Boomer Retirement, Globalisation, Outsourcing – Where’s Your Intellectual Capital?

Post Series: Barry

Barry Boyle – Skillpad CEO
Originally Published on the NG Pharma website

The two great pressures presently being imposed on top management of most Western industries, including Pharmaceutical, are the loss of intellectual capital and Globalisation.

“…the pending retirement of a disgruntled R&D lab manager for a vaccine manufacturing company had executives very worried because he would take so much knowledge with him.”

This editorial will refer to the very interesting book by David W DeLong, “Lost Knowledge” about the impending crisis if the practical knowledge that baby boomers have acquired over a lifetime of working in an “era of unprecedented technological and scientific advances” is lost to their employers in the next three to five years.

David DeLong’s book examines and proposes ways to counter the difficulties to be expected when the Baby Boom Generation retire and take their critical practical knowledge with them, leaving their employer in a “knowledge deficit” which will cause loss of production, revenue and profit, not to mention a serious reduction in shareholder value.

This is frightening enough in itself, but what if another problem is looming that will cause this “knowledge deficit” to be amplified considerably namely, the phenomenon of Globalisation?

The just-published eye-opening book by Barry C Lynn, “End of the Line”, addresses the present rush to embrace Globalisation with its concomitant need/desire to outsource more and more production to highly specialised firms who, most likely, will be far away from the Western company that developed and owns the technology.

Barry Lynn’s book describes the benefits to firms from Globalisation and Outsourcing. However, the book also elaborates on their downside, namely, the loss of control over the manufacturing function along with loss of the intellectual capital that comes with the Outsourcing inherent in Globalisation. The book is tremendously interesting throughout but one phrase is profoundly alarming, namely; “And this means that all firms end up knowing less and less about their own operations…”.

Consider the earthquake that slammed through Taiwan on September 21, 1999.” Almost all highly specialized semiconductor chips, used by manufacturers from automobiles to medical devices, around the world were produced by only 2 firms in Taiwan.

Although the 2 plants only suffered slight damage, services, such as electricity, were temporarily knocked out and the plants could not operate for a week. The shock wave hit America within days. The shock was that most manufacturers of products, for which these semiconductor chips were essential, did not know that the source of this critical component was limited to two plants in one industrial park on one island in the North Pacific – they had gone global and had outsourced to others. This situation was the direct result of Globalisation and Outsourcing to the point where end users had no clear idea of the associated dangers.

This editorial is not a condemnation of these current phenomena but is intended to bring industry management’s attention to the dangers and urge firms going global and outsourcing to take steps to mitigate them.

The two books mentioned above provide full descriptions of the dangers and offer solutions. This editorial will propose one solution to the gravest danger – the loss of intellectual capital. This is a solution that can and should be initiated immediately.
One way to ensure that firms avoid knowing “less and less about their operations” is to capture, protect and control the dissemination of the painstakingly acquired practical knowledge, which is inherent in the operations of all successful manufacturing firms and currently resides in the heads of their senior employees or in unorganised files and/or data bases.

These two pressures should be addressed immediately as a major project with direct leadership from top management. There is absolutely no time to lose. Luckily, there is a modern technology that is the best tool to achieve knowledge capture, transfer and control, namely e-learning. But, more about this later; first, let’s look at a scenario that is most likely taking place in Board rooms right now.

Top management, CEO, Chairman and Board members, and perhaps shareholders, are confronting these two crucial issues in both the near and long term: –

“Lost Knowledge”
Our older employees are baby boomers and they are about to retire en masse but, before they retire, we should do something to retain and transfer to our younger employees the practical knowledge that they possess that has come from years of making our products. If we can’t transfer this knowledge to our younger employees before the baby boomers retire, then we should at the very least, put the knowledge into a form that will allow transfer without the presence of the retiree. Our shareholders will certainly ask if their firm is about to experience a drop in production due to loss of the knowledge that they paid a fortune to develop over the last 30 years. This loss of knowledge could happen on our watch! We must get an initiative under way to address this issue or our firm’s future will be seriously compromised.

The problem above is worrying enough but another pressure is also being placed on us and our Management Team, i.e. to move production to less expensive places, in other words, to embrace Globalisation. There’s huge savings to be had from Globalisation and the fact is that we will have to build a plant in some country like China or will have to find an outsource manufacturer who can do the production for us at the lowest cost. This move is unavoidable – shareholders are pushing for it to increase profits and convert many of our operating costs from fixed to variable. Moreover, some of our competitors are already moving ahead on this.

The Question
So, if we are going global and outsourcing at the same time, can we keep control of the critical manufacturing knowledge that we will have to a) save as baby boomers retire and b) impart to the workers in our China plant or to our outsource company who will most likely also be in China? Not to mention the danger of giving away the “why” with our R & D secrets instead of just the “how” which the employees in the low-cost/outsource manufacturer will need in order to produce our products.

The answer to the above dilemma is to find a way to retain the practical knowledge in a manner that will allow:

  • Capture of the knowledge now while the baby boomer is still in the employ of the firm
  • Future transfer to others when the person who now has the knowledge is gone
  • Ease of knowledge transfer due to being in an engaging format
  • Ease of dissemination anywhere in the world
  • Transfer of only the “how-knowledge” for the manufacturing locations, especially if outsourced
  • Control who gets the “why-knowledge” which is the result of years of costly R & D
  • Localization into any language
  • Easy access for operators, management and others on a 24/7 basis

The above describes the state-of-the-art technology that we now call e-learning, a technology that has completed the initial “dot-com hysteria” phase, has now settled down to a controlled growth, has become a major knowledge-capture and knowledge-transfer technique and is becoming the preferred way most learning will be done in the future.

One area that would obviously benefit from this approach would be the on-the-job knowledge acquired by engineering and maintenance personnel in plants that have built workable systems from the combination of off-the-shelf equipment in production lines where actual experience and maintenance adjustments have resulted in breakthrough successes in industries like biotech.

The pharmaceutical industry has been slower than most others to embrace Globalisation. Also, the Baby Boomer retirement issues are just beginning. So there’s still time for Top Management to take steps to protect their firms’ future by examining all the risks associated with baby boomer retirement and Globalisation. Many strategies will have to be studied and put in place.

However, whatever these strategies are, it is difficult to foresee their successful implementation in the future if your hard-earned practical knowledge that will be needed to ensure your success is lost while you are still figuring out what to do!

Barry Boyle

Since Barry’s arrival in late 2004 he has been consolidating the company’s traditional business of leasing its library of compliance e-Lessons to Pharmaceutical manufacturing companies and, in late 2006, adding a new business based on his background namely, the use of e-learning to improve productivity in industrial manufacturing in 3 crucial areas:
Reduce time to market – new plant construction.
Continuous Productivity Improvement Program – ongoing operations.
Saving “baby boomer” knowledge for future operations.

This new business will show industrial manufacturing companies and their consultants/contractors how to apply e-learning as a tool to do “old” things better namely, Project Management and Plant Operations Maintenance.

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