IHS Chemical Week


Senior-level Retirements Set to Take their Toll on the Chemical Industry


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.

Comments (7) for Senior-level Retirements Set to Take their Toll on the Chemical Industry
This is a scenario that we see repeated across the developing world. In the UK IChemE has deployed a pretty successful campaign that has doubled the number of chemical engineering undergraduates. But it will obviously take time for these people to feed through to industry. The campaign website is www.whynotchemeng.com and you can read about the latest impact here http://bit.ly/zHqDMp
Posted by Andy Furlong on Tuesday, March 6, 2012 @ 07:41 AM
This is just predictable, and sorry, it is going to keep happening, as cash-strapped manufacturers aren't interested in hiring entry-level engineers. I graduated in chemical engineering during the recession in 2010, got one job offer in manufacturing, and saw the HUGE age gap. In addition, because of the lack of people working, I never felt I was properly trained and subsequently quit. I don't care what the numbers say on the lack of US undergraduates pursuing engineering; I have tons of friends like me that are working and underutilized or haven't even landed a job! Don't sit here and blame the students for not trying.
Posted by Erica on Wednesday, March 7, 2012 @ 05:56 AM
I agree with the comments submitted, particularly those of Erica. FYI, it also happens this way in government, despite lip-service paid to "succession-planning". I've been in a federal agency for >20 yrs, after a dozen yrs in R&D Management in the private sector, was never properly or formally trained or groomed for more of a 'leadership role', but was expected to 'cover' (ad hoc) for office management in various policy initatives and expected to offer coherent 'guidance', which was near-impossible. Whenever I'd ask for Budgetary, Program Mgmt or Project Mgmt Training, there would never be resources or "funds-available". Mgmt didn't care until recently, either. Even the more recent "Leadership Development" Programs made available through our Center seem more suitable for younger, more recent "hires" whose whole careers still lie in front of them. What a colossal waste of talent (mine) !.
Posted by Stan on Wednesday, March 7, 2012 @ 09:59 AM
The other issue that has come up is that today's engineers are not keen on technical careers, but more interested in commercial and business related activities. Therefore, in addition to a lack of engineers, industry will find itself with engineers who are not interested in engineering. Industry should make the technical side of engineering more attractive using the means the author of this article has listed.
Posted by arul on Wednesday, March 7, 2012 @ 10:25 AM
The story is completely true. Industry has failed to train young engineers to take the place of those retiring.
Posted by Allen Luksic on Wednesday, March 7, 2012 @ 04:14 PM
Like Erica, I was a 2010 ChemE grad, a valedictorian at a top 15 US university. I had an incredibly tough time finding jobs, and ended up enrolling in a PhD program because nothing ever really came. So I'll believe that fewer people are graduating as ChemE's, but there are also much fewer entry-level jobs being offered. Companies may be looking for more chemical engineers, but they want people with more experience, which is a problem because almost no one is willing to invest those first few years in a new graduate. So frustrating.
Posted by ABC on Thursday, March 8, 2012 @ 03:36 PM
I am a ChemE in the food industry and am in my mid career. What I say happen was the management decided that engineering was a commodity and shopped it all outside and therefore not developing the talent. The folks working in those jobs came and went with the work and therefore were not trained and developed. Now those folks don't have the skills to train the new engineers. I agree the problem needs to be fixed by hiring the recent grads and train them the challenge is no one out there has these skills so everyone just keeps looking for the mid level talent that never happened.
Posted by Don on Tuesday, March 13, 2012 @ 06:40 AM

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