Sunday, November 27, 2005
Brain Drain Threatens Aerospace Vitality
AEROSPACE IN CRISIS; Vol. 152, No. 17; Pg. 24
BYLINE: ANTHONY L. VELOCCI, JR.
The U.S. aerospace industry is facing a deepening problem -- a crisis, in the opinion of some observers -- that shows few signs of abating in the foreseeable future. Call it a brain drain, a hemorrhage of intellectual capital or an erosion of the brain trust: it all amounts to the same thing.
For a growing number of companies, the challenge of attracting and retaining top technical talent is becoming increasingly difficult. The situation is especially acute in key disciplines such as electrical, software and systems engineering -- hardly an acceptable condition in an industry in which information technology and systems integration are critical.
In some cases, the situation is having a measurable impact.
''It has slowed the pace of our work and caused us to stretch out some schedules,'' said Derek Cheung, vice president of Rockwell Collins Science Center in Thousand Oaks, Calif. ''We've intensified our recruiting efforts, but we're still unable to attract as many people as we need, and it's hard to keep those we do hire. The shortage of engineers has become the No. 1 issue -- and a very severe problem -- at our research lab.''
Almost every major job is understaffed by 10-15%, forcing Rockwell Collins to ''run the rest of the technical team at 120% of capacity, which directly translates into burnout,'' according to Brian Wright, vice president of Integrated Applications. ''We're in a continuous war for experienced engineers, who are very difficult to find.'' Similar frustration was expressed by Philip Cheney, Raytheon Co.'s engineering vice president who directs their R&D program. ''It's a constant battle to get top people in here,'' he said. ''Consequently, we work the ones we've got pretty hard.'' He added, ''We've started looking at the situation as a long-term issue.''
Part of the problem is that the aerospace industry is fighting a losing battle with proliferating, fast-growing wireless technology companies and Internet startups. They are luring many of the most promising young engineers with big starting salaries, as well as the potential to become multimillionaires on the strength of stock options whose value may soar.
''We can't match what dot-com companies are paying,'' said Nils Ericson, president of Northrop Grumman's Logicon Information Solutions business unit. ''As fast as we bring new people in, we have the same number leave for the commercial sector.'' At Lockheed Martin, which employs nearly 65,000 engineers of all types, Staffing Services director Tracey Staley said that company loses more software engineers to dot-com companies than to aerospace competitors. But she adds, ''Compensation isn't usually the main reason they leave; most of the time it's because they consider the work uninteresting or they don't like the direction of their careers.''
While industry may be bearing the brunt of the talent competition, some parts of the government -- no less dependent on top engineers -- are finding themselves similarly challenged. For example, nuclear weapons labs are losing engineers to dot-com companies at an alarming rate (see p. 78). NASA is having a problem too. After shrinking its workforce to about 18,500 from some 25,000 in recent years, the agency plans to hire approximately 2,000 new workers, many of whom will be engineers. The task is being made tougher, however, because a number of candidates are being drawn to New Economy opportunities.
''We're having to compete with dot-com companies,'' Administrator Dan Goldin said. ''The president of one of the major technical universities said to me, 'Dan, my smart kids are wanting to get equity in the companies, and they're looking at compensation measured in hundreds of thousands of dollars.''
But the lure of the commercial sector isn't the full extent of the difficulty companies are grappling with.
The overall engineering talent pool has been shrinking for the last 10-15 years because of declining enrollment in bachelor programs, though not everywhere. ''Enrollment is far below the level it was at 10 years ago, but it's on the rise again at Princeton University,'' said Lex Smits, who heads the Ivy League school's aerospace engineering program.
Some large universities also report that the number of graduates pursuing masters and Ph.D. degrees in aerospace and aeronautical engineering programs has remained flat since the mid-1990s. However, this aspect of the problem is actually worse than the numbers indicate. Many students graduating with higher engineering degrees are non-U.S. citizens, making them less employable on Defense Dept. programs because of security concerns.
To make matters worse, the overall quality of students in many of the U.S.' top engineering schools has diminished, according to some academicians. ''Aerospace engineering programs simply aren't attracting the talent they used to,'' said Kyle T. Alfriend, professor and head of the aerospace engineering department at Texas A&M University. Eli Reshotko, Kent H. Smith professor of engineering at Case Western University, agrees, adding, ''What bothers our crowd most is that we're no longer getting the best and the brightest.''
There is a huge difference between the best candidates and the next tier, noted Norman Augustine, who briefly joined the faculty of Princeton's engineering department after he retired as chairman and CEO of Lockheed Martin. ''The sad truth is that companies aren't getting their fair share of the best people available.''
FURTHER EXACERBATING the problem is the ''graying'' of the industry's engineering workforce. ''This trend alone is alarming and should raise a red flag throughout the highest levels of the defense establishment, starting with the office of the secretary of defense,'' a top executive told Aviation Week & Space Technology.
Consider the following: on a major Pentagon program managed by a large defense contractor, more than 80% of the engineering staff will retire within the next 30 months, according to James Schwendinger, who heads up the aerospace and defense practice of the consulting firm of Deloitte & Touche. If the program continues, it's not clear where the intellectual capital is going to come from, he said.
''I don't think there is a crisis yet, because in general I don't believe the problem is preventing the industry from delivering military and civil products on time,'' Aerospace Industries Assn. President John Douglass said. ''But the situation could become a crisis if we don't begin doing certain things.''
Douglass noted the industry's 750,000-800,000 workforce, which includes approximately 450,000 engineers, produced some $ 155 billion worth of products last year. In the late 1980s, the industry employed about 1.3 million people who produced products valued at $ 115 billion. The productivity of aerospace workers has risen dramatically, and because it has increased faster than total sales, companies have been able to make up for the steady decline in recruiting losses in recent years, he said. ''For that reason, I don't think industry is behind the power curve yet in responding to the problem.''
Douglass' assessment is not shared universally.
Many of the people Aviation Week interviewed for this report expect the brain drain to get worse before it gets better because industry has failed up to this point to mount a coordinated response. ''This industry has no long-term point of view, and it has no realistic plan for dealing with this problem,'' said Case Western's Reshotko.
Reshotko is in a position to know.
Both he and Texas A&M's Terry Alfriend are members of a blue ribbon panel that has been assembled under the auspices of the National Academy of Science's National Research Council to determine if the aerospace industry will have the capability of designing future weapons systems. ''Based on our findings thus far, there's definitely cause for concern,'' Reshotko said. ''Some capability will be lost.'' The U.S. Air Force requested and is funding the study, which is supposed to be completed around the end of this year.
''The industry is in serious decline,'' declared Wolfgang Demisch, managing director at Wasserstein Perella. ''It's almost as though the leadership both at the company level and the industry level have been oblivious to a problem that's been staring them in the face for quite some time.''
Denial might be a more apt description.
''SOME COMPANIES WON'T even discuss the problem because it could raise questions in the minds of customers and investors,'' Merrill Lynch analyst Byron Callan said. ''Raise the issue with management and you're more apt to get the party line.''
In a study conducted several years ago on the health of the U.S. aerospace industry, Deloitte & Touche found companies were having an increasingly difficult time attracting and retaining engineers in software design and some other key fields. While the trend showed up as a concern, it wasn't a high management priority, Schwendinger recalls. ''It's not difficult to understand why a lot of companies now find themselves in the situation they're in.''
AIA's John Douglass said concern about the problem varies from company to company, depending on their dependence on engineering disciplines in shortest supply. At this point, he added, there's not much more on which to base an industry-wide response than anecdotal evidence. As a prelude to developing a blueprint for such action, the Washington-based trade organization probably will launch a study of its own in the near future, possibly in conjunction with the Air Force Assn.
The Lean Aerospace Initiative at Massachusetts Institute of Technology is also exploring the industry's ability to attract and hold onto intellectual capital. ''Hard data on the seriousness and causes of what we're dealing with is badly needed,'' said MIT senior researcher Kirk Bozdogan, co-head of Supplier Networks Research Team in the Lean Aerospace Initiative.
As study teams probe the depths of the overall problem, they almost certainly will discover a gender dimension.
HISTORICALLY, RELATIVELY few females have pursued engineering disciplines, at least in the U.S., and that continues to be the case. Women made up only 7% of the engineering workforce in the mid-1990s, according to the Women in Engineering Program Advocates Network. Proportionately, many more women are physicians, attorneys or work in business. ''Reversing this trend is one of the keys to solving the problem the industry is facing,'' Wright said.
Study teams also are apt to discover the industry is perceived in a very negative light by a lot of engineering students and, for that matter, some aerospace engineering professors. Right or wrong, their sense is that aerospace no longer is as innovative as it used to be. When Augustine was teaching at Princeton, he polled engineering students to learn about their career plans. They all expressed hope they could find jobs with small, entrepreneurial dot-com companies, he recalled. ''Young people are saying the industry has lost its excitement, and this too is part of the problem,'' he said.
Other current and former college professors tell of aerospace engineering graduates choosing careers with consulting and Wall Street investment banking firms. Space still seems to offer some excitement, but there definitely is a trend toward joining relatively small, entrepreneurial companies that offer a less structured environment, Princeton's Lex Smits said.
Robert Kuntz, president of the California Engineering Foundation, isn't surprised. Young people are stimulated by companies that are pushing the frontiers of technology, but such activities have been sharply scaled back with the steep decline in independent and government-funded R&D since the end of the Cold War, according to Kuntz.
''The industry is at a crossroads,'' MIT's Bozdogan said. ''Either it can grow with vitality or it can become an also-ran in the global scale of things. Based on trends in R&D spending and the problem the industry is having attracting and holding onto top engineering talent, there's more than ample reason to worry.''
BYLINE: ANTHONY L. VELOCCI, JR.
The U.S. aerospace industry is facing a deepening problem -- a crisis, in the opinion of some observers -- that shows few signs of abating in the foreseeable future. Call it a brain drain, a hemorrhage of intellectual capital or an erosion of the brain trust: it all amounts to the same thing.
For a growing number of companies, the challenge of attracting and retaining top technical talent is becoming increasingly difficult. The situation is especially acute in key disciplines such as electrical, software and systems engineering -- hardly an acceptable condition in an industry in which information technology and systems integration are critical.
In some cases, the situation is having a measurable impact.
''It has slowed the pace of our work and caused us to stretch out some schedules,'' said Derek Cheung, vice president of Rockwell Collins Science Center in Thousand Oaks, Calif. ''We've intensified our recruiting efforts, but we're still unable to attract as many people as we need, and it's hard to keep those we do hire. The shortage of engineers has become the No. 1 issue -- and a very severe problem -- at our research lab.''
Almost every major job is understaffed by 10-15%, forcing Rockwell Collins to ''run the rest of the technical team at 120% of capacity, which directly translates into burnout,'' according to Brian Wright, vice president of Integrated Applications. ''We're in a continuous war for experienced engineers, who are very difficult to find.'' Similar frustration was expressed by Philip Cheney, Raytheon Co.'s engineering vice president who directs their R&D program. ''It's a constant battle to get top people in here,'' he said. ''Consequently, we work the ones we've got pretty hard.'' He added, ''We've started looking at the situation as a long-term issue.''
Part of the problem is that the aerospace industry is fighting a losing battle with proliferating, fast-growing wireless technology companies and Internet startups. They are luring many of the most promising young engineers with big starting salaries, as well as the potential to become multimillionaires on the strength of stock options whose value may soar.
''We can't match what dot-com companies are paying,'' said Nils Ericson, president of Northrop Grumman's Logicon Information Solutions business unit. ''As fast as we bring new people in, we have the same number leave for the commercial sector.'' At Lockheed Martin, which employs nearly 65,000 engineers of all types, Staffing Services director Tracey Staley said that company loses more software engineers to dot-com companies than to aerospace competitors. But she adds, ''Compensation isn't usually the main reason they leave; most of the time it's because they consider the work uninteresting or they don't like the direction of their careers.''
While industry may be bearing the brunt of the talent competition, some parts of the government -- no less dependent on top engineers -- are finding themselves similarly challenged. For example, nuclear weapons labs are losing engineers to dot-com companies at an alarming rate (see p. 78). NASA is having a problem too. After shrinking its workforce to about 18,500 from some 25,000 in recent years, the agency plans to hire approximately 2,000 new workers, many of whom will be engineers. The task is being made tougher, however, because a number of candidates are being drawn to New Economy opportunities.
''We're having to compete with dot-com companies,'' Administrator Dan Goldin said. ''The president of one of the major technical universities said to me, 'Dan, my smart kids are wanting to get equity in the companies, and they're looking at compensation measured in hundreds of thousands of dollars.''
But the lure of the commercial sector isn't the full extent of the difficulty companies are grappling with.
The overall engineering talent pool has been shrinking for the last 10-15 years because of declining enrollment in bachelor programs, though not everywhere. ''Enrollment is far below the level it was at 10 years ago, but it's on the rise again at Princeton University,'' said Lex Smits, who heads the Ivy League school's aerospace engineering program.
Some large universities also report that the number of graduates pursuing masters and Ph.D. degrees in aerospace and aeronautical engineering programs has remained flat since the mid-1990s. However, this aspect of the problem is actually worse than the numbers indicate. Many students graduating with higher engineering degrees are non-U.S. citizens, making them less employable on Defense Dept. programs because of security concerns.
To make matters worse, the overall quality of students in many of the U.S.' top engineering schools has diminished, according to some academicians. ''Aerospace engineering programs simply aren't attracting the talent they used to,'' said Kyle T. Alfriend, professor and head of the aerospace engineering department at Texas A&M University. Eli Reshotko, Kent H. Smith professor of engineering at Case Western University, agrees, adding, ''What bothers our crowd most is that we're no longer getting the best and the brightest.''
There is a huge difference between the best candidates and the next tier, noted Norman Augustine, who briefly joined the faculty of Princeton's engineering department after he retired as chairman and CEO of Lockheed Martin. ''The sad truth is that companies aren't getting their fair share of the best people available.''
FURTHER EXACERBATING the problem is the ''graying'' of the industry's engineering workforce. ''This trend alone is alarming and should raise a red flag throughout the highest levels of the defense establishment, starting with the office of the secretary of defense,'' a top executive told Aviation Week & Space Technology.
Consider the following: on a major Pentagon program managed by a large defense contractor, more than 80% of the engineering staff will retire within the next 30 months, according to James Schwendinger, who heads up the aerospace and defense practice of the consulting firm of Deloitte & Touche. If the program continues, it's not clear where the intellectual capital is going to come from, he said.
''I don't think there is a crisis yet, because in general I don't believe the problem is preventing the industry from delivering military and civil products on time,'' Aerospace Industries Assn. President John Douglass said. ''But the situation could become a crisis if we don't begin doing certain things.''
Douglass noted the industry's 750,000-800,000 workforce, which includes approximately 450,000 engineers, produced some $ 155 billion worth of products last year. In the late 1980s, the industry employed about 1.3 million people who produced products valued at $ 115 billion. The productivity of aerospace workers has risen dramatically, and because it has increased faster than total sales, companies have been able to make up for the steady decline in recruiting losses in recent years, he said. ''For that reason, I don't think industry is behind the power curve yet in responding to the problem.''
Douglass' assessment is not shared universally.
Many of the people Aviation Week interviewed for this report expect the brain drain to get worse before it gets better because industry has failed up to this point to mount a coordinated response. ''This industry has no long-term point of view, and it has no realistic plan for dealing with this problem,'' said Case Western's Reshotko.
Reshotko is in a position to know.
Both he and Texas A&M's Terry Alfriend are members of a blue ribbon panel that has been assembled under the auspices of the National Academy of Science's National Research Council to determine if the aerospace industry will have the capability of designing future weapons systems. ''Based on our findings thus far, there's definitely cause for concern,'' Reshotko said. ''Some capability will be lost.'' The U.S. Air Force requested and is funding the study, which is supposed to be completed around the end of this year.
''The industry is in serious decline,'' declared Wolfgang Demisch, managing director at Wasserstein Perella. ''It's almost as though the leadership both at the company level and the industry level have been oblivious to a problem that's been staring them in the face for quite some time.''
Denial might be a more apt description.
''SOME COMPANIES WON'T even discuss the problem because it could raise questions in the minds of customers and investors,'' Merrill Lynch analyst Byron Callan said. ''Raise the issue with management and you're more apt to get the party line.''
In a study conducted several years ago on the health of the U.S. aerospace industry, Deloitte & Touche found companies were having an increasingly difficult time attracting and retaining engineers in software design and some other key fields. While the trend showed up as a concern, it wasn't a high management priority, Schwendinger recalls. ''It's not difficult to understand why a lot of companies now find themselves in the situation they're in.''
AIA's John Douglass said concern about the problem varies from company to company, depending on their dependence on engineering disciplines in shortest supply. At this point, he added, there's not much more on which to base an industry-wide response than anecdotal evidence. As a prelude to developing a blueprint for such action, the Washington-based trade organization probably will launch a study of its own in the near future, possibly in conjunction with the Air Force Assn.
The Lean Aerospace Initiative at Massachusetts Institute of Technology is also exploring the industry's ability to attract and hold onto intellectual capital. ''Hard data on the seriousness and causes of what we're dealing with is badly needed,'' said MIT senior researcher Kirk Bozdogan, co-head of Supplier Networks Research Team in the Lean Aerospace Initiative.
As study teams probe the depths of the overall problem, they almost certainly will discover a gender dimension.
HISTORICALLY, RELATIVELY few females have pursued engineering disciplines, at least in the U.S., and that continues to be the case. Women made up only 7% of the engineering workforce in the mid-1990s, according to the Women in Engineering Program Advocates Network. Proportionately, many more women are physicians, attorneys or work in business. ''Reversing this trend is one of the keys to solving the problem the industry is facing,'' Wright said.
Study teams also are apt to discover the industry is perceived in a very negative light by a lot of engineering students and, for that matter, some aerospace engineering professors. Right or wrong, their sense is that aerospace no longer is as innovative as it used to be. When Augustine was teaching at Princeton, he polled engineering students to learn about their career plans. They all expressed hope they could find jobs with small, entrepreneurial dot-com companies, he recalled. ''Young people are saying the industry has lost its excitement, and this too is part of the problem,'' he said.
Other current and former college professors tell of aerospace engineering graduates choosing careers with consulting and Wall Street investment banking firms. Space still seems to offer some excitement, but there definitely is a trend toward joining relatively small, entrepreneurial companies that offer a less structured environment, Princeton's Lex Smits said.
Robert Kuntz, president of the California Engineering Foundation, isn't surprised. Young people are stimulated by companies that are pushing the frontiers of technology, but such activities have been sharply scaled back with the steep decline in independent and government-funded R&D since the end of the Cold War, according to Kuntz.
''The industry is at a crossroads,'' MIT's Bozdogan said. ''Either it can grow with vitality or it can become an also-ran in the global scale of things. Based on trends in R&D spending and the problem the industry is having attracting and holding onto top engineering talent, there's more than ample reason to worry.''
# posted by reckoner @ 2:45 PM 
