The graying of an industry

04 June 2007 00:00  [Source: ICB Americas]

THROUGHOUT THE industrialized world, the average age of workers is increasing, people are retiring younger and there aren't enough of the right people to replace them. Chemical companies will have to address the issue, just as they have dealt with globalization, consolidation, and a myriad of other influences that were not in play even five years ago. For high-performers, knowledge management and talent management will be keys to adaptation.

In the US, the average age of a chemist is 47. Age generally indicates valuable knowledge and experience, but an older workforce is also less receptive to change. In addition, 35% of the engineering and construction workforce is expected to retire within five years, according to industry reports, and there is not enough talent waiting in the wings. The number of students seeking chemical engineering degrees in the US alone has dropped 15% in the past five years. Labor availability is an even greater problem among craft workers such as pipe fitters, boiler makers and carpenters. An ongoing "war for talent" is inevitable.

The net effect is that chemical companies are not sufficiently agile. Globalization demands a more dispersed, more flexible and more mobile workforce. Multiple centers of expertise and management are critical.

All of this is complicated by a wave of industry consolidation - probably the most change-intensive trend there is.

Pulling together these drivers is a remarkably interconnected workforce. Information technology providing greater interconnectivity is a major influence on companies' and suppliers' decisions to revamp manufacturing and distribution networks.

When customers can find you anywhere, facility-location decisions are influenced more by considerations relating to low-cost production, storage and transportation. Offshoring and outsourcing become more attractive. Intercompany collaborations become easier to pursue. Centralization also may make more sense, since it's easier to stay "close" to satellite operations. In net, chemical companies are under extreme pressure to understand - and even foretell - the effects of ongoing innovations in communication.


At the ACC annual meeting on June 6-8 at the Greenbrier in White Sulphur Springs, W.Va., we will share more about the impact of industry consolidation, rapid globalization and industry restructuring. Practices such as determining the right operating model, applying the appropriate global sourcing (including outsourcing) solutions, and identifying and managing mergers and acquisition will play a huge role in determining success in an increasingly consolidated, global industry. However, knowledge management and talent management will be at the center of any plan to achieve higher performance by changing ahead of the curve.

The obvious driver for achieving change is preparing for an aging workforce with fewer successors to take their place. The problem is compounded by the cuts many chemical companies have had to make over the last cycle to maintain profitability. A common cost-cutting target is programs such as training and recruiting. The bottom line is that most industry players are behind the curve with respect to knowledge and skills management, with little choice but to be highly creative about how they identify, capture and optimize knowledge and talent. Following are two potential recourses.

In a recent Accenture survey, "world-class programs to build and maintain the right skills in your employees" was cited by executives as the most important way to improve performance. Unfortunately, operational dynamics and technologies are evolving much faster than most companies' training approaches.

Moreover, traditional approaches also tend to overemphasize the ability and perspectives of a single instructor, and underemphasize the individual achievement and the attainment of corporate standards.


Modern training approaches need to be broader and more flexible than classroom approaches and even e-learning. What is needed is a "blended learning" approach: assembling, customizing and deploying all the mechanisms needed to create a focused learning experience. Some of these mechanisms include:

  • e-Enabled knowledge - news feeds, articles, technical documents and industry/functional research made available on demand from a variety of sources. Those sources could be industry analysts, process and technology experts, academics and members of the trade or business press.
  • e-Enabled distance learning - programs such as regularly scheduled webcasts, video conferences and audio conferences, along with bite-sized training modules. These events acknowledge the always-important need for interchange and on-demandtraining but they avoid the expense and inconvenience often associated with classroom environments.
  • e-Enabled collaboration - live, onlinetext chat and discussion forums thatprovide interactive, peer-to-peer learn-ing opportunities.
  • Team-based simulation - solving problems via computer simulation. This sort of team-based exercise gives people the chance to demonstrate and expand their expertise using real-world applications.
  • Customized programs and workshops -interaction-centered opportunities focused on needs that are addressed less effectively in a distance-learning environment. Classroom training no longer is the whole story. But it remains a valuable part of a comprehensive learning experience.

Accenture's research has shown that formal learning programs do promote employee engagement and retention, but are not enough to drive high-performance skills development. A balanced talent management solution must also include on-the-job training, active mentoring and apprenticeship programs, collaborative and team-oriented experience and skills-building, and a supportive work environment to attain leading performance.


For routine work that cannot be fully automated, knowledge management strategies generally involve the use of standardization, integration and centralization into a shared-service center. A shared-service strategy entails centralizing functions, standardizing processes and systems, and providing service to multiple operating units.

It's vital to remember that a new shared-service operation is a true start-up business. Processes, technology, facility and organization are all being established for the first time. This creates an exciting opportunity to design and develop a new organization from scratch and to envision the potential cost and labor savings. In overly simple terms, achieving high performance in shared services requires that management processes be clearly defined and aligned with service level agreements.

Some key points in creating shared-service processes:

  • The value of formal management proc-esses increases with the breadth and scopeof the shared-service center. As with any process, shared-service management processes must be designed, built and implemented individually.
  • There is a significant benefit in design-ing and implementing management processes early in the overall shared-service development process. Retrofitting these processes after the organization is operational is difficult.
  • Several groups must be involved in the design of the management processes: leaders, stakeholders, employees and project team members.
  • The shared-service processes themselves must be carefully managed and fully optimized to create a stable, structured approach to leveraging new activities, tools and personnel.

Knowledge management tools increase the effectiveness of search, collaboration and learning activities associated with a successful high-performance business. Such tools incorporate search, expert locator, content management, knowledge maps, collaboration and e-learning.


However, effective knowledge management requires more than tools and networks. Unless companies focus on behaviors in the workforce (knowledge-sharing and collaboration) return on investments in tools will be less than satisfying. It is vital to systematically encourage and reward the desired behaviors that accelerate the creation of a knowledge-sharing culture.

To enable and sustain leading performance in the face of the converging industry trends, companies must create an organizational structure that represents a hybrid of centralized and distributed structures. A rebalancing of the structure includes a clearer role for the corporate center, a larger shared-services organization operating standardized and centralized processes, and a revised role for business units that will operate with less autonomy and discretion in back-office activities, but with more freedom to focus on the customer. With regard to knowledge management, a centralized staff includes roles such as the knowledge sponsor and content architect, as well as information architects who create an ordered way of conducting processes. Regional roles are also important, and include knowledge managers and content distribution managers, as well as knowledge leads and knowledge integrators.


While these changes cannot happen overnight, the challenge is to make the changes ahead of the curve. The workforce is not getting any younger, and the industry is at the top of the cycle with profitability and returns at healthy levels. Over the next 12-24 months, performance will shift over the inflection point of the curve. The time to address these challenges is here, and the net benefits over the long term are well worth it. A company that commits to knowledge management and talent management is on its way to making the correct change to become a high-performance company.

John Aalbregtse is a senior executive in Accenture's chemical industry group

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