Bill Kerr: The apprenticeship has been getting an overhaul in the United States. Federal and State programs are updating the model to adjust workplace and demographic realities. Jennifer Carlson has been playing a leading role in one public private initiative in the technology sector. Her ideas about training and hiring tech workers were shaped by her experience directing corporate IT projects. Now, as head of Washington Technology Industry Associations Non-Profit Apprenti Program, she's addressing a pair of related issues. On one hand, employers complain of a shortage of qualified workers, especially in middle skills positions. On the other hand, there's a widespread view that the tech workforce lacks diversity.

Welcome to the Managing the Future of Work Podcast from Harvard Business School. I'm your host, Bill Kerr. Jennifer joins us today to talk about how the Apprenti program works across business types and geographies, what are the incentives and cost to employers, how are Apprenti graduates fairing, and what policies can make this a template for success? Welcome, Jennifer.

Jennifer Carlson: Thanks, Bill.

Kerr: Jennifer, tell us a little bit about yourself. How did you come to lead a tech apprenticeship program?

Carlson: I come from large Fortune 100 insurance companies primarily, and in my time at AIG I led a tech migration platform program from the business side. And in doing that, there were a number of things that factored into it, from having to outsource a lot of the work we were doing because we just couldn't find adequate resources to do that, combined with a very clear loss in diversity. Working in Seattle you're in a tech mecca, and to learn the tech sector as I was leaving insurance I thought it best to go to the trade association for tech to do that. That kind of led me into a position of having some direct interactions with large companies, but also having a front row seat to seeing what the pain points were in the sector, and workforce development was a primary one.

Kerr: The specific employer was WTIA, or the Washington Technology Industry Association, and maybe position for us the broad range of activities that WTIA does.

Carlson: Yeah, as the trade association for the State of Washington, and they're a 501c6 governed by the four corners of the state, they focus on everything from policy work for 10,000 tech companies in the state with a thousand of them as active members on that front, to providing health care, collectively bargain for small and mid-size companies to be able to be competitive with the big tech employers. Workforce was sort of a natural outflow of that.

Kerr: Okay, so tell us a bit about the Apprenti program, the niche that it's targeting. How did this come about?

Carlson: So, Apprenti is kind of derived from conversations from big employers like Microsoft and Amazon. It was a combination of pain points from the University of Washington saying that their graduates in STEM fields weren't getting placed right out of college, companies putting this one to three year of experience preference on entry level jobs because they didn't want to be the first employer or have to do the onboarding training to get somebody up to speed on the job, and looking at the gap on the number of jobs that were still vacant in the state and what the economic impact is to the state for that gap, the loss of productivity. It just so happens that it was at the time that the US Department of Labor was funding grants for non-traditional sectors to get into apprenticeship.

Kerr: Okay. You mentioned earlier the diversity angle to your work. Tell us a little bit about that aspect of Apprenti.

Carlson: Yeah, so there are two impacts here. The first is that we have a massive tech shortage in the country. Washington is just a microcosm of that. The second is that there's a diversity challenge. Companies have gotten more sensitive around that, and trying to recruit have found that they're struggling to either onboard diversity or retain the diversity that they're bringing on due to some internal alienations that they're just not set up to manage to.

Kerr: So Jennifer, tell us a little bit about the specific numbers of how many apprentices that have been trained through Apprenti, and also if there's three or four very common occupations or job titles that are being met.

Carlson: Sure, so we're three years in and about 730, and moving very rapidly and forecasting double that just in the next year. There are 14 filed and approved occupations with the US Department of Labor and across a number of states. The top three, software development, cloud administration, and data center technician. Those three are I think 70% of the total placements.

Kerr: And if we thought about the diversity initiatives and the minority candidates, the veterans and women and so forth, can you give us numbers that are around those categories?

Carlson: Sure. So, women are 35% of the program if I exclude one partner, because that one partner is focused on veterans only, and women are only 10% of the Armed Forces. On the diversity side, people of color are 54%, which is pretty strong considering some of the markets that we're in, particularly in the northwest, and we're very specific in how we define that. It's African American, Hispanic, Native American, Pacific Islander, and people who've identified as mixed race. So, basically to the exclusion of Asian and Indian, which are not under-represented in our sector. And, veterans are 59%. So, if you blend the three, since you have overlapping groups, we're at about 86% diversity in our placements. Embedded in that, we have 10% that are persons with disabilities and seek some kind of accommodation.

Kerr: Okay, if we thought about the overall revenue sources or the support that Apprenti receives from Federal Government, State Governments, also the employers, what’s the support breakdown?

Carlson: I've built this to have a long term sustainability beyond grants. We have the original grant through the Department of Labor to the State of Washington that set up the pilot program, and then we have a contract from the US Department of Labor that ends in 2021 that is a million and a half a year, seven and a half million overall for five years. That contract is what's pushing the model out across the country, and funds us to go consult with companies on how to adopt apprenticeship. And then we have a number of private funders, with organizations like JP Morgan Chase, The Lumina Foundation.

But beyond that, companies paying us that fee of $2,500 per, and then with our markets, some of those markets are managed by a third-party organization that works like the WTIA. We have other fee income coming in that will ultimately offset those costs and be able to free us up from having to work for a grant.

Kerr: Okay, so if you think about the employers Microsoft and Amazon, they of course have such a large demand that they can probably think in terms of it's in our best interest to develop the Washington State technical workforce. Is that usually the sales pitch, that it has to be so broad, or is the sales pitch when you go into a company about specific returns for you?

Carlson: So, it's a mix of the two. Most companies are still looking at this from a return on Investment perspective. So, if we look at ROI in terms of cost to onboard a new talent at an entry level position that we've paid top dollar to recruit in the marketplace or even used a recruiter to go and recruit to the company versus investing in somebody organically and raising them up, the net is that it's less expensive to create the talent than it is to attract the talent.

Kerr: Okay.

Carlson: So, we can make a pretty clear business case based on the fact that registered apprenticeship delivers a credential that's portable. You can pay 40% less than the going wage, and it's a protected wage class in the US Department of Labor system. And that the cost of classroom training to get somebody up to speed is less costly than a recruiter, the time to recruit on a college campus, the onboarding process is almost identical.

Kerr: Okay. Give us a set of numbers or kind of rough estimates for if an employer is bringing in one of your typical tech apprentices, how much are they paying, what's kind of the rate of outlays, what can they hope to have at the end of the process?

Carlson: So, the typical cost structure, software development is our number one track, it's a little more than a third of our placements, and if you're looking at $75,000 entrée point for a college grad who's fully qualified walking in the door, and this a first job or a year in, that's about a $75,000. For an apprenticeship, that means you would pay them about $45,000, and you would cover the classroom cost of training, which can range to around $15,000 but in many cases we're able to find subsidies from the state and federal governments that will offset a percentage of that cost, so you can net that down about 50%. Then the cost to Apprenti is a one-time $2,500 fee, and we manage the entire process from recruitment, to compliance and government auditing, to identifying training partners, to securing the subsidies and so on.

Kerr: Yeah. And who's the typical apprentice that's coming through your program? What's their age, their demographic background and so forth?

Carlson: The median age is 33, 48% have a college degree. We don't know that up front because we deliberately don't ask that question. The point of apprenticeship is about converting talent, so this is about competency not pedigree. We're interested in whether or not you can do the work, and so you're looking at life changers or career transitioners. At 33, you're looking at people who have got some maturity, have been in the workforce, and are looking for a better opportunity. Many of the college-goers have been stuck in service industry jobs even though they had a degree that could have led them to something else, and could not find a way in. So, they're generally under-employed, 25% unemployed. And then we can talk demographics in a second, but those folks are coming into us with a median income of $29-$30,000, and they're moving to a $50,000 income in apprenticeship and a retained wage over $80,000 $85,000.

Kerr: Okay, so it's a pretty good opportunity. Have you sort of fine-tuned at this point the screening process and the ways of assessing these skills and traits and kind of internal drive, or is it still kind of a work in progress?

Carlson: So, part of what we're doing is the technical screening upfront, and it's not white boarding, it's, "Do you have baseline math, logic and critical thinking, and emotional intelligence skills?" We assess those through an online system that we ended up having to have built with industry feedback, and then we have an interpersonal screening process where we're interviewing those candidates before the company gets the final interview process. And they're soft-skills interviewing them, not white boarding them. So they're making a decision on whether or not this person has got what it takes, kind of a grit test, and will be able to work, gel well with the team that they're going to work with. And then, they're chosen to sponsor that person into apprenticeship.

Kerr: Okay. When you think about a technical apprentice, this could end up in a big range of organizations. You could have the Microsofts and the Amazons that you started with. You could also think of a leading bank as being someone that is trying to compete in some spaces with these tech enabled firms and tech giants. You can go all the way over and have someone like Kroger who employs this. So, let's think about each of these sort of use cases, and is one easier to sell to? Has one been more receptive of the model? Does it work out better? Maybe just start with Kroger. Is that an organization that typically has warmed up to the apprenticeship approach?

Carlson: If I compare Kroger to JP Morgan Chase and Microsoft, sort of a small, medium, large in terms of consuming tech, Kroger was quick to adopt because they already understand the apprenticeship model. They use it in other areas of their business. Their packaged goods company, their distribution, there's manufacturing, their plants, there’s actual delivery of product, so this was something that we're already very comfortable with.

Kerr: Okay. And it was one also that they were sort of trying to develop new ways of finding talent in this area or screening talent. I'd imagine there's such returns to scale at Microsoft for going into these communities, that Kroger might be looking for it on a less common or frequent basis.

Carlson: Sure. In a Microsoft we're doing cohorts of 20 repetitively throughout the year, and in a Kroger we might be sending five for the year total into a couple of different positions. But for them, even though they need fewer tech people, it's still the process that made sense to them, and we can blend cohorts with other companies like them and pull them together. The next step being a JP Morgan Chase. Microsoft or an Amazon have no problem getting applicants, versus a JP Morgan Chase where their pay is equitable but it's financial services and therefore again, not as appealing, so they're competing with those big companies to get the talent and they're struggling. So this is an opportunity for them to help cultivate their own talent, bring them in and build them the way they want. If we use other industries as benchmarks, the expectation is that these folks will be with those companies much longer term than the average employee because they've made an investment and there's an extra loyalty factor there.

Kerr: Yeah, it's something we've talked about on this podcast, this sort of talent supply chain idea, especially if you're not the household name employer in that space. Being able to pull in an underappreciated candidate, and then you've got longer term loyalty and benefits.

Carlson: You've got Microsoft, for all intents and purposes our very first partner at the table. They looked at this as an opportunity to both cultivate underdeveloped talent and attract a more diverse population than they get naturally on their own. So, what we're doing is trying to build women, veterans and underrepresented minorities into these large cohorts that they take.

Kerr: If you thought about the Kroger similarity to previous apprenticeship programs, does it help in the Microsoft case that they hire so many tech workers coming in, or is there some differences when apprenticeships are coming in compared to full time hires that are coming straight off college campuses or the like?

Carlson: So, a Kroger that already understands the process of apprenticeship is matching a person to a mentor who is going to be directly responsible for that persons work product for the better part of that year. Microsoft, coming to this fresh and not having that legacy of experience, is having to really figure out how do we operationalize it? How scalable can this be for us? What kind of work does it take for us internally to be able to adopt something like this across the enterprise?

Kerr: What makes this model sort of difficult to implement or what should be on the employer's mind as they're starting down this path?

Carlson: The primary ones we run up against in larger companies are things like we're on banded pay system. The 60% doesn't necessarily fit into that. We have HR hiring challenges from a potentially legal perspective if we've got contractors who have to be here for two years and this is a one year program. It doesn't fit naturally into that system, and maybe we're not ready to take them on as direct hires. How do we adapt for that? Another one is do we have H-1B visas in the same head count?

Kerr: H-1B visas for being temporary skilled workers that are coming in and their index on the salary level.

Carlson: Correct, and they're coming in from offshore, and it comes with a whole set of legal requirements about the skillset that they have and at the level that they're at, and you could be jeopardizing your access to visas if you're taking an apprentice in without knowing that that person has equitable degree skills. So, there are a number of ways that we can help companies work through some of those things, but-

Kerr: And those don't sound like often of the company's making. That's more of the company is interfacing against legal environments and regulations that we're not set up to perhaps handle the apprenticeship model.

Carlson: That's correct. Or just coming into the tech sector, our economy, if you will, within tech wasn't designed around the idea of creating our own talent, whereas many other sectors, that was built in.

Kerr: It's important in the broader kind of societal context, because we often of course rely on skilled immigration to come in and expand the tech sector, and frequently the side conversation or the other half of this is to say we should be investing in building up our domestic workforce for this. You've got now the model to make that work, but we're seeing the frictions that emerge.

Carlson: In some cases, companies have got these third party vendors that they'll run their contract headcount through. What they're having to reconcile is do you want to do that twice, where we're sending it to them and they're sending them back through to you. It's an added cost to the system, and one that doesn't necessarily have to be there.

In some cases you have companies who have stock, and they don't want to give equity in the company, or you've got companies who are willing to introduce a band, but in order to do that it takes a year. And so, we're going back up and we'll provide the service during the interim of doing payroll and benefits on the company's behalf in order to get them over that hurdle and help them work towards that resolution.

Kerr: Is the goal of this work to be one where if I walked into Microsoft or if I walked into the IT department of Kroger, degrees don't matter, the education rank doesn't matter?

Carlson: Well, the long term strategy is that we get to a point where companies can comfortably post positions as eligible for college degree or completion of registered apprenticeship. Those who have a degree are not necessarily pointed to do the work in our sector anyway. This is about re-skilling, so why should that be limited to somebody who doesn't have the appropriate training from a degree program only?

There are more and more people opting out of the cost of an education these days, and frankly, we have a fairly large segment of the population that are not set up to go to college. It wasn't part of the conversation at home, it wasn't part of the socioeconomic background, and as a result they're being held back by not being given an on-ramp into this sector. The companies that we work with by and large agree that these middle skills jobs are equally as expensive to recruit for, but we've artificially put a four year college degree requirement on all of them. And they agree, these are positions that could be trained through accelerated classroom learning with a credential attached that comes from the industry for the software or the platform that it's on, and that that's easily as transferable as an associate’s degree or something of that ilk.

Kerr: It's very important what you just described, which is the industry has set up the certification system, so you know what you're training towards.

Carlson: All the training that we offer, with the exception of software development, are industry driven certifications. It could be AWS for Amazon Web Services. It could be a Microsoft cert for an MCSA. And equally, the parameters for what constitutes a registered apprenticeship are decided and informed by the sector. So when a person goes in for that particular occupation, they are all equitably across state lines and industry types meeting the same performance criteria. The US Department of Labor is conferring that diploma if you will, or that degree of attainment for apprenticeship completion, on the same standard across the country that the industry set for itself.

Kerr: Have you been seeing differences in sort of the promotion rates out of middle skills roles into senior management and so forth with the apprenticeship model versus otherwise?

Carlson: We've still got about 18 months to go before we can get into a full longitudinal study at five years. Early apprentices that came into the program have, if you will, stayed with it and have been promoted through the ranks. They're making a commitment publicly in many cases to the fact that they're willing to stay with the company or in this position longer before moving on because the company made that investment in them.

Kerr: Great. If we go back to kind of the goal of being sort of blind to degree in these middle skill positions, where are we in this transition process?

Carlson: Moving away from the need for the four year college degree more and more. A Kroger is more comfortable than a Microsoft, but there are some in tech, high tech specifically, that still primarily defer to the college degree as a requirement, and are very interested in which school that it came from even though they'll say publicly that they're not interested in that.

But their interview process hasn't changed one bit for those rolls. So, the assumption is that you're coming in still with the same academic ability as the person who went through a higher level set of math training at a four year level. So that's not a model that's set up to actually train folks, they're just willing to look past the degree if you have the capacity to do exactly the same work as the degreed person. Pretty consistently the companies we're working with have said it's about 40% of the jobs that have to have the college degree or higher. The companies admitted that their biggest pain point are those middle skill positions, which is where we started, software development to cloud, et cetera. In defining those roles, they've made it really clear to themselves that that doesn't really require the college degree and that there are certifications out there they already consume in addition to the degree, which is why the English Lit major that applied for the job naturally and had a cert got through the screening funnel. In this case, what if I bring you somebody who has the capacity to get one of those things and doesn't have the other, why does it matter?

Kerr: Yeah. If we think about the broader ecosystem beyond just the companies, you have unions, you have universities, community colleges and so forth, any points of resistance to the Apprenti model?

Carlson: I think that there's definitely territorial disputes. There's a curiosity in some areas of the country more than others around is apprenticeship automatically a union, and the answer is no. Apprenticeship is a training model that's hands on and classroom blended together, and it has some regulatory oversight in order to generate consistency. When you introduce the other training providers, we as the intermediary are agnostic to who does the training, and if the company has a preference we'll work with the college or the community college.

In many cases, both the community college and a code academy think they're the equivalent of us, not the other way around, and they think that they can deliver on this same promise of consistency, but there's no credential in the code academies portion of this. It doesn't move fast enough in the community college to college system, or they can't scale. There isn't exactly a lot of capacity sitting out there unused when it comes to STEM degrees, particularly for computer science. So, even if they wanted to grow and to meet the output, they couldn't get there. So, really this is an opportunity to expand beyond that, and we can usually work with all of the players at the table.

Kerr: But it sounds like you often have to also clear up some confusion as to what's going on. People have tried past programs, maybe they didn't work out so well, and so they're like, "What's different about this one?", and so forth.

Carlson: Yeah. The key difference for us is that it's the employer comes first. The employer has to put up the job and give us the head count. It doesn't work the other way around. We don't put 20 people into training, turn them loose and tell them to go get interviews and good luck, and five of them get jobs.

Kerr: You start with the demand, and then work your way backwards from there.

Carlson: That's right, exactly.

Kerr: One of the groups that sometimes lobbies against high skill migration, which is another way of growing the tech force are the tech workers themselves or some of their lobbying bodies, because they suggest that this could lower the wages of the full time workers in the sector. Do they lobby similarly or worry about apprenticeship programs being another path towards increasing the supply of workers in the space, therefore my particular job is going to have a lower wage?

Carlson: Give it 10 to 20 years, you could see some, I wouldn't go so far as to say stagnation, but you probably could see some leveling off of the salaries that right now are seeing significant double-digit jumps year over year because of that poaching mentality we're living with. But when we posted over three million tech jobs last year and we only graduate 65,000 STEM degrees a year in computer science, there's a significant delta there that isn't going to be overtaken anytime soon by apprenticeship.

Kerr: Yeah, and the rate of which we increase the immigration side is also not going to come anywhere close to that level of demand.

Carlson: That's right. And those numbers are almost identical. It's 65,000 for computer science degrees. We have 85,000 visas, but 60,000 are consumed by us.

Kerr: Yeah, yeah. I think you're now in 15 states?

Carlson: 13 states, 15 cities.

Kerr: 13 states, 15 cities. Talk to us about that expansion. That's pretty rapid for your kind of stage of development, the number of years you've been in operation. How did you get to so many states so fast?

Carlson: Well, so it was two factors really. One is that the US Department of Labor put out a contract for six intermediaries to be founded, one in each sector, and it would be a sole contract, IT being one of those sectors. So we pursued it, and we won. In doing that, it created a need for a tandem roll out, not just the pilot in Washington, but an expansion into other states.

The second piece was Amazon said “so anybody we're going to partner with on this front has to be able to meet our need and deliver it with fidelity in each of the markets we wanted, and for all the job types that we want it in.” And so, we're in eight of those markets today because it's Amazon that drove us to be there.

Kerr: Because Amazon wanted you there.

Carlson: That's right. And then, once we have that conversation with a JP Morgan Chase and a Microsoft and other companies that have multiple markets with tech needs, they're saying the same thing. There's inconsistency in our own model across the country from a Department of Labor perspective. 25 states are under the purview of the US Department of Labor, 25 states are independent, and you have to deal with the state differently. Even though the feds supersede all 50 states, if you're receiving any support, subsidies, or anything from a state level, we have to go deal with the State Labor Department. So, part of our role is to manage that on their behalf, and we want to be as efficient as possible, too.

Kerr: It's a very powerful consulting opportunity service that you're providing to them, and one can see the value that comes from that. Other pathways to growth -- if someone has a big tech workforce in Toronto, which a number of our US companies are starting, would you go there as well?

Carlson: So, yes we would consider going there. We've had conversations with three provinces in Canada, because they have a very standardized apprenticeship model there, but tech is not among them and they're looking at how they can do it. We've also looked at a couple of other countries in Japan and Australia on behalf of hiring companies in the United States who are also looking at how do we standardize this in other locations.

Kerr: We think about all the technology that allows virtual work, and one could make the argument that if you could have virtual apprenticeships, surely IT should be a place where that becomes more possible. Maybe not possible in some of the trades, but in this space, is that the future, so that you could be across the entire country offering these types of services for people?

Carlson: If you're an apprentice, being in an office is a critical piece of that, but not having your mentor be in your office is not as big of a barrier. It's just not something that the regulatory environment has caught up to, and we've been working with the State of Washington on a way to try to work through that.

Kerr: What's kind of the biggest things you could see from your vantage point right now that would make the workforce opportunities, particularly for middle skilled workers in America, much better?

Carlson: One, setting up a federal fund with as limited the strings attached as we can do that states can tap into to subsidize the training costs. It would help companies, I think, get over some of the financial barriers to paying for the classroom training when they're still an unknown quantity coming in the door. And we've proposed to Congress a split three ways of the feds paying for a third, the states paying for a third, and the companies paying for a third. Getting that on a consistent basis for the long term would really stimulate adoption quickly. That's one. Two, you're dealing with the visa issue, as we talked about before.

Kerr: H1b visa.

Carlson: Getting companies comfortable with the idea that if you can go like for like, adoption of an apprentice for an adoption of a visa. It doesn't have to be one-to-one ratio, but just something that gets them spurred into training domestic talent to fill the same void.

Kerr: And many tech CEOs go to Congress and are talking about their need for skilled visas, and then also say we should be investing in the American workforce and helping that. So, this is just asking them to sign up for a program that would tie those two things formally together.

Carlson: Companies need some protections. That if they're taking a visa'd person for a software development job for example, that they're not dis-incentivized for taking an apprentice at the cost of a visa.

Kerr: Any final words that you would say for an employer that's thinking about engaging in an apprenticeship program? Perhaps with Apprenti, but also more broadly towards this type of middle skills work?

Carlson: Yeah. One thing that we are doing is working with a few companies that have built their own apprenticeships without the registration process, so there's not a conferred certification at the end, but they have a longer training program in-house beyond an internship, and they're looking for ways to scale those programs and are looking for some subject matter expertise. We're happy to be that subject matter expertise. The intent being that you're cultivating that talent with an intent to keep them on. So, if there's anything we can do to help companies start thinking what that cultural shift looks like and what kind of leadership it takes at the top to direct that internally and get that to scale and adopt, we'd love to have that conversation.

Kerr: Jennifer, thank you. The Apprenti Program sounds like an emerging and very strong force for the development of the tech workforce going forward, and also something that I think we can learn from for a lot of different sectors, so we appreciate you joining us today.

Carlson: Thank you.<

Kerr: Thank you for listening to this episode of the Managing the Future of Work podcast. To find out more about our project on the future of work, visit our website at hbs.edu/managing-the-future-of-work.