As the aerospace, defense, and government (ADG) sectors grapple with an unprecedented technical talent shortage, the urgency to cultivate a resilient workforce has never been clearer. In anticipation of an upcoming publication from our People and Organizational Performance Practice on building a resilient workforce, Oliver Wyman Principal Lili Meyer engages with ADG Partners Rachel Jenkins and Tim Garnett to explore the critical implications of this talent crisis. Together, they discuss how ADG organizations can redefine their workforce strategies to not only attract and retain top talent but also adapt to the rapidly evolving technological landscape. With the stakes higher than ever, this conversation highlights the urgent need for innovative approaches to workforce management in the ADG industry.
What makes the technical talent shortage so important in the ADG industry?
Rachel: Demand for software and computer engineers, cybersecurity, and artificial intelligence (AI) talent is outpacing supply across industries, but is especially pronounced in ADG, where highly technical skills have historically been more insulated from competition with commercial employers. This will require ADG firms to redefine and rethink their total rewards programs and employee value proposition to compete not only with commercial technology firms, but also ADG’s own startup culture.
Tim: We are going through a generational transition right now, with the demand for software engineers and emerging technology skillsets dwarfing everything else. When you have an Anduril, or Shield AI, or Palantir who are doing a much better job appealing to the next-generation workforce, this becomes a critical challenge for more traditional ADG companies.
Rachel: And for ADG, it’s not only white-collar jobs seeing this pressure. It spans across the manufacturing industrial base in which for years we have seen accelerating attrition in the tradespeople workforce, exacerbated by the COVID-19 pandemic.
What risks do you see coming as Baby Boomer retirements accelerate?
Tim: Major aerospace and defense (A&D) platforms and systems take years to develop, and go on to have lifespans of 20, 30, even 40 years. As the workforce retires, the institutional knowledge about how to repair, improve, or even just maintain defense equipment and systems goes with it. This is a huge challenge amplified by younger generations being far less likely to stay in the same job. It requires ADG companies to have a much more dynamic development, training, and knowledge transfer approach to get the workforce onboarded quickly — which is incredibly foreign in ADG and will be an uphill battle.
Rachel: Not only that, but the ADG industry is particularly exposed to Gen Z disruptions to the workforce, as companies rely on highly experienced and tenured employees to fill program leadership roles and in many cases, lag other industries in Gen Z hires. It comes back to how ADG organizations will redefine the employee value proposition and keep it agile and responsive to younger generations entering the workforce with a desire for purpose-driven and flexible work.
We are seeing this transition play out in ADG manufacturing as well, not just in technical and professional services. The rapid pace of retirements has reduced the average years of experience in building these very complex platforms and systems. These dynamics raise some fundamental questions for me. Are these organizations equipped to backfill talent at pace with retirements? Does the talent market support backfilling at pace? And do they even want to keep even, or is this an opportunity to rethink workforce and program delivery structure?
How do ADG leaders — and business and workforce models — need to evolve to build a resilient, future-proof workforce?
Rachel: I think a big part of this will be shifting from siloed program staffing to considering and optimizing the workforce at an enterprise level. This impacts how both HR/people organizations and full C-suites think about talent acquisition, learning and development, and retention — allowing for career mobility and knowledge sharing and collaboration.
For the ADG industry, it raises a host of strategic and operational questions that impact broader business operations. For example, for time and materials (T&M) and cost-plus businesses, how do we shift to an enterprise talent strategy while managing direct labor needs on program? Do we have the cost structure to support dedicated time for upskilling? Are our business development and customer-facing teams proactively shaping program structures that enable us to fully leverage our talent pools and move us to these new models? These questions will require active engagement from business, growth, operational, and finance leaders in addition to HR.
Tim: Disruption is definitely in the air. Consider the rise of generative AI, and how that will disrupt the ways companies staff and deliver government programs. Today, the industry tends to see 1:1 growth between revenue and headcount; I expect the spectrum and pace of adoption of generative AI and other technologies will vary by program, but it will happen faster than some people think. For example, in call centers today, we are seeing rapid adoption already transforming the way these services are delivered. But to enable the opportunity, companies need to shape the customer toward outcomes-based and firm-fixed-price contracts that allow for creativity in technology deployment.
As organizations shift workforce strategies, what roadblocks and opportunities do you expect your ADG clients to encounter?
Rachel: Historical practices — notably staffing open billets on five-plus-year programs — will no longer suffice. There is an opportunity to better harness talent across an organization, rather than letting individuals get siloed in programs. While this may require a more generous “bench” policy between programs, there is a way to do this for priority skillsets and/or top talent that will reduce the burden from turnover on talent acquisition. I think we are on the cusp of unlocking a whole new efficiency lever for ADG companies if they can move beyond the program structure.
Tim: The shift in the virtual and digital domain makes transferability of skills higher, which may make this easier than it used to be. In the past, when you had a nuclear engineer working on a submarine, you couldn’t then drop them into a ground vehicle program once the sub work concluded. But now, a greater emphasis on digital skillsets makes a more agile and mobile workforce model in itself.
One of the biggest hurdles I see to longer-term strategic enterprise workforce planning is around the clearance process and having enough cleared staff with the right skillsets. That said, we are seeing creative ways to solve this already, such as segmenting and firewalling pieces of the work that don’t actually require a clearance. The customer plays a role too, and finding ways to shape the customer away from defaulting to clearance requirements will be key.
How might talent acquisition and attracting that top talent differ in the future?
Tim: Our clients will need to rethink where their talent supply is coming from. Everyone has the traditional channels, but the pipeline will need to change and evolve to solve for talent shortage challenges. And tracking back to my generational shift comments, ADG will need to change its messaging. What is the pull for younger talent to join ADG over commercial industries? The sector will need to speak to what matters most to each subsequent generation to build a resilient, future-oriented workforce.
Rachel: It will likely require a greater emphasis on the long-game — trying to get people interested in the ADG sector earlier in their education or career to better compete down the road. This may come in the form of STEM learning camps for high schoolers, apprenticeships with community college students, or college scholarship programs. From the manufacturing perspective, how might meaningful investments and partnerships with trade schools support filling the gap already seen in the defense manufacturing industrial base? Across the board, it reinforces the need to have onboarding programs that support mentorship and knowledge transfer to drive workforce effectiveness.
How can ADG improve talent retention and development, and what challenges might they face?
Rachel: I’ll start with retention. How do you create cross-program opportunities for talent mobility to appeal to the next generation’s focus on fast-paced career development and flexibility? There is also a challenge presented by employees often feeling more connected to their customer’s program or mission than that of the company — resulting in significant attrition if and when programs are lost or end. So, it begs the question, how can we better retain talent from completed programs, particularly for the most critical skillsets that are difficult to acquire?
Tim: With the pace of technology advancements in ADG, the industry will not only need to retain its top talent but must also keep its workforce aligned to the most critical customer challenges with the right skillsets. This shouldn’t be about promoting training and development programs just for the sake of learning, but rather be tied to direct career opportunities, promotions, or direct customer program applications. This is a major opportunity but would require a meaningful shift in how companies think about creating time and managing the economics of dedicated employee upskilling hours.
So, this is a call to action for ADG: The time is now to redesign your workforce models to ensure you can retain your top talent and critical skillsets, present your workforce with meaningful and purposeful training that drives company loyalty and employee satisfaction, and build a resilient workforce for the future.