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Senior-level Retirements Set to Take their Toll on the Chemical Industry
7:49 AM MST | February 28, 2012 | By ANDY TALKINGTON AND JIM ASLAKSEN
by Andy Talkington and Jim Aslaksen, Senior Client Partners and co-leaders of Korn/Ferry International’s Global Chemicals Practice
Within a few years, a large wave of senior-level managers will be able to retire from the chemical industry. Across all sub-sectors, there is a significant lack of leaders primed to fill these retirees’ shoes. As a result, companies face potential fallout in terms of reduced leadership, innovation, production and productivity. And, this challenge isn’t going away any time soon.
A Challenge Decades in the Making
Major chemical companies have significant shortfalls in general management and functional leadership that extend deep into the organization. Demand for professionals adept at creating a vision, and empowering staff to bring it to life, is no longer at an all-time high.
The problem dates back nearly three decades. In the early 1980s and 1990s, the U.S. endured recessions and spikes in oil/raw material prices. During these cycles, chemical companies either didn’t hire new professionals or downsized. Potential entrants saw the industry as unstable and pursued other sectors, such as technology and life sciences.
An intense supply and demand situation has now surfaced. The baby boomers who were working 20-30 years ago are now senior leaders, and up to 75-80% of them will be retiring in the next five-to-seven years. Talent pools to fill these openings are badly depleted because of the past hiring freezes and downsizing. Furthermore, a large population of middle management has not been adequately groomed to assume these leadership positions.
Then, there is the private equity pull. Since the mid-1990s, numerous small companies have spun off of large chemical corporations, creating additional demand for high-potential executives to fill C-level roles. Additionally, developing nations are vying for senior-level western executives to drive productivity and operational excellence, or manage out-of-country assets.
The recent global recession and slow recovery isn’t helping the situation either. Fewer U.S. students can afford to attend college, and those who do, aren’t pursuing math and science degrees. In the U.S., the number of chemical engineering graduates each year is around 5,000 compared to nearly 7,500 in the mid-1980s. This has resulted in a diminished supply of talent. In fact, within five years, most of the technical talent will be sourced out of the U.S. because we aren’t producing the workers to sufficiently service the chemical industry.
With reduced leadership, innovation can suffer. The vision is not there. Productivity and quality erodes. There is simply more room for error as span of control enlarges.
A Necessary Shift
In the short term, chemical companies’ immediate need is senior-level leadership. Below are some necessary steps the industry must take:
· With fewer leaders, there’s an increased need for innovative systems and processes that can help support productivity and quality control as span of control expands and less trained leaders must step up one to two levels.
· Chemical companies must take greater and more rapid promotional or recruitment risks than they have in the past. Historically, the industry has relied on the best talent bubbling to the surface over time. That can’t happen anymore. Proactive identification and development must occur now broadly in the industry.
· There will be a greater emphasis on recruiting senior candidates from other companies. In fact, this is a prime opportunity for rising industry professionals in their mid-40s to make a giant leap in their careers.
· Companies must become more flexible in their compensation programs and relocation packages. The cost of talent is going to rise, and these costs are beyond compensation; they include training, mentoring programs, telecommuting options, etc. – the things that make people “stick and stay.”
In the long term, the challenge is to more rapidly train a technically savvy workforce. Companies must intensify college graduate recruitment efforts in order to “feed the bottom.” Otherwise, the current talent crisis could repeat itself in a few decades, and that’s a situation everyone wants to avoid.