Right Skills Right Place Right Time Developing the

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“Right Skills, Right Place, Right Time” Developing the 21 st Century Aerospace Workforce Presentation

“Right Skills, Right Place, Right Time” Developing the 21 st Century Aerospace Workforce Presentation to: May 2002 MIT Labor Aerospace Research Agenda (LARA), Center for Technology, Policy and Industrial Development, MIT http: //mit. edu/ctpid/lara 1 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Key Challenges Demographic “cliff” Ø Average of production workers is 44 in the Commercial

Key Challenges Demographic “cliff” Ø Average of production workers is 44 in the Commercial Sector and 53 in Defense Ø BLS estimates 20 -30% of the engineering and production workforce will retire within five years Increasing skill shortages/changing skill mix Ø Inadequate number of scientists and engineers in the educational pipeline and/or demonstrating an interest in aerospace Ø Inadequate number of apprentices in the pipeline and lack of incentive for individual establishment or firm to make these investments in the absence of an overall industry commitment to do so Ø Changing skill mix – increased importance of information and science-based technologies, communications and team-based interaction skills, and other shifts in skills needed for development/production of aerospace products/services Reduced attractiveness of aerospace; increased competition from other industries Ø Reduced innovation in products, processes and services Ø Declining appeal of aerospace for current and next generation workforce. Ø Less than 20% of current workforce would encourage their children to pursue careers in aerospace Ø Increased attractiveness of other sectors for the “best and brightest” 2 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Key Challenges (cont. ) Divisive & potentially immobilizing concerns over job security & instability

Key Challenges (cont. ) Divisive & potentially immobilizing concerns over job security & instability Ø Industry has lost over 500, 000 jobs since 1990 Ø Destabilizing shifts as a result of industry concentration, frequent shifts in government spending, rapidly changing technologies, suppliers seeking business out of aerospace, and changing corporate leadership vision and strategies Fundamental changes in the nature of work and labor management relations Ø Importance of stability for continuous improvement in new work systems and the diffusion and sustainability of labor-management partnerships Ø Islands of innovation in work systems and labor-management relations exist, while the majority of relationships reflect a traditional arms length, command control mode. Aerospace lags other industries in the use of knowledge-driven work systems and supporting labor-management partnerships Ø Aerospace lags other industries in use of knowledge-driven work systems and supporting labor-management relationships Global competitive dynamics Ø Projected loss of U. S. jobs and revenue due to increased global competition Ø Projected increase in foreign content; projected job growth in European Aerospace 3 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Recommendation 1: Interagency Aerospace Workforce Task Force Ø Create a cross-departmental task force –

Recommendation 1: Interagency Aerospace Workforce Task Force Ø Create a cross-departmental task force – spanning the Departments of Defense, Labor, Education and Commerce – to coordinate government workforce initiatives centered on attracting and retaining a 21 st Century workforce with the skills and capabilities needed to support a world-class aerospace industry. Ø Charge this Task Force to fund or otherwise help ensure world-class apprenticeship and training programs for production and technical workers and the educational programs needed for ensuring a steady and adequate supply of engineers, scientists, and managers for the aerospace industry. 4 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Recommendation 2: Aerospace Capability Network Ø Create and fund an Aerospace Capability Network to

Recommendation 2: Aerospace Capability Network Ø Create and fund an Aerospace Capability Network to develop public/private partnerships in which all key stakeholders—business, labor, government, and community groups—coordinate activities such as: Ø Development of aerospace skill standards and certification programs, Ø Dissemination of information on occupations and job availability, Ø Grants for demonstration projects at local and regional levels to foster the growth of aerospace-related industry and mitigate the impact of instability on employment and program performance and to facilitate worker mobility across firms when necessary. 5 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Recommendation 3: Aerospace Industry Innovation & Promotion Ø Develop and implement a strategy for

Recommendation 3: Aerospace Industry Innovation & Promotion Ø Develop and implement a strategy for diffusing best practices in career development, employment relations, and life-long learning across the industry. Ø Mount a national campaign to attract public attention to opportunities within the aerospace industry targeted to primary schools, secondary schools, community colleges and universities coordinated through the Aerospace Capability Network and funded through public and private sources. 6 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Recommendation 4: Skills and Employment Relations Requirements Statement Ø Defense Department procurement contracts in

Recommendation 4: Skills and Employment Relations Requirements Statement Ø Defense Department procurement contracts in excess of a designated amount (such as, for example, $50 million) should include “Skills and Employment Relations Requirements Statement” which would include: Ø The primary skills and capabilities anticipated as essential for execution of the contract Ø An assessment of investment required to develop/maintain these skills and capabilities over the project or product life-cycle Ø An assessment of the quality of the work systems and labor-management relationships in place and plans for continuous improvements in these domains over the life of the project/contract Ø Workforce impact statements and plans associated with major shifts in government funding Ø An assessment of skills and capabilities associated with work that will be placed outside of the U. S. (with specific number of jobs involved and verification of adherence to international labor standards). 7 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Concluding Comment Ø All of the above recommendations require substantial contributions from public and

Concluding Comment Ø All of the above recommendations require substantial contributions from public and private sectors – not just contributions of funds, but of leadership time and attention Ø We call for a deep commitment to fundamental cultural change in this industry – valuing human capital as the key to future success. 8 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Appendix: Selected Supporting Materials ØRecommendation 1: Aerospace Workforce Investment and ØRecommendation 2: Aerospace Capability

Appendix: Selected Supporting Materials ØRecommendation 1: Aerospace Workforce Investment and ØRecommendation 2: Aerospace Capability Network ØWhy worry about instability? ØHighlights from case studies on Instability ØInstability and program performance ØInstability and the loss of critical skills ØMitigation of Instability – most common and least common practices ØRecommendation 3: Aerospace Industry Promotion ØDeclining experience levels ØLooking ahead to the next generation ØRecommendation 4: Human Capital Impact Statements ØFundamental changes in the nature of work ØSales and employment ØImports and employment ØBackground on MIT’s Labor Aerospace Research Agenda (LARA) ØOverview on LARA ØSample LARA Publications 9 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Why Worry About Instability? Interdependence Total U. S. Aerospace Employment Pull Flow Stability T

Why Worry About Instability? Interdependence Total U. S. Aerospace Employment Pull Flow Stability T 1 Source: AIA Prepared by: IAM Strategic Resources Department 10 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology T 2 T 3 T 4 T 5 T 6 Time T 7 T 8 T 9 T 10

Highlights From Case Studies on Instability Ø Types of instability: Ø Funding/orders Ø Shift

Highlights From Case Studies on Instability Ø Types of instability: Ø Funding/orders Ø Shift from R&D to production funds Ø Fluctuations in demand for primary product in facility Ø Technology Ø Changes in customer requirements Ø Shifts in materials Ø Rapid pace of change in computer capabilities) Ø Environmental constraints 11 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Ø Organizational Ø Acquisition/layoffs Ø Mergers/restructuring Ø Relocation of products among facilities Ø Two-tier relationship between sister facilities Ø Demographics -- retirements/gaps in past hiring, skill shortages Ø Turnover -- management, engineering, and hourly

Highlights From Case Studies on Instability (cont. ) Ø Observed mitigation strategies: Ø Business

Highlights From Case Studies on Instability (cont. ) Ø Observed mitigation strategies: Ø Business Strategy Ø Increase proportion of commercial business sought Ø Shift in product mix to increase focus on space Ø Human Resource Management/Industrial Relations Ø Cross-training/flexible utilization/teams Ø Informal no-layoff practice Ø Labor-management partnership Ø Employee involvement Ø Intensified training of hourly and salaried employees Ø Co-location of engineers, teams Ø Two-tier wage system Ø Multi-facility transfer agreements 12 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Instability and Program Performance Source of Program Cost Growth Government Sample Average Annual Cost

Instability and Program Performance Source of Program Cost Growth Government Sample Average Annual Cost Growth (N=101) Contractor Sample Average Annual Cost Growth (N=80) Budget or Funding Instability 2. 3% 1. 8% Technical Difficulties 2. 4% 2. 7% Requirements Changes 2. 5% 2. 7% Other 0. 1% 0. 8% Total 7. 3% 8. 0% Table 2. Sources of Program Schedule Slip Source of Program Schedule Slip Table 1. Average Annual Program Cost Growth and Its Sources Government Sample Average Schedule Slip (N= 76) Contractor Sample Average Schedule Slip (N= 66) Budget or Funding Instability 8. 2% 7. 8% Technical Difficulties 6. 3% 5. 8% Requirements Changes 5. 0% 3. 4% Other 4. 2% 4. 0% Total 23. 7% 21. 0% 85 70 Mean Baseline (months) Source: Eric Rebentisch, MIT Lean Aerospace Initiative, 1996 13 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Instability and Loss of Critical Skills Source: MIT Labor Aerospace Research Agenda National Facility

Instability and Loss of Critical Skills Source: MIT Labor Aerospace Research Agenda National Facility Survey, 1999 (n=194) 14 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Facility Survey: Reported Use of Mitigation Practices – Five Most Extensively Used Practices (past

Facility Survey: Reported Use of Mitigation Practices – Five Most Extensively Used Practices (past 3 yrs) Source: MIT Labor Aerospace Research Agenda National Facility Survey, 1999 (n=194) 15 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Facility Survey: Reported Use of Mitigation Practices – Five Least Extensively Used Practices (past

Facility Survey: Reported Use of Mitigation Practices – Five Least Extensively Used Practices (past 3 yrs) Source: MIT Labor Aerospace Research Agenda National Facility Survey, 1999 (n=194) 16 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Declining Experience Levels -Military Aircraft Programs 40 Year Career Span XP 5 Y A

Declining Experience Levels -Military Aircraft Programs 40 Year Career Span XP 5 Y A 2 D XC 120 F 4 D F 3 H B 52 A 3 D X 3 S 2 F X 2 F 10 F F 2 Y F 100 B 57 F 102 R 3 Y 1 F 104 A 4 D B 66 F 11 F C 130 F 101 T 37 XFY F 8 U F 6 M 1 U 2 SY 3 F 105 X 13 C 133 F 107 B 58 F 106 F 5 D X 14 C 140 T 2 F 4 A 5 T 39 T 38 AQ 1 X 15 F 5 A X 1 B Retired Experience: 6+ Programs Retiring Experience: 1 -2 Programs Experience: 1 Program A 6 B 52 SR 71 SC 4 A X 21 X 19 C 141 B 70 XC 142 F 111 A 7 OV 10 X 22 X 26 B X 5 A X 24 F 14 S 8 YA 9 A 10 F 15 F 18 YF-17 B 1 YC 15 YC 14 AV 8 b F/A 18 Mid Career Very Few “We believe that a declining experience level has been a contributing factor to the problems we observe in many recent aircraft programs. ” RAND F 117 F 20 X 29 T 46 T 45 B 2 V 22 F 22 EMD YF 22 YF 23 JSF X 36 JSF X 37 C 17 JSF EMD UCAV BX 1950 s 1960 s 1970 s 1980 s 1990 s 2000 s 2010 s 2020 s 2030 s Source: RAND Study (chart by Northrop Grumman) -- Vertical Bars: Military Aircraft Program Starts 17 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Future Prospects for the U. S. Aerospace Enterprise “I would highly recommend that my

Future Prospects for the U. S. Aerospace Enterprise “I would highly recommend that my children work in this industry” (Agree or Strongly Agree, n=482) 18 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Fundamental Changes in the Nature of Work Craft Production Mass Production Knowledge-Driven Work Social

Fundamental Changes in the Nature of Work Craft Production Mass Production Knowledge-Driven Work Social Technical Systems Decentralized Enterprises Custom Manufacture Mastery of Craft Specialized Tools Vertical Hierarchies Assembly Line Scientific management Interchangeable Parts Global, Network Alliances Flexible Specialization Team-Based Work Systems Information Systems Adapted from: “Knowledge-Driven Work: Unexpected Lessons from Japanese and United States Work Practices” (Oxford University Press, 1998) 19 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Sales and Employment 20 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of

Sales and Employment 20 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Imports and Employment U. S. engines and parts imports as a share of total

Imports and Employment U. S. engines and parts imports as a share of total aircraft sales, 1981 -2000 21 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology

Overview on the Labor Aerospace Research Agenda (LARA) Ø Sponsor: USAF Man. Tech Ø

Overview on the Labor Aerospace Research Agenda (LARA) Ø Sponsor: USAF Man. Tech Ø Lead Partners: IAM and other Labor Organizations in Aerospace Ø Principal investigators and Research Team: Ø Tom Kochan (Co-PI), Joel Cutcher. Gershenfeld (Co-PI), Betty Barrett, Rob Scott, Takashi Inaba, Eric Partlan, Shannon O’Callighan, Kevin Long, and other team members Ø Links to MIT’s Lean Aerospace Initiative (LAI): Ø Organizations and People, Knowledge Deployment, Other Research/Product Teams, and Curriculum Development Ø Funding: Ø ~$300 K/yr 22 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology Ø Focus: Ø Impact of instability on employment and workplace innovation in the aerospace industry Ø Investments in social capital and institutional infrastructure driving future success in aerospace Ø Methods Ø National random sample facility surveys Ø Individual surveys Ø Case studies Ø Collective bargaining contract analysis Ø Archival data analysis Ø Conferences and working sessions

Sample LARA Publications (available at http: //mit. edu/ctpid/lara) Resource Guide: Ø Collective Bargaining in

Sample LARA Publications (available at http: //mit. edu/ctpid/lara) Resource Guide: Ø Collective Bargaining in the Face of Instability: A Resource for Workers and Employers in the U. S. Aerospace Industry Case Studies: Ø A Decade of Learning International Association of Machinists and Boeing Joint Programs Ø Transformation Through Employee Involvement and Workplace Training: The Challenge of a Changing Business Context Rocketdyne Propulsion and Power and the United Automobile Workers Ø Employing Activity Based Costing and Management Practices Within the Aerospace Industry: Sustaining the Drive for Lean Boeing Commercial Airplane Group, Wichita Division and the International Association of Machinists Ø Fostering Workplace Innovation and Labor-Management Partnership: The Challenge of Strategic Shifts in Business Operations Pratt and Whitney (UTC) and the International Association of Machinists Ø Fostering Continuous Improvement in a Changing Business Context Textron Systems Ø From Three to One: Integrating a High Performance Work Organization Process, Lean Production, and Activity Based Costing Change Initiatives Boeing Commercial Airplane Group, Wichita Division and the International Association of Machinists Note: LARA Research is also incorporated into Lean Enterprise Value: Insights from MIT’s Lean Aerospace Initiative (Palgrave, 2002) 23 -- Labor Aerospace Research Agenda © 2002 Massachusetts Institute of Technology