The Chemicals Perspective – A Focus on Talent

Accenture Global Manufacturing StudyHow leading manufacturers thrive in a world of ongoing volatility and uncertainty

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As part of Accenture’s Global Manufacturing Study, we surveyed executives from the chemical industry to gain insight into the issues and practices they are considering in the pursuit of sustainable growth in today’s volatile global economy—as well as the challenges they face in achieving their growth goals.1 We found that most chemical companies in our survey are growing strongly—both in terms of revenue and profitability—and look forward to continued growth. But we also found that chemical companies’ sustained growth is threatened by a number of talent shortcomings, including major skills gaps in key roles. In this paper, we explore how chemical companies can address this talent challenge through stronger investments in educational programs, employee training, and new productivity tools that can help them build a sustainable talent pipeline, retain their best talent, and get the most out of their skilled employees.

Spotlight: Chemical Industry

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According to the Accenture Global Manufacturing Study, the chemical industry is in growth mode: Many chemical companies have experienced robust growth in the past few years and even more expect to grow strongly in the coming 12 months. For instance, since 2011, nine in 10 chemical companies reported revenue growth, with half reporting growth of more than 6 percent (Figure 1).

Ninety percent of chemical executives are optimistic that the economies of their top revenue markets will expand this year, and 42 percent are highly optimistic. Overall, virtually all chemical companies surveyed plan to grow their revenue in the next year, with 56 percent expecting growth to exceed 6 percent.

Similarly, profitability has been on the rise. Eighty-three percent of chemical executives said their company’s profitability had increased since 2011, with 47 percent indicating it grew by more than 6 percent (Figure 2). To maintain or improve profitability in the coming year, chemical companies expect to rely largely on two value levers: improving operational efficiency, cited by 64 percent of executives; and improving quality, named by 44 percent.

Chemical companies are growing profitably

Figure 1: Chemical companies’ revenue growth since 2011.

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Figure 2: Chemical companies’ profitability growth since 2011.

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Skills gaps pose an obstacle to continued growth

Figure 3: How chemical companies have changed their workforce since 2011.

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Figure 4: Chemical companies reporting large or extensive skills gaps in these roles.

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General labor

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Of course, to drive and sustain such improvements, chemical companies must have an experienced, skilled and loyal workforce. However, this is increasingly challenging for chemical companies in our survey. In fact, skills gaps in just a few key roles could be an obstacle to chemical companies’ ability to achieve and sustain their growth goals.

Recognizing they need talent to drive growth, chemical companies have been hiring aggressively. Just over seven in 10 chemical executives reported their company has increased its manufacturing workforce since 2011, with 39 percent saying they increased it moderately or extensively (Figure 3). Among those reporting an increase, the majority focused on adding full- or part-time salaried workers whose skills were determined to be strategically important to the company and who were in countries where demand was strongest.

Yet despite this hiring, chemical executives still indicated their companies have some significant skills gaps across a wide variety of roles in their organization (Figure 4). The largest percentage, 25 percent, said they have large or extensive gaps in skilled trades labor, while 19 percent also reported gaps in operations management and at the executive level. Seventeen percent reported gaps among supervisors and maintenance staff, and 14 percent noted gaps in general labor.

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The factors driving chemical companies’ skills gaps vary according to the role. The primary factors contributing to executive-level skills gaps are difficulty paying candidates what they demand (23 percent) and the fact that the skills needed at this level are simply in short supply (23 percent). A basic lack of available skills also is the top factor for supervisors (27 percent) and skilled trades labor (26 percent). For operations management (31 percent), maintenance (31 percent), and general labor (25 percent), the challenge is not one of supply, but desire: people who would be qualified for the job tend to not want to work in the chemicals industry and have employment opportunities in other industries.

Accenture’s experience confirms our survey findings. In our work with many leading chemical companies, we found that experienced workers have left the chemical industry in droves—whether by choice (they opted to work in another industry or retired) or because they were laid off during the most recent recession. Chemical companies also have been unable to consistently retain younger workers due to tools and working conditions these employees consider to be outdated and unattractive. And in some instances, chemical companies have had difficulty even competing with lower-level service-industry jobs because of the reduction in salaries and benefits chemical companies have enacted and the rise in

service-industry wages. In some cases, these two factors have narrowed the total compensation differential between service and chemical manufacturing jobs to the point at which many younger employees view a job at a fast-food chain as offering greater career potential than one on the shop floor at a chemical company.

Figure 5: US Chemical engineering graduates 1986-2011.

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Source: Data from National Center for Educational Studies, National Science Foundation, and the American Society for Engineering Education.

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Figure 6: Practices chemical companies use to close skills gaps and improve workforce performance.

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Real-time critical feedback is provided and is an embedded part of the company’s culture

Full participation in coaching and mentoring activities

Well-defined talent sourcing and selection strategy is in place

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Employee satisfaction surveys are conducted regularly and results are shared

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Global and local communities of practices, e�ective at sharing knowledge

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Formal competency models are in place defining required skills, career levels and appropriate curriculum

Performance rewards tie to both individual success and enterprise profitability

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One role that is proving especially vexing to fill is engineering. Indeed, the chemical industry faces one of the most severe shortages of engineering talent it has ever faced—driven largely by two factors:

• The boom in shale drilling, which has sent demand for engineers sky high. Engineering and construction group Fluor, for instance, estimates 20,000 to 50,000 craft workers will be needed in the next 10 years for construction of US oil and gas projects.2

• A variable supply, as universities turn out fewer engineering graduates and experienced engineers leave the chemical industry when times are tough, for what they consider to be higher-growth and more-attractive industries (such as high tech) (Figure 5). For example, in a recent survey by Bayer, an overwhelming majority of corporate recruiters—90 percent—attributed their difficulty filling science, technology, engineering, and math (STEM) positions to a shortage of qualified candidates with two-year or four-year STEM degrees.3

Complicating matters is the fact that the misalignment between supply and demand has driven up the price for experienced engineering talent. According to recruiters, engineering professionals in senior (but not executive) managerial roles can command between $200,000 and $350,000,4 which makes it even more difficult for chemical companies to hire people they do find due to ongoing pressures to keep labor costs in check. The gap also threatens to slow economic growth as some companies put major projects on hold because they cannot find skilled workers.

To address their skills gaps, chemical companies in the Accenture survey reported employing a variety of practices (Figure 6). The most commonly mentioned is performance rewards tied to both individual success and enterprise profitability (56 percent), followed by formal competency models (53 percent), leadership’s encouragement of innovation (47 percent), competitive salaries and benefits (39 percent), and career advancement that includes rotations through various roles and assignments to different countries or facilities (39 percent). A majority (64 percent) also plans to invest in their talent and skills base as part of their overall initiative to strengthen their operating

model. In fact, talent was the most-frequently cited operating model dimension planned for increased investment in the coming year.

Chemical companies further plan to continue hiring to plug their skills gaps. Nearly six in 10 chemical executives in our survey said their company plans to increase its overall manufacturing workforce in the next year by at least 5 percent (25 percent expect to boost it by 11 percent or more). Those brought aboard are expected to be primarily full- and part-time employees; contractors and consultants are seen as less likely to play a role in chemical companies’ talent base.

In some cases, chemical companies are planning an even more dramatic step to find talent: moving entire facilities to new locales. Of the 29 percent of chemical companies in our survey that are considering relocating operations to new locations in the coming year, 38 percent said one of the most important factors in their deliberation was the desire to capitalize on needed skills in that location. As a counterpoint, an equally prominent factor in the decision to relocate is the ability to reduce labor costs, which may reflect continuance of long-running labor arbitrage strategies.

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Key actions to attract and retain vital skills

While the aforementioned moves could help, Accenture believes chemical companies need to do more to attract and retain the skills required for the industry’s continued profitable growth. Specifically, they need to aggressively invest their significant cash on hand in efforts to build and maintain a strong pipeline of talent, and to develop and retain critical skills they need to fuel sustainable growth when the shale boom begins leveling off. Within those two broad courses of action, we have identified several specific initiatives that are key.

Work with schools to create a consistent pool of students with valuable STEM degreesAn investment in talent should start at the beginning of the talent pipeline: the education programs that enable students to earn the degrees that are in demand among chemical companies.

In the past 20 years, many engineering and technical schools have struggled to stay afloat due to a drop in support from industry. That trend must be reversed to dramatically increase the number of high-quality STEM graduates and technicians available to businesses. Chemical companies should identify a few key programs and schools they want to work with to provide targeted funding for operations and to shape curriculums that will produce graduates with the skills they need.

For example, the ongoing shortage of qualified welders in the US Gulf Coast region is causing cost increases and delays in chemical industry capital projects intended to take advantage of low-cost feedstocks. In response, San Jacinto College in Pasadena, Texas, has greatly expanded its capacity to train welders and added a popular night program that produces a qualified welder in as little as six months.5 With industry backing, San Jacinto and similar technical schools could expand even more rapidly to better balance skill supply with demand. STEM degrees take four to five years to complete, so longer lead times are required if the chemical industry is to make a significant impact on the supply of those critical skills.

But it is not enough to help a school create a curriculum or provide some funding. To keep schools viable and make them magnets for the most promising students, chemical companies also need to commit to hiring the graduates of the programs they support. Doing so will make a career in the chemical industry more attractive to students and enable chemical companies to infuse badly needed new talent into their operations who represent the next generation of leaders in their organizations.

Create more compelling and competitive compensation packagesOnly 39 percent of chemical executives in our survey said their company is focusing on competitive salaries and benefits as part of their efforts to close critical skills gaps. That figure needs to be higher if chemical companies hope to stop losing key talent to industries that are considered more attractive. The fact is, chemical companies’ ongoing push to reduce costs has dramatically affected their ability to pay the market rate for qualified, skilled talent.

Quite simply, to more effectively attract— and lock in—talent, chemical companies need to spend more on top-level talent. Higher salaries, combined with other incentives such as equity stakes in the company, will make it easier to bring and keep talent aboard for the long term. Currently, in “hot” areas such as the US Gulf Coast and Australia, wages for high-demand skills are increasing, but prospective employees have little doubt that when the cycle turns, the industry will return to its historical pattern of benefits cutting and wage stagnation.

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Strengthen internal training and development programsOne of the main reasons chemical companies have been reluctant to hire recent graduates (opting, instead, for experienced hires) is that they do not want to deal with the learning curve that comes with new, inexperienced talent. Because chemical companies’ operations have become so lean in recent years, they fear injecting inexperienced talent into the equation could dramatically and negatively affect the company’s performance.

To be sure, no one expects a new hire to be as effective as a seasoned employee from day one. Chemical companies must adjust their expectations—they cannot have instant productivity. But they can get new hires up to an acceptable level of proficiency quickly by providing access to training programs, supported by modern tools and learning environments that target building and sustaining specific competencies that are vital to success in a given role. The classroom and computer-based training modules of traditional training programs should evolve to more-effective forms that utilize social media, simulation, and visualization as developed by the computer gaming industry.

One example of this kind of contemporary “blended” training is that delivered by Accenture Academy, which follows a comprehensive, flexible approach to building a portfolio of integrated skills for a company’s most important workforces. This approach delivers relevant and timely learning via a curriculum tailored to an organization’s needs, based on a detailed assessment of current skills and skill gaps. Through an interactive, diverse, and highly engaging learning environment supported by innovative technologies, Accenture Academy enables companies to address each student’s personal learning style and performance needs. In the process, companies realize significant productivity and efficiency gains while eliminating spending on methods that produce little return.

Another way chemical companies can shorten the new-hire learning curve is by using directed workflow, which enables the inexperienced to handle the difficult by following standard practices accompanied by limited guidance and mentoring. Directed workflow involves taking what is in the heads of experienced employees and standardizing and institutionalizing it so others can use and benefit from it.

A simple example is pump repair. Seasoned maintenance employees repair pumps dozens of times across a company every year, and many consider what they do an “art.” In reality, it is not an art at all, but rather, hidden science. By explicitly documenting what these experienced employees do to repair a pump, a company can enable an inexperienced person to do the job effectively by following step-by-step instructions. In developing countries, companies are using directed workflow in factories to enable employees—many of whom are not even literate—to be very effective because the system tells them precisely what they need to do, in what order, and what confirmation they need that each action is completed correctly before moving on to the next one. By thus removing the mystery and guesswork from an activity, a company can enhance an inexperienced employee’s contribution and dramatically reduce the occurrence of mistakes.

Invest in contemporary productivity toolsAlong with training, chemical companies need to provide more robust tools that can boost the productivity of highly skilled employees—new and experienced alike. Such tools are sorely needed: Chemical companies average 2.5 percent annual improvements in productivity, half of the 5 percent generated by the typical high-tech company.

A variety of sophisticated analytics, diagnostic, simulation, and mobility tools are available that are being used only sporadically in the chemical industry. Instead, most companies still rely on outdated tools such as Excel spreadsheets and other manual systems that consume an inordinate amount of an employee’s time. For instance, why would a company choose to have a highly skilled maintenance employee walk around with an infrared thermometer looking for “hot spots” under the insulation when the monitoring process, from thermal scanning to hot spot detection and analysis, can be automated?

Similarly, real-time simulation and diagnostics tools that continually monitor operations for efficiency and potential trouble areas can replace manual tools that require more time from a skilled employee to accomplish the same task. Mobility tools also can significantly boost employee productivity by enabling them to access what they need to do their jobs—anytime, from anywhere.

In addition to improving productivity, such tools have an important side benefit: They help attract and keep younger employees who have grown up using technology and consider it an indispensible part of their lives. Indeed, the younger generation is used to rapid feedback and collecting, consuming and analyzing tremendous amounts of data in real time. It is not unusual for new hires to fail to make it to their one-year anniversary at chemical companies because they tire of working with antiquated tools. They are ambitious and want to excel, so they end up moving on to other industries where the tools being used can help them, not impede their progress.

Importantly, when deploying new tools, chemical companies should focus them on where they can have the greatest impact. In many cases, that means using them to foster large step-changes in engineering and M&R productivity.

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Relieve high-skilled employees of menial, time-consuming tasksOne of the keys to getting the most from valuable employees is enabling them to focus on what they do best—and what is most valuable to the enterprise. But in many chemical companies today, that focus is diluted to the point at which skilled labor spends the vast majority of their time on non-value-adding activities.

In fact, the relentless pursuit of cost and overhead reduction in the past decade has resulted in the elimination of many traditional clerical support roles as well as the widespread adoption of self-service for such things as human resource support—which, in turn, has increased the administrative burden on skilled and expensive employees.

For example, maintenance professionals today routinely are responsible for work order reporting, scheduling, creating documentation, and gathering parts for their kits—activities that used to be handled by a less-skilled and -costly employee. Wrench time analysis is used to assess the efficiency of front line maintenance workers by validating planning and scheduling effectiveness has plummeted in recent years. At one petrochemical company, the “wrench time” was at 20 percent, which is less than half of what is considered best practice. In other words, highly skilled labor at this company spends upwards of 80 percent of their time on things that do not directly benefit the business. In fact, it was observed that factors impacting productivity (e.g., waiting for parts, unclear job order instructions, non-availability of equipment, etc.) were typical maintenance challenges that affected work efficiency and by working through these issues, the wrench time would increase by 20 percent to 25 percent.

How can chemical companies get their skilled labor out from behind the desk and out in the field, where they can have a much bigger impact on the business? New tools certainly can help. Software, for example, instead of maintenance professionals, can write most work orders. Creating new or refilling old clerical roles supported by new tools also can be effective—for instance, having less-expensive employees handle scheduling and kit assembly.

In some cases, it is possible to offload routine, lower-value tasks that are not location-dependent to an external provider. One chemical company, for example, outsourced responsibility for its IT applications to Accenture to relieve its engineers and manufacturing IT professionals from the day-to-day running of those systems (and to capitalize on the lower costs of offshore labor).

The point is that with skilled labor in short supply, chemical companies need to do whatever they can to use overhead strategically to maximize the work output of talent focused on high value-adding activities.

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Conclusion

It is true that chemical companies face a major challenge when it comes to finding the right skills to sustain growth. But, as just discussed, it is equally true that there are many ways chemical companies can address that challenge.

For most chemical companies, it comes down to a few simple points: Invest in the front end of the talent pipeline—help schools improve their STEM programs and hire the graduates of those programs. Challenge new hires— give them a lot of opportunity to excel or fail, and support them with the right training and tools to enhance the chance of the former and reduce the chance of the latter. And pay more for fewer, but highly talented, people—and give them the tools to be productive and remove the administrative and clerical work that distracts them from their “real” job.

Doing so will help chemical companies be more successful in attracting younger hires, getting more out of them and other highly skilled employees, and securing the commitment and loyalty of key people to help drive the business over the long term.

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References1. The Accenture 2013 Global Manufacturing

Study was based on a comprehensive survey of 250 senior manufacturing executives in large companies headquartered in North America, Europe, South America, and Asia, including executives representing chemical companies. The full global research study can be downloaded at http://www.accenture.com/us-en/Pages/insight-global-manufacturing-study-2013.aspx.

2. “Fluor challenged by shortage of skilled labor amid US shale boom,” Ben Kesling, Hydrocarbon Processing, June 25, 2013, http://www.hydrocarbonprocessing.com/Article/3223288/Fluor-challenged-by-shortage-of-skilled-labor-amid-US-shale-boom.html.

3. “Is There a STEM Workforce Shortage?” Facts of Science Education survey, Bayer Corporation, October 22, 2013, https://www.bayerus.com/News/NewsDetail.aspx?ID=DCF6FA59-C9B5-2F14-A7AB69927FB04B0B.

4. “Engineers get rich as talent war heats up,” Alanna Petroff, CNNMoney, July 25, 2013, http://www.money.cnn.com/2013/07/25/news/economy/engineering-jobs-pay/index.html.

5. “‘Learn to weld’: Labour shortage imperils U.S. shale boom,” Isaac Arnsdorf, Dan Murtaugh, and Jack Kaskey, Financial Post, April 17, 2014, http://business.financialpost.com/2014/04/17/learn-to-weld-shortage-of-workers-imperils-u-s-shale-boom/?__lsa=7ff4-4b3b.

For more informationTo learn more about how Accenture can help you thrive in a world of ongoing volatility and uncertainty go to www.accenture.com/manufacturing, or contact:

Richard Clos Seattle, Washington richard.clos@accenture.com

Mehul Jain Chicago, Illinois mehul.jain@accenture.com

David Rossi Chicago, Illinois david.a.rossi@accenture.com

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with more than 293,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.