32%

16%

34%

63%

15%

26%21%

7%12%

53%

46%

28%

0%

10%

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009 2010 2011 2012

Year

Retirements Skill Loss

The Education Gap

Science & Engineering

“We have observed a troubling decline in the number of U.S. citizens who are training to become scientists and engineers, whereas the number of jobs requiring science and engineering (S&E) training continues to grow.”

Source: National Science Board, Science and Engineering Indicators, 2004

U.S. Education Gap

Worldwide Science & Engineering Degrees

China, 1,200,000

Europe, 830,000

U.S., 400,000

Other, 370,000

% Eight Graders withAdvanced Math Scores

0% 10% 20% 30% 40% 50%

China

Taiwan

U.S.

Source: National Science Board, Science and Engineering Indicators, 2004

“Even if action is taken today to change these trends, the reversal is 10 to 20 years away.”

U.S. Education Gap• 46% drop in Electrical Engineering

talent over 10 year period

• 35% drop in students taking trade or industry related vocational or technical courses

• At Colorado School of Mines and Texas A&M, B.S. degrees in Petroleum Engineering dropped 67% between 1986 & 2001 and 81% between 1982 & 2001

Sources: URS Presentation April 2006 referencing Dr. John Daly, University of Texas-Austin, UBEC Issues Update, July 2005, “Oil Industry Waits for Skilled Workers”, Alexander’s Gas and Oil Connections, Volume 6, Issue #14, July 31, 2001

Knowledge

Where’s the Knowledge?

Employee’sBrains

ElectronicDocumentation

PaperDocumentation

ElectronicKnowledgebase

From After the Gold Rush, The Delphi Group

42%42%

26%26%

20%20%

12%12%

Current Knowledge Management Practice

Types of Knowledge

• Explicit Knowledge– Manuals– Databases– Documents– Specifications– Procedures & Processes

• Tacit Knowledge– Has personal quality– Rules of Thumb– Intuition– Relationships– Values & Opinions

Management Strategies

• Knowledge Elicitation (Capture)– Expert Systems– Expert Interviews– After action reviews– Knowledge mapping

• Knowledge Exchange (Connect)– Orientation– Training– Communities of practice– Expertise location– Mentoring / peer assist– Alternative work arrangements

Source: Gray Matter Matters: Preserving Critical Knowledge in the 21st Century, IBM Business Consulting Services, 2003

Strategies

No ActionWithout Pain

“Inevitably, there will need to be pain associated with the looming talent shortage before people take the issue seriously and integrate it in their strategic thinking; without pain, it is just too easy to keep putting it off and leaving it for someone else to resolve.”

Source: Confronting the coming talent crunch; What’s Next?, Manpower Inc., 2006

Solutions Requirea Long-Term Strategy

“It seems very clear that to cope with the aging population, it takes a 100 percent, long-term policy. I mean, you can predict these things 25 to 30 years in advance….[But this proves] a true problem for modern democracies, which are instead mostly preoccupied with short-term problems.”

Source: Esther V. Rudis, CEO Challenge 2004: Perspectives and Analysis, The Conference Board

INGAA Foundation Initiative

INGAA Foundation Initiative• 2006 Workshops

April 12, 2006 – “Changing Workforce Demographics. Is the pipeline industry in a

crisis?”October 5, 2006 – Contractor / Operator Construction Issues

Workshop• 2006 & 2007 Studies

• Phase I Study focused on development of high-level strategy roadmap to guide future Foundation efforts

• Phase II Proposal to build on roadmap with focus in key areas that are aligned with the Foundation’s mission

Resources• Friedman, Thomas L., The World is Flat, Farrar, Straus,

Giroux, 2005• Manpower Inc., Confronting the Coming Talent Crunch –

What’s Next?, 2006• The Conference Board, Managing the Mature Workforce,

Morton, Foster & Sedlar, 2005• U.S. Bureau of Labor (Statistics)

– www.bls.gov• Society for Human Resource Management

– www.shrm.org• Calgary Economic Development Workforce

– www.calgaryeconomicdevelopment.com

The Issues are Real!

It’s Not Just an HR Thing

We Must Take Strategic Action Now!

Aging Workforce

Education Gap

Knowledge Loss