Industrial Future Shaped by Demographics.

• Author: Erwin, Sandra I.
• Position: Brief Article

The workforce crisis that the Defense Department predicts it will confront in 2007--as a result of a tidal wave of retirements--surely will hit the defense industry too. This has been widely acknowledged by both government and industry leaders, but it remains to be seen how successful they will be in tackling the problem.

A Pentagon task force called "Acquisition 2005" plans to spend the next several years trying to revamp outdated regulations and trying to convince Congress that some laws need to be changed in order to attract new workers into the Defense Department's acquisition career field (related story p. 16).

Defense contractors, which typically recruit many senior managers and scientists from the government, have endorsed the findings of the task force. But these companies also realize that they need to take action soon, to preempt a shortage of skilled workers.

The much-publicized Defense Science Board report on the health of the industrial base summarized the problem: "Key personnel are leaving or retiring, and recruitment and retention of high quality technical and management people is very difficult."

The reality is that defense companies are competing for both human and financial resources with "new economy" companies, despite the turmoil experienced in recent months by the dot-com industries. "The technical and management skills critical to defense also are key for new economy companies, which was not true in the past," said the Defense Science Board report.

Some sobering statistics emerged from the study, which began in the fall of 1999, and was released publicly in November 2000.

* According to Booz, Allen & Hamilton, one-third of the technically oriented workforce is within five years of retirement eligibility.

* The next generation of senior managers (age 45-55) will come from a shrinking pool of talent (currently 35-45 years old).

* The share of top engineering school graduates going to the defense industry is down sharply.

* Technical talent in the 30s and 40s age group is not "locked in" by retirement programs.

* The best people within defense companies often migrate to non-defense work.

Competitive Advantage

The bottom line for industry executives is that skilled workers can give a company a competitive advantage not only to attract customers but also investors. "We consider the workforce the most important thing we have," said Frank Marchilena, president of Raytheon Command, Control, Communications and Information...