Water utilities are dealing with a number of priorities. With pending retirements, access to a qualified workforce is moving up on the list…procurement can make a difference.
By Jim Baehr
Escalating operational cost, access to capital, regulations, decaying infrastructure, cybersecurity, as well as ever-increasing customer expectations for safe and reliable drinking water are all very real challenges facing the water industry. Add an aging workforce and it’s understandable that utility leaders might be asking, “what’s next?” Could the “what’s next?” be the introduction of a more prominent role for procurement, augmented by new sourcing tools in the hands of emerging professionals to help address some of the workforce related matters? Maybe.
Utilities in general have a higher concentration of employees in what’s called the “retirement zone” – between the ages of 59 to 63. This could be attributable to low turnover in a culture that values career employment. Also, give credit to human resources for programs that place emphasis on employee retention. But, the reality of a mass departure of experienced employees from utilities is now taking on a sharp focus.
The only saving grace is that surveys show, in general, an estimated 53 percent of workers aged 60 and older may postpone retirement. Such delays could buy time to further build out transition plans but there’s a need for urgency when it comes to adapting a utility’s workforce while it can be done. Postponed retirements could also provide time to look for innovations, but this continues to be a challenge for water utilities as they’re steeped in their long-established ways.
In the September 2004 issue of the Harvard Business Review (HBR), Dorothy Leonard and Walter Swap noted that throughout an organization, there are people with “deep smarts.” Their judgment and knowledge – both explicit and tacit – are stored in their heads and hands. Their knowledge is essential. They are the “know-how” people. German-based utility RWE recognized as much and performed demographic risk management analyses back in 2010 anticipating population shifts in their workforce. This was followed with a program of rotational and cross-functional assignments to develop their talent and increase their deep smarts. This really isn’t a new dilemma for utilities.
Fast forward a decade and we find that in January 2018 the U.S. Government Accountability Office (GAO) wrote “Safe operation of the nation’s water utilities depends on access to a qualified workforce, particularly certified water operators.” In June 2018, the Brookings Metropolitan Policy Program called out “Constructing, operating, designing, and governing water infrastructure systems demands a skilled workforce.” It’s unlikely there’s any disputing of these outlooks.
The GAO report details the various ways that water and wastewater utilities are working with government programs to do what they can to avoid or minimize any gaps in water operator positions. Making matters more complicated is the anticipated digitalization of water operations which in some cases is already in place or underway. The technical skills required go beyond the traditional which utilities must consider before moving to any planned use of enhanced digital technologies.
Engineers, if not already so, will be in short supply. Engineers both within utilities, and contracting to utilities, do the planning, design, and construction of water and wastewater systems and facilities. They are also needed to rebuild, repair, and upgrade the infrastructure. If the demand continues to grow and if a sizeable portion of the existing engineers retire there will be another skills gap. This represents another critical area where water managers must find ways to deal with a new reality.
As these engineering concerns point out, not all the workforce challenges are coming from within the utility. Surveys show that 80 percent of contractors report difficulty hiring qualified workers, particularly in the hourly craft positions and it’s expected that the shortage will continue to grow. Prices for goods and services used in construction have moved up 6.2 percent (September 2017 to September 2018) intensifying the cost problems for contractors already dealing with the labor shortage. All told, these difficulties could cause many established local contractors, whose ownership and employees are themselves nearing retirement, to close their businesses. Water entities rely heavily on these contractors.
Engineering, operations and maintenance, as well as contractors, all warrant the attention being received. Bu, the GAO also points out that utilities “reported ongoing challenges…hiring other skilled workers.” Other skilled workers are required in areas such as customer service and administration. In the current economic environment there are real challenges in filling these other positions.
A Brookings report highlights there’s “sizable economic opportunity offered by water jobs, including the variety of occupations found across the country, the equitable wages paid, the lower educational barriers to entry, and the need for more diverse, young talent.”
Emerging professionals, the “young talent” are bringing a tellingly different perspective to the workforce. Utilities need to recognize and adapt to changing expectations as well as changing demographics. Consider the following:
- The next generation witnessed and experienced the disruptions that came with the economic downturn of 2008 causing many emerging professionals to want to work for an employer that offers stability and job security.
- The thought that a company exists merely to create profits doesn’t resonate. Emerging professionals often look for employers who are committed to making the world a better place.
- Bureau of Labor Statistics studies have determined the characterization of emerging professionals as choosing to hop from job-to-job is exaggerated. Rephrasing a well-recognized environmental slogan – while they think globally, they may prefer working locally.
Considering these assertions, one might expect the water sector would be an employer of choice. But then again, in a career discussion, being a water utility professional isn’t likely to be on the short list of the next generation of workers.
This is where procurement comes in. Historically, in water utilities it’s been common for procurement to be viewed as just another function – simply transactional and tactical. There’s limited upward mobility and no opportunity for growth. It’s an end point where employees finish their career, not start it. It’s simply about getting the job done – orders out the door. There’s no forward thinking about the role of procurement.
In the private sector, executives are working diligently to enhance the state of procurement and they’re succeeding. As for public water utilities, it’s a challenge to convince leadership that procurement can both add value and represent one of the best prospects for attracting emerging professionals.
Procurement can become a keystone to the future of effective water utility management. Here’s how:
Procurement as a Career
Over the past two decades procurement has evolved significantly – from being a job, to being a professional career. It’s no longer about “buying stuff.” It’s about understanding markets, managing categories and developing strategies to acquire goods and services. Procurement has become such an integral part of business that universities have instituted academic programs intended to produce sought-after, well-prepared emerging procurement professionals.
New Tools
Utilities have been using the same manual purchasing tools for decades. Preparing, issuing and analyzing requests for proposal requires the development of complicated paper and spreadsheet driven bids that are labor-intensive and time consuming. With the right tools in the hands of capable professionals, procurement can spend less time on mundane, repetitive tasks, and more time engaging stakeholders as well as more time crafting sourcing strategies.
Building Relationships
With so much strain on the external workforce of utility engineers and contractors now more than ever before relationships need to be a top priority. Water utilities are obligated to know and understand the reliability of their engineering and construction contractors. Low-bid choices will need to be replaced with decisions based on best value and risk. Bonds and insurance work but it’s much preferred that contractors remain viable. Managing and developing contractor relationships should be founded on collaboration between procurement and contract managers. Supplier relationships can be developed and enhanced by skilled and capable procurement professionals.
Innovation
Water utilities are pursuing ways to reinvent themselves and their operations. They’re making progress in areas like advanced metering infrastructure, improved management of transmission and distribution assets, and enhanced customer services. There are other ways to upgrade operational effectiveness where procurement can take the lead. A prime example is integrated supply management where the provider facilitates relationships with all its suppliers. The provider wholly manages the distribution and logistics activities through their centralized system rather than the utility trying to manage multiple suppliers. Electric and gas utilities already use this approach rather than tying up capital and resources to oversee these responsibilities. There are also possibilities for engaging distributors to better define materials requirements grounded in an understanding of products and best practices.
How To Do This? A Simplified Version
The question for water utilities – do we really need to do this? The current procurement approach gets the job done. Can’t it just be business as usual? The simple answer is “no.” It’s time to accept that procurement is an underutilized resource.
It starts with finding the right leader for procurement. The chief procurement officer (CPO) must be both empowered and supported to do the job. She or he must represent a new vision for procurement in water utilities. There also must be a change of the talent management mindset going from hire, train and retain to engage, educate and energize. The new leader must also be provided the funding and the opportunity to work with the chief information officer to acquire tools that automate routine tasks.
Then next step is to find the needed deep smarts within the utility who recognize the importance of the efficient and effective acquisition of goods and services. Understood this is easier written than done. It doesn’t need to be a permanent assignment. Bring them into procurement with the clear understanding that they’re there to guide the CPO and to share their experience and teach new hires.
Step three is to make a few anchor hires – able to exemplify a new way of doing things. If the first two steps have been taken, an emerging professional will recognize that the utility leadership is serious about changing. The new hire should be someone who understands and accepts the worth and importance of working with established deep smarts professionals. These new hires should have strong analytical and interpersonal skills.
The CPO is obligated to create a high energy work environment that inspires and encourages innovation. While emerging professionals value structure and stability they also look for meaningful work, real responsibility and continued learning opportunities. The CPO must find these learning opportunities for both the established deep smarts and newly hired emerging professionals. It’s preferred these opportunities be strategic, cross-functional and capable of inspiring meaningful outcomes that deliver value and improve stakeholder satisfaction.
Finally, if the utility leadership isn’t confident it can do all of this on its own, then it should seek outside help.
In Summary
If attracting new talent is crucial to the survival of a water utility consider this – although, emerging professionals may be attracted to the purpose, culture and stability found at the utility they’re also savvy enough, and perceptive enough, to ascertain if there’s a real commitment to moving away from the traditional and embracing the modern. If water utilities choose not to commit to change, they face the likelihood of having the wrong kind of talent. Keep in mind that electric and gas utilities face the same challenges when it comes to talent and process. The harsh reality is that on the procurement maturity curve Electric is generally ahead by at least three to five years and gas is well ahead of water.
Undoubtedly, these changes will be disruptive to the status quo at the heart of many water utilities. And yet, the current environment may be an opportunity for the water sector to take a quantum leap forward. If the workforce issues identified here are not well managed, then the costs associated with the resulting inefficiencies and ineffectiveness will be borne by ratepayers.
The future for the water workforce is now.
Jim Baehr is the founder of the Sourcing Strategies Group, which supports the supply management needs of clients in both the public and private sectors. He has also served as an independent advisor leading transformation initiatives and supply management projects for chemicals, energy, retail and water clients. Baehr is a frequent contributor to WF&M.
