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The Offshoring of Engineering: Facts, Unknowns, and Potential Implications Workshop Presentations
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The Offshoring of Engineering: Facts, Unknowns, and Potential Implications Implications of Offshoring for Engineering Management and Engineering Education Anne Stevens An initial hypothesis of the study group was that offshoring is a huge risk and a major issue for all of us in engineering in the United States. But, from another point of view, it is not as big a risk as all the hype makes it out to be. Which is it? In terms of engineering, how much is actually being offshored? If we look back at history, we have been offshoring engineering, distribution, marketing, and selling of products all over the world since the early 1900s. Ford Motor Company has been operating in Argentina, Brazil, and Mexico for more than 90 years. General Motors, too, has been participating in business, including offshoring engineering, for just as long. But what are the facts? One problem in understanding the issue is some confusion about both the binning of the data and the accuracy of the data. But what is important is what we do with what we know. What are the implications for engineering management? What are the issues? the opportunities? What should we do as an academy, as leaders in academia and industry and government? What is the role of engineering managers? Does that role have to change? Should engineering managers be spending their time differently? Do they require new skills? If so, what are they? What is our plan to give engineering managers, in their 20s, 30s, 40s, 50s, or 60s, those skills? The first issue is that in some countries, such as India, there is a “hire-ability” measure for one-year engineers, three-year engineers, and 10-year engineers. It was noted that 10-year engineers really wouldn’t be considered for hiring because they would be too hierarchical. I do believe that in some of our industries—such as Ford and General Motors and some others—in some academic areas, and in the government, we do have an issue with hierarchical structure. To be competitive in the new world, we must know what is going on in the global economy. Old hierarchies cost money. They cost the morale of young employees. And they are inefficient in terms of bringing products or services to the marketplace or education to students. What is really important is how we transition these hierarchies into more nimble structures. There are already many nimble structures in existence today. Just look at firms like Google. The second issue is workforce transition and adaptability. A 50-year-old engineer who is in or out of the market today for various reasons needs reentry plans. Another issue is the middle class. Companies like Ford Motor Company and General Motors are displacing tens of thousands of hourly workers, who were the foundation of the middle class in the United States. Their ancestors were farmers who came off the land and into the factory. Companies started paying $5.00 a day, which grew the domestic automotive market. The issue is about transitioning people in the prime of their lives who have amassed much education and experience. How can they—as well as other segments of the population—be mainstreamed back and contribute value to our economy or our educational system? The third issue is allocating the right level of resources to the right areas of R&D. Where, what, when, who, how much? Bob Galvin, a keynote speaker for this workshop and retired Motorola CEO, is still very active and is working to realize important engineering activities. There are Anne Stevens is chairman, president, and CEO of Carpenter Technology.
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The Offshoring of Engineering: Facts, Unknowns, and Potential Implications many more Galvins out there. The question is how we use their brainpower and their energy to address some of these issues. As for engineering management, we have to retool, but not just retool. We must change our attitude in several ways. It is critical that we tap into the skills and inherent creativity and innovation in the millennial generation, the group born between 1977 and 1995, which is going to be bigger than the baby boomer generation. Estimates range from 60 to 74 million. So we must look at the millennial generation. These are the customers of the future, the politicians of the future, the students of today and of the future. Engineering management cannot expect to lead this generation with the same set of skills that were used to lead many of us. The millennial generation will be a huge economic and social force in our world. Their perceptions and attitudes are different from those of previous generations. They are a connected generation. The Net is their primary source of news; the next closest source is radio. Compare that with older generations, which strongly prefer TV. Technology has always been part of their lives. Whereas prior generations see the Net as something to connect to, millennials see the Net as a way to connect to each other and the world. Here are a few personal examples of the millennial generation. First story: I have a granddaughter, Courtney Anne. She’s nine years old, but the story I am going to tell you took place when she was four. Courtney Anne’s other grandfather, my daughter’s father-in-law, has a Ph.D. He is a very, very educated, savvy professional. He is retired now. Courtney Anne was sitting with him at the computer. I don’t know what he was saying, but he was pretty upset. She looked at him and said, “What are you trying to do, Pop-pop?” He told her, and she said—at four years old—“let me show you how.” The second story took place when I was with Ford. A young man sent a letter to Jack Nasser who was then CEO of Ford Motor Company. “Jack, let me tell you something. I’m 13 years old, but I know I need to start thinking about things now. I know for sure in the future that what I want to be is CEO of Ford Motor Company. The thing I don’t know is what I should be studying. What is my field when I go to get a university degree? Where do I start in Ford Motor Company when I come in, knowing that I want your job?” Public Affairs was fascinated with this young gentleman. I got a phone call asking if I would please meet with him when he came into the company, which I did. He came in with his mother. They flew in from California. We set up a very interesting day for this young man. We put him in the design studio with the designers. We took him into the manufacturing facility. The individual engineers who met with him at the end of the day were absolutely shocked, because in the design area, this young man knew more about future design trends from what he had read than many of the designers did sitting at the tubes. When he was taken around the manufacturing plant by a superintendent, he asked more questions about the power train of the trucks than the superintendent could answer. All this information was learned from the Web! These are the kinds of individuals we are going to be dealing with, as customers, employees, and students. They are different, and the rules have changed. The last example: I was privileged to give the commencement speech this year for the engineering students at the University of Michigan. Before my address I had lunch with several of the best and brightest in the class. They had a lot of questions for me, and I had one question for them. My question was what don’t I know about them, what is it that people in my generation don’t understand. These very savvy, brilliant, top-of-the-class engineers all looked at me and said one thing: Facebook. Technology like that can really network in the virtual world, as we offshore engineering. But if we bring these young people into organizations and try to evaluate their worth and their performance by whether they are in at 7:00 in the morning and whether they are in their seats until 7:00 at night—if we use those rules and many other current rules—we are not going to be able, as engineering management, to tap into their creativity and innovation. As leaders in engineering management, we need to increase the appeal of science, engineering, and technology to the millennial generation. Galvin’s road map, with his grandson leading it in terms of defining technology management and areas of engineering and science for the future, is right on and brilliant. And what about those 50-year-olds who have been displaced and the middle-class hourly workers or workers in other fields? Many of our institutions were really responsible for their predicament. In the Depression era people were encouraged to go to school, join a company like AT&T, Bell Telephone, or Ford and GM, and stay there until they retired. Today that model of job security has changed! Many people in the generation that have been displaced basically thought they had signed a parental contract, with employers and with governments. “We are going to take care of you. In exchange for your loyalty, you’ll have a retirement benefit that’s going to be there, health care, and a job for 30 years.” The rules have changed. Generation Xers know it, and the millennials know it. This is not going to be an issue for them. They have their skills, their abilities, their capability, and their networks. We need to figure out how to take these lessons from the Generation Xers and millennials and re-teach 50-year-olds and the middle class and hourly population—how to generate value back. All of us have some responsibility there. Going back to the appeal of science, engineering, and technology, Galvin’s example is one that works. Maybe it’s “hairy, audacious goals,” as put forth by Collins. Maybe it’s higher salaries, as some speakers have said. Maybe it’s figur-
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The Offshoring of Engineering: Facts, Unknowns, and Potential Implications ing out the next version of the space program to reenergize youth, or maybe it’s MacGyver on steroids on the Web. But whatever it is, we know we need to reengage the population to give us the talent we need for the future. In summary, what about offshoring? First of all, it differs from industry to industry. It is a very exciting issue, and, at the end of the day, we should be optimistic. Offshoring for us is an opportunity. But we have to get at the roots of who we are as people living in the United States of America and bring forward what we have always been able to do best. The biggest risk we face is complacency. But, culturally, as a country, we have what it takes to succeed. America was, is, and always will be the lion. America knows how to eat. The gazelles are out there, and we are going to figure out how to feed ourselves. The key to that is some of the things summarized during this conference. Academia, industry, and government all have major roles to play.