We are delighted to share with you the inaugural issue of The DeLong Report. The changing workforce presents a landscape of different problems that threaten organizational performance. Whether it is how to transfer knowledge from aging baby boomers, recruit Gen-Ys, or retain high-performing Gen-Xers, the staffing and leadership development challenges facing management today are complex and difficult. But there are solutions. This quarterly newsletter will help you:

• Understand different dimensions of the changing workforce and how they should effect your priorities, decision making and implementation strategies.
• Get ideas from other leaders who are solving these problems today.
• Recognize the real impacts on organizational performance when organizations don't address the risks of knowledge loss.

For more ideas and resources, please visit our newly redesigned website at www.LostKnowledge.com where you will find:

• Access to lots of free articles and case studies
• Our latest research reports
• A survey you can take to see how prepared your organization is to confront the challenges of a changing workforce
• A "Did You Know?" section that provides dozens of interesting facts that show how the workforce is actually changing.

We always welcome your feedback and ideas. Please contact us.

Featured Article

Five Reasons Why CEOs Don't Care About the Aging Workforce

Every executive today knows the workforce is aging fast. But most CEOs don't seem particularly concerned that in the next five years the number of workers age 50-64 will grow about 40 percent. Here are five reasons why top executives aren't responding to this startling demographic trend and what that means for the organization. Read more

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Defining New Workforce Challenges

The changing workforce presents a wide variety of challenges for managers. Our clients talk about the problem in many different ways. For example:

• "Lots of our experts are retiring."
• "Our younger employees don't have a good work ethic."
• "We can't find skilled people in critical areas."
• "We've got to improve our knowledge sharing capabilities."

Recognizing the landscape of new problems brought on by changing workforce demographics is the first step to taking effective action. To understand the complexities of the issues you face, this section describes the kinds of problems and solutions we are seeing in our research and work with clients. How are you dealing with these issues? Contact us if you want to talk about collaborating on solutions.

Motivating Experts to Share

1. How do we convince experts to share their knowledge before they leave?

This is one of the questions we hear most frequently. Our research across industries shows that reluctance to share the knowledge that makes an individual uniquely valuable is an almost universal feeling in organizations today. There are many reasons for this, depending on the particular situation, e.g. history of layoffs, retirement plans, etc. But management must consciously address this problem with specific strategies if they are to convince departing experts to share critical knowledge before leaving. This means first accurately diagnosing whether the levels of trust are high enough to encourage effective knowledge sharing. It also means recognizing whether veteran employees have the skills they need to be an effective mentor. For more insights on how to improve knowledge sharing skills see our case study on Boulder Labs (.pdf 90KB).

Skill Shortages: Single Firm vs. Regional Problem?

2. Is our skill shortage problem a departmental or organizational issue alone, or should our regional workforce development board or industry association also be collaborating on the solution?

Workforce boards and industry associations are increasingly looking for ways to help their constituents solve changing workforce issues. Indeed, some of the skill shortages threatening your organization require collective action beyond the firm, while others can only be addressed by the leadership of a specific department who know how to recruit certain highly-specialized talent. An example would be the difference between developing a pool of certified nurses assistants versus hiring a pediatric cardiologist, who must be recruited from a small national network of specialists.

The first step is to recognize the difference in sustaining capabilities in these situations. Then identify strategies that work best for recruiting, developing, and retaining the most essential roles in your skilled workforce. Workforce boards and associations are going to have a much bigger role to play in the future, as employers increasingly recognize the need to build the pipeline for skilled labor years in advance.

Workers' Compensation Costs Could Skyrocket

3. How will an aging workforce effect workers' comp costs and what can employers do to limit their risk?

Our research shows one of the most serious benefits issues facing employers may be a huge jump in workers' compensation premiums in the years ahead. But, if management starts planning now, there are things firms can do to keep these costs from spiraling out of control. Because of the shortage of younger, skilled employees, it's a given that most organizations are going to have more older workers. The good news, according to actuaries, is veteran employees tend to have fewer injuries, in part, because they work smarter. The bad news is their injuries cost one-third more and take longer to heal. This fact is particularly troubling because we are about to see a huge increase in the number of aging baby boomers in the workforce. Industries where highly-skilled employees are performing demanding physical tasks are most vulnerable to this workers' comp problem.

If you don't have a plan for dealing with common cases, such as back and rotator cuff injuries, to get people back to work as soon as possible, then your firm's workers' comp premiums could increase significantly, putting the company at a competitive disadvantage. Healthcare and manufacturing are two sectors that are attacking this problem aggressively. For example, one New Mexico hospital, which is now self-insured under workers' comp, saw its costs drop by over a million dollars in the last year when it introduced a "healthy back" initiative for its workforce.

Attending to workers' compensation costs is just part of an integrated strategy needed to address the challenges - and opportunities - created by the changing workforce.

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Lessons from the Leading Edge

This section describes what we are learning when organizations implement creative solutions to build future workforce capabilities and accelerate knowledge transfer. This case shows how Boston Scientific has addressed a looming shortage of critical technical talent.

Boston Scientific’s Apprenticeship Program

Boston Scientific’s Wayne, New Jersey, facility is a leading manufacturer of highly engineered surgical grafts and fabrics used to treat vascular disease. A risk analysis of plant operations a few years ago revealed that less than 25% of critical managers and professionals were backed up by skilled employees who could fill their positions on short notice. These findings were of considerable concern in certain areas of the plant which had more experienced employees with unique skills that are virtually impossible to hire off the street.

For example, 14 specialists in knitting, weaving, and yarn texturizing work on intricate machines that transform special yarn into tube-like grafts. These skilled craftsmen not only set up the machines, which can take weeks, but also repair and troubleshoot them. Their knowledge and skills have been acquired since the late 1950s when the plant first started producing woven vascular grafts. But with some employees now in their sixties and seventies, management recognized that the loss of these skills could cost the company millions of dollars in lost production of these profitable products.

Thus, Boston Scientific, began a plant-wide succession planning program to ensure they had successors for critical positions. This meant launching an aggressive initiative to transfer critical knowledge from their knitting, weaving, and yarn specialists to a new generation of employees to sustain the high-quality manufacturing operation. As a first step, management promoted four apprentices to begin training under veteran craftsmen. This meant increasing labor and training costs hundreds of thousands of dollars for new employees who would not be productive for some time. But leaders recognized this investment was more than offset by the millions of dollars of future revenues at risk if these essential skills were not transferred before key people retired. Boston Scientific did two things to accelerate the development process.

• The actual production process was relatively slow and meticulous, making it hard for apprentices to accumulate useful experience on the job. But because the cost of materials used in production was relatively cheap, managers set up a practice loom and knitting machine so that apprentices could develop and test their new skills without disrupting production. This accelerated their learning time by almost 50%.
• Management also recognized that this training process was something that would need to occur again and again, as future generations of employees left the company. Thus, they wanted to capture lessons from the current knowledge transfer process. So they brought in a consultant to document the training process and the content that was being passed on from their veteran craftsmen. “It’s about risk management,” said one manager. “We have millions of dollars invested in this business, and we don’t want to be dependent on experts who might not be around in the future.”

Today, Boston Scientific’s Wayne plant is approaching their goal of 60% replacement readiness. That means, out of the facility’s 250 positions the 60% deemed most critical would have someone capable of immediately replacing the current incumbent. Plant management now does an annual assessment of jobs that could be threatened by turnover. Then they evaluate the difficulty of filling a particular role with an external hire. When they identify specialized jobs where it will be very hard to hire replacements, management takes proactive steps to create backup resources.

Lessons Learned

The story of Boston Scientific’s Wayne plant is typical of the workforce development and knowledge transfer challenges occurring in many manufacturing and technology-intensive work settings today. Management’s strategy to sustain critical workforce capabilities provides important insights into how leaders need to be thinking about these challenges. Three things they have done are:

1. Identify the most critical roles, given the organization’s strategy. This plant has focused its knowledge transfer and workforce development efforts on those jobs most essential for sustaining profitability. Do you know what those roles are in your organization?
2. Develop and implement a short term knowledge transfer strategy. Boston Scientific identified specific apprentices and worked hard to build effective mentoring relationships. They implemented a specific plan for knowledge transfer that evolved as they gained experience with the process and its challenges. Does your organization have an explicit strategy for knowledge transfer to sustain or improve performance in key roles?
3. Use creative HR recruiting and retention strategies to find and retain key employees of all generations. Boston Scientific proactively develops relationships with potential recruits so it won’t be caught flat-footed if a key employee leaves a hard-to-fill role. At the same time, management at the Wayne plant has continually communicated with veteran employees about how much they are valued, reassuring them they are not being eased out. Are your HR practices supporting or undermining how the organization continually improves its critical skill base?

For more insights on Boston Scientific’s initiative, see their case study in our recent report done in collaboration with MetLife’s Mature Market Institute. It’s titled Searching for the Silver Bullet: Leading Edge Solutions for Leveraging an Aging Workforce (.pdf 1,289KB) and is available on our website.

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Lost Knowledge Stories (This shouldn’t happen to you)

Failure to identify and address threats of knowledge loss costs organizations millions of dollar's each year. But the problem remains largely invisible in our society. This section contains stories, which we continually collect, that illustrate the real costs of this problem for organizations - and individuals. These examples can help you identify emerging risks in your own organization. Stories like these are an essential part of building a business case for investing in pre-emptive solutions.

• After a maintenance technician retired from a plant producing soybean oil, large batches of oil started to go bad unexpectedly during production. This veteran employee knew the fifty-cent seals on the machines that pressed the oil had to be changed every week, instead of every eight weeks, as dictated by the maintenance manual. It took the firm two years to rediscover this, costing them millions of dollars in lost product and sales revenues in the meantime.
• The director of business processes for a West Coast food distributor was encouraged to take early retirement with no attempt to transfer his unique strategic knowledge about the firm's new store development processes. The sudden loss of his critical expertise was a major contributor to the company missing its strategic growth objectives for new store openings the following year by almost 25 percent.
• The central pool in the Fort Worth Water Park, a civic fountain in this Texas city was designed to be 3 ½ feet deep when it was built 20 years ago. The fountain was well maintained into the 1990s, when through a series of retirements and cut backs in the training budget, the maintenance group lost track of how deep the pool should be. In June 2004, four people - including three children - drowned in the Water Park in a tragic accident because the pool was being maintained at nine feet deep. The organization had “forgotten” how to safely maintain the pool.
• A major Midwest utility paid a big price for the retirements of most of the company's technical and professional staff who had built long term relationships with regulators in one large state's public utilities commission. "It used to be that our word was our bond," said an executive vice president. "But now they don't know us from Adam." As a result, the PUC has issued regulatory decisions going against the utility that have cost them billions of dollars.

For more information on diagnosing the costs of lost knowledge, see our report: Diagnosing the Costs of Lost Knowledge on Organizational Performance

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