Bill Kerr: As outsourcing, new technology, and automation change job requirements, keeping skills up to date is more critical than ever. But for older workers, the challenges posed by retraining can seem insurmountable.

Welcome to the Managing the Future of Work podcast. I’m Harvard Business School Professor Bill Kerr. Today I’m speaking with my colleague Professor Willy Shih, who studied retraining programs across the country, and who argues that old dogs can learn new tricks as long as their unique challenges are addressed. Welcome, Willy.

Willy Shih: Thank you, Bill.

Kerr: Willy, we’re going to talk about retraining today, but I’d like to first begin with a little bit of your personal background and how you came to HBS. Tell us a bit about your career up until now.

Shih: Well, Bill, I spent 28 years in industry before I came to HBS, so I actually had a lot of positions where I oversaw manufacturing operations in all corners of the world. I had factories in the US; I had them in Mexico, in Ireland, in China, in Japan. I’ve even had factories in Indonesia and France. So I’ve had exposure to a lot of different work environments around the world, and it has kind of fed my continuing interest in manufacturing and global competitiveness, and those ways of working and how they differ around the world.

Kerr: And you recently wrote a book about producing prosperity [Producing Prosperity: Why America Needs a Manufacturing Renaissance (Harvard Business Review Press, 2012)] . Tell us a little bit about that.

Shih: That was a book that I wrote with my colleague here at the business school, Gary Pisano. And that was an outgrowth of a piece that we wrote for the Harvard Business Review on restoring American competitiveness. And the focus in both that article and the book were in some of the unexpected—but not very good—consequences of offshoring, when people didn’t consider some of the other implications and consequences of that.

Kerr: Can you give us an example of the unconsidered implications?

Shih: Well, I think the best example was really, when you offshore a lot of things—as the US has done, for example, in electronics manufacturing—you lose a lot of the capabilities in your, we call it, your industrial commons—all the supplier networks, the people who train, the universities who train—all those ancillary parts that are really complementary assets that you need for a business to thrive. So the example we used in the original piece on restoring American competitiveness that really got a lot of attention was why America can’t manufacture a Kindle. I remember when the first Kindle came out—and it’s typical for people with my mindset—I took it apart and I looked inside it.

Kerr: I could just imagine at home tinkering, the screwdriver stuff.

Shih: Oh, no, I have a jailbreak kit that allows me to open all of these devices that were not intended for you to open. So I looked inside the Kindle, and it was really sad, because most of the technologies inside the Kindle were invented in the US. But over a decade and a half of offshoring and outsourcing, up until that point, when you looked at the components—you know, I could recognize these components, and a lot of them were really pioneering components. For example, the Paperwhite display—that was a technology that was invented at MIT and became a startup here in Cambridge. But if you looked at the components, you couldn’t make a single one of those in the US anymore, because we had lost the capabilities in this country to manufacture any of those components.

Kerr: Now, work that had a powerful influence in policy circles in Washington, DC, and elsewhere, Willy, you’ve had a career that, for three decades you ran companies, and you worked with people on their training needs, and then you’ve had sort of your increasing role in policy. Why is retraining so important right now?

Shih: Well, I think we’re seeing a very dynamic economy these days. We’re seeing a lot of new technologies being introduced that really are changing the nature of work. We are seeing the globalization of supply chains so that work is just shifting around with increasing fluidity. And what that means is, we need a workforce that can respond to those changes as jobs change, as the need for specific skills change. What are we going to do with our workforce as old skills become obsolete and new ones become required?

Kerr: We often ask the question in this room and on this podcast, “Is this time different?” Like, is the technology change this time different or not? If you thought about the previous decades that you worked in with retraining your workforce, is there something that’s different about the pace or the requirements today?

Shih: Well, I tend to think of it more as a continuum, but a few things I do see changing is an accelerated pace. And a lot of what is driving that are things like inexpensive computing power, right? So inexpensive computing power allows a lot of functionality that might have previously been done in hardware to migrate into software, and you’re seeing more-sophisticated control systems and production systems, and things like that. What that means is, if you walk into most jobs, on the factory floor and elsewhere, you need more knowledge of digital technology, maybe some software technology, or at least how to work with it. And the changes have really become more dramatic, because computing power and communications capability have become so pervasive. It’s just affecting more and more things.

Kerr: And, as you highlighted, the speed is also increasing.

Shih: Yes, I think the speed is increasing dramatically. We think about Moore’s Law as explaining the increases in computing power, but it’s also how much bandwidth I can send over the air to devices. You know, back in 1997, I worked with Cray Research, because I was with a company—we owned Cray Research and, you know, they manufactured supercomputers at the time. In those days, we used to sell things like the Cray Y-MP—which was an 8-processor supercomputer—for $32 million. We used to love the intelligence agencies, because they were the only ones who would buy 32 of them at a time. So, a $32 million computer that had 8 processors. One of those processors today has roughly the power that you would find in the latest iPhone.

Kerr: Wow.

Shih: Okay, so that’s a supercomputer now in your pocket.

Kerr: It’s a rapid change, and that’s what’s going to take us into the retraining, because a number of the people that you’re looking at had careers that were already well up and running in 1998 when you were having those explorations.

Shih: Yes, and most of the people in my age cohort grew up in a time that we didn’t have this kind of extraordinary impact of computing and communications. We saw the impact, but most of the people in my age cohort went to school before the internet blossomed and really came to dominate so much of what we do.

Kerr: So, tell us a little bit about how you went about the research. How did you conduct the study that we’re going to be thinking through today?

Shih: Well, let me tell you about the original motivation. The original motivation is coming off the Producing Prosperity and the American competitiveness work that we had done. I was down in Washington having a discussion with an administration official, and I had spent 7 and a half years at Kodak before coming to the Harvard Business School. And I made the casual observation there that I was very fortunate in coming to the Harvard Business School a year before the financial crisis. So I was lucky to be able to obtain a position at the school, and I made the observation that there were many, many people in my age cohort who lost their jobs during the financial downturn, which is now 10 years ago—we’re celebrating that anniversary now. They lost their jobs in that downturn, and they were never able to find anything comparable. And I asked the question, I said, “You know, here are people between the ages of 50 and 65 who have 10 to 15 productive years to contribute, and they have not been able to find jobs. They’ve never been able to find something close to what they lost. And what are we going to do about those people?” And the answer was very disturbing. The answer I heard was kind of the conventional wisdom, which was, “Those people can’t be retrained. We have to give up on them.” Now, what was interesting, what happened about a year ago, two of my students here at the school came to my office, because they had read many of the things that I had written.

Kerr: Congratulations. That sometimes doesn’t happen around here [laughter].

Shih: That doesn’t happen that often. But they were very interested in my views on things. They brought me a copy of the book Janesville, which was about the collapse of the economy around Janesville, Wisconsin, during the financial crisis, when General Motors closed their plant there. And this book was just filled with the stories of what happened to the people and what happened to the towns. And one of the students—Colleen—said to me, “When I was in second grade, I always felt that it was really important for everybody to have a job and be able to buy food and to be able to support their family.” I said, “That’s how I was brought up.” And we were talking about it, and at the end of the meeting, the two students—Colleen and Howie—asked me, “So what are we going to do about it?” And I thought about it, and I said, “Well, what we have to do is, we have to conduct a research project, and we have to go write about it, and we have to try to influence policy.” That’s what launched this study. We then went on an independent study program—an independent research program—like none that I’ve ever worked with students on. We interviewed dozens of people across multiple states, and then I said, “Well, we have to go on a road trip.” And so we went on a road trip—Ohio, Kentucky, through Appalachia—where our objective was to interview people and collect some of those stories, because I don’t accept that narrative, and they didn’t, either.

Kerr: Let’s start with the narrative and begin with the challenges. What are some of the challenges older workers face with the shifting economy?

Shih: If you think about it, older workers went into their jobs with a level of training that was appropriate when they started them. Some of them have been in those jobs quite a few years. We’d talked to some who had been in their jobs for over 30 years. We visited Scott Bowen, who was formerly in the coal mining industry for 15 years. He had a job in advanced manufacturing. And he had lost his job in coal mining, and it came about very suddenly. So he told me about some of the struggles that he faced after he lost that job and how he thought about the future.

[Scott Bowen from American Metal Works]: “My wife and kids would go to bed at night, and I’d be sitting out on the porch at midnight worried to death. What are we going to do? You know, I have got some friends, co-workers, from mineral labs that are working at a gas station. Some of them still can’t find work.”

Kerr: It’s an enormous hill in front of Scott. How did he turn things around?

Shih: Well, Scott was fortunate. He found a local community college that told him that advanced manufacturing was a field that he could get a good career in. And the community college was partnered with a startup company by the name of American Metal Works in Paintsville, Kentucky. What he did is he went into this program and worked at the same time at American Metal Works, who really gave him that practical hands-on training at the same time. It’s fascinating, if you look at Scott’s story, because here’s somebody who is making a dramatic change. As we talked to Scott, he certainly had his share of doubts about whether he was going to be able to do this.

[Scott Bowen from American Metal Works]: “I did have moments like that when I said, ‘I’m not going to be able to do this.’ And it was like, this one day it started, not long before I came here, it just like it started clicking some. And it was great. I mean, there are programs out there, and there is help out there if you seek it. And just try. Like I said, when I first heard of advanced manufacturing, I said, “I won’t be able to do that.” But I just kept talking to them, and they kept guiding me. And I’m like, well yeah, I can do this.”

Kerr: It’s an amazing story for Scott. Does it work with everybody?

Shih: Well, it’s hard to believe—I’m sure there are examples where it doesn’t work—but one of the really gratifying things that we found is, we found quite a few examples of people making these very dramatic changes. Another company that we visited was a company by the name of Bitsource in Pikesville, Kentucky. It was founded by a gentleman named Rusty Justice, who saw what had happened to his friends and neighbors in the coal mining community, and he decided to do a startup that would hire and train former coal miners to write code. So he had put an ad in the paper specifically looking for coal miners, and he got 950 applicants. Now, what he did is, he and his partner decided they’re going to hire 11 people. They selected 11 people and set a start date, and said, “Okay, come in, we’re going to pay you while you learn to program.”

[Rusty Justice from Bitsource]: “They were all on unemployment, with the exception of this one guy. He had a job making $8.50 an hour. And he had been making about $80,000 a year. And he lost his home, he lost his vehicle, he lost everything. And he passed all of our tests and everything. And on the Monday when everyone showed up here for day one, he didn’t show up. And I called him and said, ‘Where are you?’ and he said ‘I’m just a dumb old coal miner. I can’t do this.’ And so he talked himself out of something. He could have been just one of these folks and been a software developer today and been a lot better off. And we started them at $15 an hour. And so he turned down a job that paid more because he could not convince himself he could, although he’d passed every test we’d given everyone else. One hundred percent of them people we selected have succeeded.”

Kerr: So, Willy, it sounds like your example suggests that old dogs can learn new tricks, but there’s perhaps some surprising stuff that gets in the way.

Shih: Well, I think that’s the popular narrative: “Old dogs can’t learn new tricks.” But I think there are a lot of factors that people who want to put together these training programs need to consider. And that was the focus of our research: What kind of things do you need to do in order to make these programs successful? Now, in the Bitsource example, one of the things Rusty highlighted is, he said, “We actually have an early course, an early session, on what we call re-imagination training. We have to get people to realize what is possible.” And by doing that, and by breaking down those barriers about “I can’t do this, I can’t do that,” obviously that was a key component of that.

Kerr: So with having interviewed hundreds of people and also having looked at many different programs, can you tell me what are the key features that were linked to success?

Shih: Well, Bill, I think there are a couple of them. One of them, and we’ve touched on that already, is work-based training—in other words, short programs that are focused on specific skills that will give people hands-on experience at the same time. So what you can do is, you can connect those skills to what they’re seeing in the classroom. Another component that we found to be very important was stackable credentials. And the idea of stackable credentials is, most of these people who’ve been out of work for a long time, they need income. So they don’t have time to take off two years for an associate degree. What they need is, they need short programs that can give them some skills, get them employed again, and then, step by step, they can take additional courses, which, over time, “I can maybe get that associate’s credential.” What they need is, they need credentials that they can accumulate, which add up together to give them that next …

Kerr: … step by step, stackable, yeah.

Shih: Step by step. Another thing that we’ve found to be extremely important is something that a lot of these leaders who put together these programs call “wraparound support.” That’s actually a term that comes out of the healthcare industry. And it’s really, how do I look at my client, in this case the student, comprehensively? Look at all the other needs. We often talk about how I wanted to do this, but life gets in the way.

Kerr: “My car broke down, or …”

Shih: “… my car broke down. I didn’t have money for gas.” And what we’ve found is a lot of these students had these small problems: transportation; have to pay the electric bill; a car payment, or a rent payment. And what was inspiring was to hear what some of these organizations that were doing the training had put together. There was one school that has had a remarkable success rate in retraining—Southwest Wisconsin Technical College in Fennimore, Wisconsin—and their form of wraparound support was really very comprehensive. Number one, they had a food pantry, because they said, “A lot of our students are hungry, so we don’t think you can learn when you’re hungry.” They had a counselor. They had a clothes closet, because when students went for job interviews, many of them didn’t have the right clothes to wear. So they had worked with Lands’ End, who is a local clothing supplier, to have a clothes closet so these people would be professionally dressed when they went for their job interviews. They had an emergency loan fund. And Jason Wood, who is the president, told us about this emergency loan fund. He said sometimes it’s because a student doesn’t have $25 for gas to get home. So they had gas cards. And sometimes it’s to make a rent payment, or a car payment, or some medical issue comes up and they needed a small emergency medical fund. What was incredible to me is, we asked Jason, “Do you expect repayment?” And he said, “Well, if they can, they repay us.” But they don’t insist on it. So we asked, “Well, how do your donors feel about it?” And he said, “Well, actually, most of our donors are the staff here at the school. Ninety percent of the staff at the school donate to the program.” I was looking at our two students, and we were saying, “Here’s a person who’s the president of the college, who probably doesn’t make that much, himself, and yet he’s donating to the program.” That was absolutely inspiring.

Kerr: Yeah. That’s powerful. In fact, you mentioned a number of things that are rare to find in these types of programs—from even the partnerships between the work-based skills and what they are being taught in training programs, all the way over to this wraparound support. What did you see as being the root factors that a community needed to have in place in order to have a successful training program?

Shih: Well, I think, as we talked to these people, whether they were in Wisconsin or Kentucky or Mississippi or South Carolina, one of the things that we found is, it’s all about local leadership. Now, the question you always ask is, like, “Doesn’t the federal government provide all these funds and all these grant programs, and things to help?” And that is true, and most of these programs tapped into them wherever they could, because they always had leaders who knew where to find them. But the key thing that we found was this kind of grassroots leadership of people who were local in the community, who understood what the needs of the employers in the area were. And then they would do this matching of students to those programs, and then they would tailor the retraining to those people as well. They even went so far as to do what we dubbed “load balancing.” Jason Wood at Southwest Wisconsin Tech told us, he said, “It makes no sense for us to train more people for a particular type of job than the market has.” Because the worst thing you can do is put people into a sector where there are no jobs.

Kerr: Flood the market with people.

Shih: And flood the market, because that’s not good for anybody. So they would actually meter people out. It’s that local leadership, and really this ... and we saw this repeatedly, everywhere we went. You found people on the ground, in a community, who understood the needs of their community. And the people in that community, who took it upon themselves to put together these programs that really matched that resource of people to those job opportunities, and then tailor the training in an appropriate way.

Kerr: Willy, beyond developing this inspired local leadership, are there any particular recommendations you would make to the people who are actively trying to help in retraining right now?

Shih: Well, I think the thing that really struck me was this understanding of local needs. We talked to people in Washington about this as well, to collect the views. I think there’s bipartisan support for this type of program. And, particularly, there’s growing recognition, especially with how the economy is evolving, we need to tap into these older workers, both from a demographic standpoint and from a kind of maturity and skills standpoint. But I think one of the things we observed in a couple of places is the distance of the people in Washington from the on-the-ground needs. And we heard this when we were traveling through Appalachia, which is, “Well, the guys in Washington are well intentioned, but they don’t really know and understand what we really need at that local level.” So some of the successes we saw, we were just really impressed with that local leadership.

Kerr: It’s a lesson that I think the guys at Harvard Business School could also learn.

Shih: I think that is definitely the case.

Kerr: So, Willy, as you think about the future of work and managing the future of work, are you optimistic? Are there things that you look ahead and you say, we can crack this retraining model?

Shih: Well, I see a lot opportunities for us, because I’m actually optimistic with some of these examples that we’ve seen—you know, the Scott Bowens and the Rusty Justices of the world. It’s positively inspiring to see what can be accomplished when you systematically look at this problem and really tackle some of those things that get in the way.

Kerr: My last question: If you could make one change going forward to enable this process, what would that be?

Shih: Well—and I know there is legislation that has been introduced recently that would allow Pell Grants to be used for retraining older workers. Right now Pell Grants are only allowable for degree programs. So, as we said, stackable credentials, this kind of incremental approach—people who are in need cannot apply for those. We heard from a number of people that just simple things like that would really help a lot. If we could do things to encourage more of this on-the-ground local leadership as well through support mechanisms, or just if we can give those people help, I think it would have an enormous amount of leverage.

Kerr: Thank you, Willy, for describing your fascinating work and instilling in us more hope and also ideas on the power of retraining for older workers.

Shih: Thanks for having me, Bill.

Kerr: From Harvard Business School, I’m Professor Bill Kerr, thanking all of you for listening in.