Why Invest? » Business Drivers

Business Drivers

In today’s knowledge-based global economy, businesses and industries depend on progressively higher levels of education, and for many workers, the speed of change has necessitated continuous learning.9 Increasingly, Canada has recognized the importance of human capital formation and utilization as a critical part of its competitive advantage. The acquisition and application of skills and knowledge (including higher level educational attainment) have become a basis for increased productivity, economic growth, and are associated with better labour market outcomes, such as higher earnings, higher labour force participation rates and lower unemployment rates. Numerous authors have pointed to knowledge as an organization’s best sustainable source of competitive advantage and recent academic and popular media attention on organizational knowledge creation, capture, and transfer attest to a widespread acceptance of this idea.10

Key KM/KT Business Drivers within the Electricity Sector

Traditionally employees in the electricity sector tended to be long term, joining the company upon graduation from university/college or completion of apprenticeship training. Workers learned on-the-job as they were gradually promoted to more experienced and specialized posts. Because of the technical and regulated nature of the majority of occupations in the sector, the industry maintains that even with the right training and qualifications, it takes four years after graduation for a new hire to be fully proficient in their position. During the downsizing and consolidation years (late 80s and early 90’s), few companies recruited new employees. This has led to a critical situation whereby remaining employees are leaving (retiring) and there are no employees ready to take their place. The situation is even more serious since the industry is growing, particularly in the newer electricity sub-sectors, and employers not only need to replace retiring workers, but require additional workers with new skills and competencies.

At the same time, experience within the sector is that colleges and other trade education programs are not readily available and will not provide enough graduates to fill the gap in the labour force market. Because technology is evolving at a fast pace, especially in the electricity sector, there is also concern that educational programs are not adapting to the technological changes in the sector and responding to the industry’s needs by producing graduates with the appropriate level of technical skills and knowledge.11

Complexity of the Sector

The electricity sector covers a wide range of subsectors, including hydroelectric, solar, wind and nuclear power; at a broader level the energy sector includes oil, natural gas and fossil fuels, in addition to other renewable sustainable energy resources. The sector is highly regulated, which means it is a complex working environment operating under strict training, certification, health and safety requirements. High health and safety rates are integral to achieving high productivity, which in turn is required to maintain an advantage in a highly competitive global sector. Losing a significant number of long serving employees, coupled with few recent hires, means that the regulatory environment is potentially being compromised, particularly health and safety. It is becoming increasingly critical that organizations within the sector be able to hire graduates now and to somehow fast-track their long learning curve and transfer critical knowledge and expertise so they are ready to replace those who are expected to leave the sector in the coming years.12

Emerging Technologies

The electricity sector has primarily relied on the same technology for the last 100 years, with the exception of more recently discovered ways of harnessing electricity such as nuclear, solar, etc. This has also changed with the introduction of smart grids and new electricity industries such as wind and solar. These technology changes are driving new skill requirements. However, the ongoing reliance on legacy systems, particularly for specialized programs and those that have been custom built in-house, has meant that organizations have to develop this knowledge internally as the legacy technologies are often quite unique and often not part of post-secondary education programs. It is clear that the sector is evolving using a mix of old, new and updated infrastructure and equipment and traditional and non-traditional sources of electricity. For power producers including both private and public, this means new skill sets and knowledge bases at all levels of the business to support changing operations and business requirements.

The Need for Specialized Knowledge

It is widely known that the majority of positions in the sector require some form of post-secondary education and that these workers will need to become lifelong learners. The competencies and skills required are constantly being upgraded by new technology, regulations and management systems that become available. Results from the EHRC 2008 Labour Market Information (LMI) Study indicate that employers are increasingly in need of employees who have a broader base of knowledge in computing/ technology and are able and willing to commit to lifelong learning. Employers also want graduates with ‘essential skills’, such as communication and people skills, and math skills. More than ever, tradespeople will be required to have the skills and training in new and advanced technologies. These changes are happening swiftly and Power Line and Cable Workers, Power System Operators, and other trades people are increasingly required to have a changed skill set which better reflects the demands of the electricity sector today.

Changing Demographics – The Aging Workforce and Knowledge Transfer

Recent studies conducted by EHRC and augmented by several other labour market studies13, anticipate profound changes to the sector’s workforce over the next few years. The portion of the population aged 55 and older increased from just over 15% in 1971 to approximately 20% by the end of 1991 and it has risen to approximately 25% today, with a further projected increase to 30% by 2016.14

This change in demographics, coupled with slowing growth in the population due to declining fertility rates, have led to a declining growth rate in the working age population15, which, in turn, is predicted by some observers to adversely affect Canada’s productivity growth.16 As for the electricity sector, data based on reporting by employers estimates that approximately 30% of the current electricity workforce are expected to retire between 2007 and 2012, a higher annual rate of retirement than was estimated in the 2004 Canadian Electricity Association Sector Study. This has serious implications for both maintaining and sustaining the skilled workforce within the sector.

Under current trends, the 2008 EHRC LMI Study predicts there will be an insufficient supply of workers to fill the demand of the sector to meet the growing consumer demand for electricity. This gap exists at all levels of the industry, from engineers, through technicians and trades people. This means that the sector will have to double its hiring of recent post-secondary graduates at a time when the demand for such workers is increasing in many other sectors as well.

“Some technical jobs are difficult to recruit, primarily because of the specialized knowledge and new technical requirements that continue to expand. Utility companies are all competing for the same relatively small labour pool”.

North Eastern Utilities

Even if companies can hire the required employees, younger workers cannot be counted on to fill the void, as they lack the depth of experience that is required in the sector.17 In addition, younger workers today tend to be more highly mobile and change jobs frequently, taking their technological savvy and any knowledge they have gained with them. Conventional expectations that knowledge will simply pass down through long tenured employees simply no longer holds true. The mobility and lack of loyalty of the modern workforce, and the fact that in many workplaces, as many as four generations work side-by-side, means knowledge is not always filtered well throughout the organization.18

Existing staff need development so that they are ready to fill vacancies in senior and critical specialist/technical positions that require significant experience in the field. New workers require orientation and training to bring them to a competent level of performance, particularly in heavily regulated industries such as the electricity sector. Sector participants generally note that new engineering and technical graduates require four years on-the-job experience to reach full competency. Managers, usually with engineering backgrounds, generally require 10 to 12 years of experience in the field, which is why management retirements are a particularly worrying issue for the industry. This is leading to an emerging critical situation whereby remaining employees are leaving (retiring) and there is an insufficient pool of well-trained and experienced employees ready to take their place. The situation is even more serious since the sector is growing, particularly in the newer electricity sub-sectors, and employers not only need to replace retiring workers, but require additional workers with new skills and competencies to sustain business growth.

Developing the Next Generation of Electricity Workers & Post-Secondary Education

The sector needs to invest substantially in human capital development. In some areas of the industry workers (such as engineers, specialized technicians and management) typically have a life-long career in the electricity sector, and these workers possess a tremendous amount of corporate memory and experience. Sector workers have, on average, a higher level of education than workers in other industries. Specifically, 76% of electricity workers have a post-secondary degree, diploma, or certificate, compared to 57% for all industries. This is positive since globally all labour experts predict that employees in the future, whatever the sector, will be required to have some form of post-secondary education. Having a skilled and trained workforce means that industry organizations within the sector will be competing aggressively with each other to recruit and retain many of these graduates.

Within this backdrop, the sector has faced an “image” problem a result of cyclical downturns in the sector that led to slow downs and a lack of demand for labour and subsequent declines in enrolment in electrical engineering programs, except in British Columbia. This may be changing with the predicted rise in demand for electricity and a greater interest in greener/renewable sources of electricity including: solar, geothermal, wind and tidal power. However, even with a changed image, there is an issue with the number and caliber of graduates ready to work in the sector. In recent years, universities have not invested in electricity related programming, faculty are reaching retirement ages, and, in some cases, positions are not being replaced with academic experts in the electricity sector. Many national and international sector councils within broader energy industries have noted that the number of engineering graduates has been declining, particularly in the nuclear and electrical fields, which in turn has been compounded by the fact that the engineering faculty in these disciplines are also of a retirement age and are not being replaced. This means that there are not enough universities offering electricity-related specialized programs since the numbers of professors in these fields are also declining and not being replaced. In turn the programs are not being sufficiently updated and fuelled by new academic research. The US, the UK as well as the Nuclear, Solar and Wind sectors are actively working through their respective international sector councils with governments, educational institutions and other stakeholders to remedy this issue.

The approach to developing workers in the sector is also changing According to the International Atomic Energy Agency (IAEA), traditional worker training programs have addressed explicit knowledge that is contained in written documents, policies, and procedures. However, tacit knowledge that is held in a person’s mind has not typically been either captured or transferred in any formal manner. Rather, new workers have acquired such knowledge over time (if at all) through working with those who already possess it. As those workers, who are in possession of this tacit knowledge, leave the workplace for retirement, the effective capture and transfer of that information becomes even more critical.19

Although this need has always existed as individuals transferred to other jobs or leave the organization, there have usually been others in the organization that also had the tacit knowledge to provide continuity of operation. It is the increased rate of current and expected worker departures, along with the decreasing numbers of qualified replacements that has made KT a more significant problem.

The potential risks associated with impending demographic shifts, emerging and legacy technologies, potential economic downturns, increasing competition and, in some cases, a mismatch within the sector between the supply and demand of employees with the right skills and expertise include an increasing lack of knowledge to maintain legacy systems and/or have and apply sophisticated technology skills at all levels of the workforce (from power line workers to electrical engineers). There is also the potential for a decrease in innovation and productivity due to critical gaps in the workforce, a lower level of skills, knowledge and expertise, which could lead to an increase in health and safety incidents, both on the job, for the sector and for the Canadian public.

Clearly the sector is diverse with different life cycles and approaches to harnessing and distributing electricity using a variety of technologies and systems - some legacy and others leading edge. The business drivers and needs of organizations within each sub-sector will vary, as will the solutions to KM/KT issues.

9 - Kevin Milligan, Assistant Professor of Economics at the University of British Columbia and a Research Fellow with the C.D. Howe Institute

10 - Davenport, T. H., DeLong, D. W., & Beers, M. C. (1998). Successful knowledge management projects. Sloan Management Review, 39(2): 43-57.; Costa, Dan. (1999, July). Knowledge is power. Computer Shopper, 252-254.; and Marchand, D. & Davenport, T. H. (2000). Is KM just good information management. In D. Marchand & T. H. Davenport (Eds.), Mastering Information Management. New York: Financial Times-Prentice Hall.

11 - Electricity Sector Council Succession Planning Best Practices and Tools for the Canadian Electricity and Renewable Sector: Final Report. pg. 24, 2008.

12 - Refer to the US coal industry study in Part B to this Toolkit - Best Practices for information about how one sub sector is currently dealing with the challenge of accelerated learning.

13 - Conference Board of Canada; Ontario Chamber of Commerce

14 - (1976 - 2005) Statistics Canada Annual Demographic Statistics, (2006 - 2051) HRSDC - SPRD, Labour Market and Skills Forecasting and Analysis Unit, 2006 Reference Scenario

15 - Statistics Canada (2005) Population Projections for Canada, Provinces and Territories 2005-2031. Catalogue No. 91-520-XIE. (December) at p. 1

16 - OECD (Organization for Economic Co-operation and Development) (2005a), Aging and Employment Policies: Canada, Paris: OECD.

17 - Greenes, K. & Piktialis, D. (2008a) Bridging the Gaps: How to Transfer Knowledge in Today's Multigenerational Workplace

18 - Retrieved from: http://www.management-issues.com/2008/8/27/research/organisations-ignoring-the-transfer-of-knowledge.asp

19 - International Atomic Energy Agency (IAEA). "The Nuclear Power Industry's Aging Workforce, Transfer of Knowledge to the Next Generation", in the June 2004 Journal of Knowledge Management Practice.