Prioritizing the Workforce Is Critical to Utility Transformation

Investments in technology, infrastructure, and service can only take a utility so far. Without organizational agility, employee expertise, innovation, and creativity, true and sustainable transformation is improbable.

As the power and utilities (P&U) sector moves toward a decarbonized, digitized, and decentralized future, companies are battling for the talent they need to unlock business transformation and create collaborative cultures that can thrive in a more complex, competitive environment. This battle for talent is a significant challenge.

The path forward for utilities is being shaped by many factors without a clear blueprint for success. Societal changes related to the future of work, including a generational shift in the workforce and the impact of digitization and automation on jobs, create additional roadblocks. The rise in environmental, social, and governance (ESG) investing, and new Securities and Exchange Commission requirements around human capital disclosure, bring new responsibilities and the need for enhanced transparency.

As the industry strives to meet the challenges presented by today’s changing marketplace, human capital management and culture sit at the forefront of corporate governance issues and the keys to delivering long-term value for all stakeholders.

New Market Realities Require New Skills

The need for transformation across the P&U sector is very real. Four major market trends—each one transformative on its own—are coming together to compel utilities to adapt quickly. Changing consumer expectations, emerging technologies, policy and regulatory changes—especially the Biden administration’s goal to modernize the electric grid and produce 100% carbon-free electricity by 2035—and new market entrants are all forcing utilities to strive for transformation. To build a skilled workforce that can thrive in a new energy world (Figure 1), utilities must balance their focus on an evolving operational model with equal attention on employee strategy.

1. Emerging roles across the power and utilities (P&U) value chain. Courtesy: Ernst & Young LLP (EY)

The recent Ernst & Young LLP (EY) P&U Digital Transformation and the Workforce report—a survey of 159 leading P&U executives—found that 93% of respondents plan to adapt their companies to meet changing consumer expectations for a cleaner economy over the next several years. And 91% are changing their mix of energy sources. In addition, the evolution of digital technology is creating pressure to modernize. The survey found:

■ 94% of respondents report their companies need to invest in technology and the workforce to support their organization right now.

■ 91% of respondents’ companies are planning to invest at least a moderate amount in digital technologies over the next several years, with 45% investing a great deal.

The COVID-19 pandemic has not slowed the need to adapt. The EY survey found that the pandemic actually accelerated digital implementation in 45% of utility companies—nearly three times the number reporting that the pandemic delayed implementation. These findings demonstrate that P&U leaders recognize the imperative to move to a new, transformative operating model—one that is environmentally focused, flexible and responsive, consumer-oriented, and technology-driven. Customers are no longer just homeowners who need service; they are anyone or anything that wants to connect to the system. This evolution requires utilities to leverage emerging technologies to enhance their integrated planning, asset management, system operations, pricing and solutions, and customer management.

Utility executives also understand that technology requires the right people to make it work. For example, 89% report that having too few workers with the right skills is a challenge to digital adoption, and 85% said that the ability to reskill (Figure 2) will determine their success over the next three years. Yet, just 57% agreed that their organization has a robust plan to reskill in that same period. This situation indicates that without substantial changes and reprioritization of the workforce, P&U companies will stand to lose value and open the door to market challengers.

2. This graphic shows the proportion of the workforce needing to be reskilled based on findings from the EY P&U Digital Transformation and the Workforce Survey. Courtesy: EY

Attracting Talent Is More Difficult Than Ever

In a world where digitally savvy employees have a broad range of opportunities, attracting, hiring, and retaining a skilled workforce is challenging. Compared to the staid world of utilities, Big Tech and other industries often offer what appears to be a more compelling option—especially to younger workers.

As utilities transition from traditional grid service providers to market-oriented “fit-for-purpose” distribution systems, they need new skills and capabilities across the entire value chain. Process automation specialists, data analysts, artificial intelligence (AI) and machine learning specialists, and software developers are just a few of the new roles in high demand and short supply. Even existing jobs require almost constant reskilling to adapt to changes in software, technology, and processes.

This skills gap has major implications for technology rollouts. As utilities rely more on digital technologies, the amount and scope of data has surged, and so has its importance. But turning data into insights requires critical data analytics skills that utilities often lack, hindering their ability to maximize the investment return and improve customer service delivery.

In the past, key jobs within the sector were industry-specific, and utilities competed mostly against each other for talent. With the rapid adoption of new technologies and the need for a more data-focused approach to service, utilities are competing against a broad range of industries for a limited pool of talent. In fact, a study found that 60% of U.S. companies report difficulties filling tech skill positions, even after 12 weeks of the position being open. Complicating this issue is the fact that the P&U sector in the U.S. is expected to need more than 100,000 new workers—many of them requiring digital skills—by 2030.

Five Changes Utilities Must Make

As the industry has struggled to attract new employees, the workforce has continued to age. According to the U.S. Bureau of Labor Statistics, almost half of sector employees are age 45 and older and 26% are 55+, compared to the 24% who are 25–34. Utilities also face diversity issues, with an industry workforce that is about 70% white and male, according to the U.S. Energy and Employment Report.

The workers available to fill new and existing positions within the sector will likely have significantly different expectations than those before them. Attracting those valuable employees will require a substantial pivot for utilities. Five critical changes that utilities need to make to be successful in hiring and retention in the years ahead follow.

Promote the Opportunity. Historically, utilities positioned themselves as stable and reliable because that’s what consumers and investors valued. But Millennial and Generation Z workers—those most likely to have digital skills—see utilities as old-fashioned and carbon-intensive. Utilities must do a better job of communicating the unique technological challenges and environmental benefits that a modern grid and distributed energy present—challenges that require smart, digitally savvy employees to solve. Helping potential employees understand how they can make a difference in the industry will make utility jobs more attractive.

Change the Culture. Employees are seeking inclusive companies that offer flexibility and are less tied to location, have a more open approach to collaboration, and embrace technologies such as automation to make work easier. They want their employer to have a strong environmental agenda and they prefer organizations with few layers of management.

To recruit and retain these employees, utilities need an employee-centric culture. Programs and initiatives that enhance employee satisfaction, improve employee mental health, offer work-life balance, teach new skills, elevate employee responsibility, and increase outreach to underrepresented groups are vital.

Inclusion requires a culture change at many organizations, too. Subtle or unspoken requirements that employees adapt to a dominant behavioral culture can sideline the benefits of inclusiveness. Embracing differences across the enterprise requires both a concerted organizational effort as well as a high level of self-awareness from the C-suite on down. To help build this culture, leaders should frequently ask themselves and their teams: “Is this a preference, tradition, or requirement?”

Cast a Wider Net in Recruiting. Employees today want a workplace where leadership embraces diversity and teamwork. Most companies today recognize the value of a diverse workforce, but often don’t change their approach to recruiting and hiring. Broadening the candidate pool requires companies to rethink their employment processes from the ground up.

Here’s an experiment. If your company found an ideal candidate for a much-needed technology job, but that individual was self-taught and had no college degree, would you make an offer or would your human resources (HR) team pass because the candidate didn’t fit existing guidelines? Would your HR function even be able to find this candidate in the first place?

True diversity encompasses more than gender and race. Hiring people from different backgrounds and with different life experiences is the key to maximizing creative disruption and enhanced problem-solving. For example, many companies find that implementing a neurodiversity program—hiring employees on the autism spectrum, and giving them the training and support they need—can lead to increased innovation, especially around highly technical processes such as AI, cybersecurity, and process automation.

Emphasize Career Development. Employees today don’t expect lifetime employment, but they do expect their employer to provide training and opportunities to develop their skills and keep them hirable. That doesn’t mean constant promotions are necessary—development today can be fluid and job changes can be horizontal. Challenging employees through new experiences or projects helps them feel valued and improves their desire to advocate for your organization.

Eliminate Silos. The systemic cultural change that utilities need today requires an overarching enterprise-wide strategy supported by a close working relationship across the executive team—specifically, among the chief HR officer, chief information officer, and chief financial officer. Studies show that close collaboration among these leaders results in higher earnings growth and improved human capital metrics, including significant improvements in workforce productivity and employee engagement. When these functions work closely together, business challenges are addressed from the three critical perspectives of workforce and technology needs as well as budgeting/funding capabilities.

Don’t ‘Do’ Digital; Be Digital

To execute an employee-centric approach throughout the business transformation, utility leadership must continually ask the right questions to make sure they are optimizing and building workforce skills and culture to improve performance and create long-term value for all stakeholders. In short, it’s not enough for P&U companies to “do” digital—simply implementing digital technology. Rather, utilities must implement a workforce strategy that enables them to “be” digital—creating and nurturing a culture that enables digital technology and human ingenuity to flourish side-by-side, and complement and enhance each other’s growth. As utilities implement new technologies and processes to meet consumer needs and decarbonization demands, focusing on workforce and culture issues can make a true transformation possible.

—Cyntressa Dickey is a principal at Ernst & Young LLP and serves as the EY Global and Americas Energy People Advisory Services Leader. Ryan Levine is a principal at Ernst & Young LLP and serves as the EY U.S.-East Region Energy People Advisory Services Leader. The views expressed are those of the authors and do not necessarily reflect the views of Ernst & Young LLP or any other member firm of the global EY organization.