05 Mar 2021
Eight Human Capital Trends and Recommendations for 2021
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With the unprecedented events of 2020 transitioning into a still volatile 2021, all aspects of the aerospace & defense sector have been impacted in transformative ways.
These include: talent and human capital, which was highlighted from layoffs in the commercial aero sector; unprecedented declines in travel, which of course has led to Zoom and Microsoft Teams meetings; growth in markets such as space; the new Biden administration and shifting priorities; and changes in the ways organizations work and recruit.
Some of these changes may be transitory, for instance the cancellation of the Paris Air Show, but after a year of COVID impact, other changes may be more lasting. As we look ahead to 2021, here are the trends we suggest looking at and our key recommendations:
- Agile leaders – There may have been no year that required senior leaders to demonstrate more strategic agility than 2020 and now 2021. The global pandemic, widespread social unrest, a new U.S. administration, and fundamental threats to business survival—all of these required leaders to pivot faster and more aggressively than many had done before. As we evaluate candidates for senior level roles, the demonstration of agility has been a critical success factor. Moving into 2021 and beyond, agility and strategic acumen will still be required given continued market uncertainty. Those executives who can be nimble and help identify market dynamics sooner and most effectively will be best positioned for success as we eventually return to a degree of normalcy.
Recommendation: When developing a senior level role, ensure strategic agility is a key priority for leaders to demonstrate in their current roles, and when recruiting leaders into the organization, be sure to evaluate and assess for nimbleness, flexibility, and the need to move decisively and swiftly.
- Divergence between Aerospace & Defense – While 2017–2019 saw both defense budgets growing and commercial aerospace expanding on a seemingly never-ending growth cycle, 2020 saw a massive divergence, especially from a talent perspective. Commercial aerospace was of course impacted to unprecedented degrees by ongoing pandemic-related and travel limits, while the defense market by and large continued to operate at a normal pace. Looking ahead to 2021, defense firms are seeing near-term stability of budgets but downward pressure in the longer term. In commercial markets, leaders continue to evaluate demand forecast scenarios and a return to normalcy.
Recommendation: From 2017–2019, market forecasting was fairly predictable. In an uncertain 2021, however, companies need to ensure that their leaders are willing to seek outside advisors and team members who are able to share, debate, and determine the best path forward in less predictable times. In the defense space, leadership needs to understand how to operate in an environment of budgetary pressure; and in the commercial sector, leadership must be prepared to scale back up quickly as travel and cargo patterns return to normal.
- Accelerated growth in space, unmanned, AI, and Cyber – All these markets saw significant focus on capital, M&A, and finding the right talent. Executive experience in these areas remains incredibly high with large and small companies including start-ups, venture capital, private equity, and governments making significant investments. Fueled by massive capital injections from billionaires and venture funds, as well as the newly dedicated Space Force, the space sector is now front and center. Unmanned continues to be a major focus across the globe, while Cyber and AI have gained greater importance and visibility during COVID.
Recommendations: As the need for high-demand talent in these markets grows, aerospace & defense organizations are competing with leading firms in technology and other sectors, thereby making it imperative that they take a targeted approach to recruiting, retaining, and developing executives with relevant experience and backgrounds. Additionally, organizations need to ensure that knowledge of these market areas exists at the C-suite and Board level.
- Diversity & Inclusion – momentum and action – 2021 will see a continued emphasis on attracting, developing and retaining a more diverse and inclusive workforce across the aerospace, defense and national security sector. While developing and promoting a more diverse & inclusive workforce has been an area of emphasis for companies in the sector for some time, results have been uneven with some organizations doing quite well and some lagging behind. Based on our discussions with leaders across the sector, we see continued momentum and progress that should continue through 2021 and beyond.
Recommendations: When recruiting for senior leaders, companies should expect to have a diverse set of candidates. For Board, C-level leaders, and general managers, there should be an expectation that performance incentives take into account the ability to attract, retain and develop a diverse & inclusive workforce. Finally, beyond attracting talent into an organization, it is imperative that organizations set up the right culture, sponsors, and career paths to develop and retain and ultimately expand a diverse & inclusive workforce.
- A new administration = new ways of doing business – With the Biden administration succeeding the Trump administration, there will be the obvious shift in policies and style. As is typical when an administration changes from one party to another, organizations will need to place greater emphasis on government affairs in order to navigate the new political realities and priorities going forward. Government relations roles will be a natural priority for companies and trade associations in 2021. Additionally, there will be a greater emphasis on global partnerships and diplomatic “soft power.”
Recommendations: Presidential transitions generally bring changes to existing private-public relationship structures, especially when there is a shift in parties. Organizations must ensure they are able to respond and quickly navigate these changes. Given the volatility leading up to the 2021 transition, it is critical to have a government affairs team well-aligned with the Biden administration’s priorities.
- Services, Training and simulation – While the services, training and simulation markets in both commercial and military spaces saw growth before the coronavirus pandemic, the need for companies to operate remotely is transforming in-person training and simulation. As more is accomplished remotely, leaders who can help navigate the fast-changing training and simulation markets and help develop new business models will be in high demand. Service company business models and leadership approaches will need to change as a result of less on-site work. While in-person will resume to some extent, services companies will need to adjust to a more in-person/offsite hybrid.
Recommendation: While in-person training and simulation will return as vaccines are more widely adopted, organizations should carefully assess how their training is done. For services companies and training and simulation providers, understanding and developing new delivery methods will be critical. For consumers of training, assessing cost and benefits in hybrid and other new models will be essential.
- Accelerated recruiting process – If you had asked leaders pre-COVID if they would be comfortable conducting entire searches via Zoom or Microsoft Teams, many would have said no. But we have learned that these technologies work, and now most searches are conducted either predominantly or entirely virtually. This has accelerated the search process dramatically, as the weeks of scheduling required for senior leaders to meet candidates has been condensed into days, with many C-suite executives now going through an entire search process without meeting the entire candidate slate. In some cases, new executive leadership has been hired with in-person meetings taking place only with the finalist candidates. In the future, identifying, attracting, and onboarding talent will increasingly consist of this hybrid of virtual and in-person approaches.
Recommendation: Recognize the benefits of accelerating the recruiting process by doing initial discussions via Zoom or Microsoft Teams. If this process is working for your executive leadership team, assess the feasibility of a new hybrid virtual/in-person meeting model going forward.
- M&A drives leadership changes – With significant capital and dry powder available, the M&A market has remained active. Washington Technology highlighted over 100 transactions completed in 2020. There remains significant demand for CEOs, CFOs, COOs, and general managers who can take over businesses and work with investors to establish a strategy, set a vision, and determine a growth path in a period of fast-changing and complex market conditions.
Recommendation: If operating in an M&A environment, recognize that new leaders coming onboard during COVID will need to move quickly and operate in an increasingly virtual world. But the skills required for new CEOs may look different than they used to, even if you’re operating in a more “normal” environment. When evaluating leadership candidates, look for a track record of success particularly in the 2020–2021 time-frame.