Virgin on Business: Beware the Brain Drain

The steady drip, drip, drip of job cuts and moves continues apace at Boeings technical and engineering operations in this region. First, it was IT jobs to St. Louis and South Carolina. Then, it was a design engineering center serving airline customers, sent to Southern California. Tomorrow, itll be … well, what have we got left?

Boeing says not to worry. There will still be lots of engineers around here designing the aircraft of tomorrow.

Whether the planes will actually be assembled here is yet another prompt for fretting. What little reassurance the region got from announcements about 737 MAX and 777X production staying local hasnt been enough to counterbalance the unmistakable trend line in which Boeing moves, disperses or outsources design and production work once long assumed to be the exclusive province of Puget Sound.

Its not just the numbers of people involved that makes this issue fret-worthy at last count, Boeing still employed more than 80,000 folks in the state of Washington but the experience and expertise that those employees possess, and which will be lost to the company and the Northwest if the jobs or the people who hold them leave.

Theres a semi-technical term for that know-how: institutional memory. The graybeards of the workforce dont get a lot of respect in contemporary business life, dismissed as they often are as opponents and obstacles to change. Those whose years of tenure can be numbered in the decades are viewed as meeting every disruptive improvement with a chant of weve always done it that way. But its also often the case that the old folks not only remember why its always been done that way, they also were around when the last set of geniuses proposed reinventing the wheel and trying one in the shape of a rectangle.

The loss of institutional memory is an issue at the micro- and macro-economic level. For individual companies, particularly those of some vintage like Boeing, its a looming problem of demographics, as baby boomers head to retirement with what remains of their pensions and with that mental storehouse of valuable knowledge. Actively running off employees well versed in the design and production of airplanes magnifies and intensifies the problem, as Boeing found out painfully in dispersing so much work on the 787.

Entire regional economies can suffer loss of institutional memory, too. Companies with a legacy of success dont just provide employment today. They also serve as a magnet for people to stay and build careers. They provide the seed for a new crop of companies to spring up and attract and retain smart, motivated people who themselves will continue the cycle. Lose those magnets and the jobs that go with them and, eventually, those smart, energetic and motivated people drift away as well, as hundreds of has-been small towns and big cities around the county depressingly attest.

This isnt a new phenomenon. Humorist George Ade once said of his home state, A lot of smart young people have come out of Indiana. The smarter they are, the faster they come out. More recently, its been said of one Appalachian state that it exports two things: Coal and young people.

Interestingly, the flight of human capital isnt an issue Seattle has had to address ever since it made the definitive shift from a natural resources-based economic model to one with a heavy emphasis on industry generally and aircraft in particular. Even when Boeing went through one of its periodic swoons, there was enough else going on the emergence of medical research, devices and treatment, software, retailing management, the internet that the region retained those with institutional memories about how to start and run companies and build things, and also wound up importing talent from all over.

The Puget Sound region might well continue that track record on the macro level even as Boeing on the micro level (an admittedly oversize micro) decides the loss of institutional memory isnt happening or doesnt matter. As long as the region continues to develop and maintain a cluster of companies, entrepreneurs, universities and research centers to keep its warehouse of institutional knowledge full, people will still want to stay and move here.

Which is good because there are few more expensive conversations, to a business or an economy, than those that start with Remind me again why we dont do it that way and are followed by a horrendous crash and the conclusion, Ohhh, thats why.

Regular contributor BILL VIRGIN is the founder and owner of Northwest Newsletter Group, which publishes Washington Manufacturing Alert and Pacific Northwest Rail News.