JOINT VENTURE’S workforce study

AN ANALYSIS OF THE WORKFORCE GAP IN Joint Venture: Silicon Valley Network Board of Directors

Co-Chairs:

Ron Gonzales, Mayor, City of San Jose

Lew Platt, Chairman, President & CEO, Hewlett-Packard Company

Ruben Barrales, President & CEO, Joint Venture: Silicon Valley Network

Ann Bowers, Trustee, The Noyce Foundation

Robert Caret, President, San Jose State University

Robert Cavigli, President & CEO, Ehrlich-Rominger Architects

Leo Chavez, Chancellor, Foothill-De Anza Community College District

Jim Deichen, Senior Vice President & Tech. Industry Manager, Bank of America NT&SA

Charles Dostal, Principal, Woodside Asset Management

Katheryn Fong, Vice President-Customer Revenue Transactions, Pacific Gas and Electric

Carl Guardino, President & CEO, Silicon Valley Manufacturing Group

S. Reid Gustafson, President, Shea Homes

Jay Harris, Chairman & Publisher, San Jose Mercury News

Mark Hyde, President & CEO, Lifeguard, Inc.

W. Keith Kennedy, President & CEO, Watkins-Johnson Company

Paul Locatelli, President,

Judy Nadler, Mayor, City of Santa Clara

John Neece, CEO, Building & Construction Trades Council

Joseph Parisi, CEO, Therma

J. Michael Patterson, Tax Partner, PricewaterhouseCoopers

Condoleezza Rice, Provost, Stanford University

Joe Simitian, Board of Supervisors, District 5, County of Santa Clara

Steve Tedesco, President/CEO, San Jose Silicon Valley Chamber of Commerce

John Vasconcellos, California State Senator, California State Senate

Chester Wang, Chairman, Pacific Rim Financial Corporation

Colleen Wilcox, Ph.D., Superintendent, Santa Clara County Office of Education Table of Contents

INTRODUCTION ...... 2

EXECUTIVE SUMMARY ...... 3

REPORT METHODOLOGY ...... 4

THE WORKFORCE GAP ...... 5

HIGH-DEMAND SKILLS ...... 6

EMPLOYMENT COSTS ...... 8

CLOSING THE WORKFORCE GAP ...... 11

STUDENT AWARENESS OF SILICON VALLEY CAREERS ...... 12

IMPLICATIONS FOR SILICON VALLEY ...... 16

SILICON VALLEY’S 30 COMMUNITIES 1 Atherton SAN OAKLAND FRANCISCO 2 Belmont S 3 Campbell A N 4 880 Cupertino F 680 5 East Palo Alto R A 6 Fremont

N 92 29 7 Foster City C 23 I 6 8 Gilroy 7 S C 9 84 17 Los Altos 2 O 21 10 Los Altos Hills 20 B 5 A 11 1 Y Los Gatos 280 12 13 12 Menlo Park 30 18 16 13 Milpitas 19 28 9 14 24 Monte Sereno P 10 22 4 15 Morgan Hill A 3 16 C Mountain View 26 I 14 85 17 Newark F 11 18 I Palo Alto C 101 19 Portola Valley 17 O 20 Redwood City C 15 21 E San Carlos A 22 San Jose N 23 San Mateo 27 24 Santa Clara 8 25 Santa Cruz 25 26 Saratoga 27 Scotts Valley 28 Sunnyvale 29 Union City 30 Woodside

Silicon Valley is home to more than 7,000 technology-based companies which employ nearly 40% of the Valley’s workforce and indirectly support many more jobs in peripheral industries and businesses.

1 Introduction

WhenWHY THE asked SILICON what VALLEY factors COMPARATIVE influence ANALYSIS? their business location decisions, high-tech executives most often citeThe accessSilicon toValley a diverse Comparative and skilled Analysis talentbenchmarks pool. As economicForbes magazine vitality recentlyand quality reported, of life whileattributes old economywith 10 other industry established clusters orformed emerging around technology suppliers, regions factories of andthe transportation,. new economy clusters are made out of brainpower.(1)

To assess how well Silicon Valley is meeting the demand for a diverse and skilled talent pool, Joint Joint Venture developed the Comparative Analysis to: Venture: Silicon Valley Network joined with management consulting firm A.T. Kearney to produce this• Increase Workforce understanding Study. The of Siliconstudy analyzes Valley’s regionalthe supply strengths; of skilled high-tech workers within Silicon Valley and the demand created by area high-tech employers. The findings are distressing: the region’s • Educate community stakeholders about the interdependence of Silicon Valley’s economic vitality domestic workforce is not meeting the demand for high-tech workers. Looking farther down the and quality of life; and ‘pipeline’, the report finds that area high school students have relatively low understanding of high- tech• Focus careers discussion and even on thelower critical interest challenges in pursuing facing high-tech-related the region. majors in college.

ThisWHY THESE study BENCHMARKS? is the latest in a series of reports and documents dealing with issues affecting the Valley’s commonThe benchmarks goals of promotingselected were an innovativethose found economy, to be measurable sustaining and a livable reliable environment, across multiple and regions. creating anFurther, inclusive they society have been through deemed regional critical cooperation. to the success Joint ofVenture: Silicon Silicon Valley’s Valley technology Network industries. views this reportThese asindicators part of its were long-term first outlined effort to in focus Joint onVenture’s and to helpAn Economy improve at the Risk economic,and the Blueprintsocial and for environ- the 21stmental Century conditions Community in the(June region. 1992 and June 1993, respectively). They include measurements for innovation, entrepreneurial spirit, access to global markets, financial and intellectual capital and Clearly, if the Valley seeks to remain the world’s high-tech leader, aggressive actions will need to be quality of life. taken to provide more people in our region with the skills needed to participate in the new high-tech Severaleconomy. of Joint these Venture attributes intends relate to to play technology an active industry role in clusters this process.–a geographic concentration of inter- dependent, internationally competitive firms in related industries. Using a “business ecosystem” To access the full library of Joint Venture reports, please visit us on the Web at www.jointventure.org. model, cluster industries represent the top of the “food chain.” They create interdependent linkages with each economic layer below–from contract manufacturing to specialized business services to general business services to retail. Industry clusters drive exports, create high-wage jobs and generate wealth for the region. And they cultivate the specialized support services, technological expertise and entrepreneurial spirit upon which a region’s global competitiveness is built.

WHAT DOES THE COMPARATIVE ANALYSIS CONCLUDE? Ruben Barrales As a portrait in time, the Comparative Analysis paints the following picture: President and CEO •JointSilicon Venture: Valley Silicon compares Valley very Network favorably with other U.S. technology regions and is well positioned for continued economic success.

• Silicon Valley’s economic vitality is supported by a world-class business infrastructure.

• Silicon Valley must respond to deficiencies in housing, transportation and education if it is to sustain its competitive edge.

• Silicon Valley’s current challenges are regional in nature and therefore can best be resolved through regional collaboration among people in business, government, education and the community.

(1)TIM FERGESON, “SUN, FUN AND PH.D.’S TOO”, FORBES, MAY 31, 1999

2 Executive Summary

The workforce shortage is an increasingly critical impediment to the growth of high-tech companies in Silicon Valley and threatens the economic vitality of the region. This Workforce Study found that the current workforce gap is 31 to 37 percent of the high-tech industry demand in Silicon Valley. Employers identified three key drivers of this shortage:

• Limited supply of qualified candidates, • High housing costs in the Valley which affect attraction and retention of talent, and • High wages which hinder small and mid-size companies’ ability to hire.

The study determined that the incremental cost of the workforce gap to the high-tech industry in the Valley is approximately $3–4 billion annually. The study results also demonstrate that Silicon Valley students, the future pipeline of skilled labor, lack a familiarity and interest in high-tech careers and are therefore not building the skills required for these job opportunities.

Although many Silicon Valley stakeholders–companies, schools and colleges, non-profit organizations, and industry associations–have individually taken steps to address this issue, most efforts have not affected lasting improvements. Typically the efforts have been fragmented, short-term focused and not sustainable. The numbers of initiatives are insufficient to generate the needed momentum.

It is critical to rally Silicon Valley resources around actions that ensure the development and full utili- zation of its regional “homegrown” talent. A collaborative approach of all Silicon Valley stakeholders will be required to provide a sustainable long-term impact on the workforce shortage and ensure the economic growth of the Valley.

“The results of Joint Venture: Silicon Valley’s workforce study represent a reality that Silicon Valley employers cannot afford to ignore. To tap into and mine the potential workforce our young people represent, we must reach them at the state of development where formative educational and career decisions are being made. Silicon Valley represents a world of opportunity where employers and educators must share the responsibility of helping to prepare the future workforce for those exciting careers.”

REBECCA GUERRA, VICE PRESIDENT HUMAN RESOURCES, EBAY

3 Report Methodology

Joint Venture: Silicon Valley Network’s Council of Co-chairs asked the organization to define and quantify the cost of the workforce gap. Joint Venture engaged A.T. Kearney to spearhead a study to address these questions and to present a compelling business case detailing the economic reasons why action was required to address the gap. The results of the Workforce Study were presented to the Council of Co-chairs and are summarized in this report.

The project team utilized a hypothesis-driven approach to the analytical requirements that supported the objective of the study: “Rally Silicon Valley around actions that will ensure the full utilization of its homegrown talent”. The first step of the project involved primary and secondary research to assess the size and characteristics of the workforce gap. This involved a substantial number of interviews with human resource executives, recruiters, job placement agency executives and academic workforce thought leaders. In addition, more than 60 Silicon Valley technology oriented companies, represent- ing 35,700 employees (7.5% of the target workforce) were surveyed for this study. Leaders of commu- nity colleges, other educational providers, and other community organizations were interviewed to assess how current programs and resources are addressing the workforce gap. In order to understand one of the primary factors of the future skilled labor supply, 1,160 Silicon Valley 8th and 11th grade students were surveyed to gauge their awareness of, and interest in, high-tech careers. Secondary research consisted of collecting and analyzing workforce related data from federal, state, and regional government agencies, educational institutions, non-profit organizations, and industry associations.

The second step of the project involved the development of a business case analysis to quantify the impact of the workforce gap on business, the community, and individuals.

THE PROJECT TEAM OVERARCHING HYPOTHESES DEVELOPED THREE KEY HYPOTHESES HYPOTHESIS 1 THAT DROVE THE There is a gap between demand and supply of local labor for some skilled positions in Silicon Valley. ANALYTICAL REQUIREMENTS Objective: Rally Silicon Valley resources around actions OF THE STUDY that will ensure the full utilization of its “homegrown” talent.

HYPOTHESIS 2 HYPOTHESIS 3 The Silicon Valley community is not High school students are not well informed about adequately addressing the workforce gap. Silicon Valley careers and therefore not building the skills required for these opportunities.

4 The Workforce Gap

Joint Venture’s Workforce Study confirmed that there is a growing gap between demand and supply of local labor for some skilled positions in Silicon Valley. The workforce gap is defined as the difference between the local/regional labor supply and the total demand of high-technology industry cluster(1) jobs. Three segments determine the gap:

• Commuters: workers who must commute long distances into the Valley, • Outside recruits: People actively recruited from outside of Silicon Valley and • Unfilled positions: positions left vacant until a suitable candidate arrives.

The current workforce gap is between 31 to 37 percent of the region’s high-tech industry cluster demand. The gap has been increasing since 1995 and is projected to grow to approximately 200,000 positions by the year 2010.

Only 63 to 69 percent of Silicon Valley’s high-tech industry cluster jobs are filled by local residents or people who chose to move to the area. The remaining positions are filled by outside recruits, com- muters, or are left vacant. The top reasons cited by survey respondents as drivers for the workforce gap were:

• Limited supply of qualified candidates (77%), • High housing costs, which affect attraction and retention of skilled talent (68%) and • High wages which hinder the hiring ability of small and mid-size companies (35%).

The study also finds that employers’ human resource practices exacerbate the gap. Companies often “poach” each other’s trained workforce and take a short-term view to recruitment. Most companies underestimate the total cost of employment and therefore under-invest to gain the benefits of training, retention and workforce development.

THE WORKFORCE TOTAL DEMAND FOR HIGH-TECH PROJECTED GAP(2) FOR HIGH-TECH INDUSTRY CLUSTERS(1) INDUSTRY CLUSTERS IN THOUSANDS GAP IS ABOUT ONE THIRD OF Unfilled Positions Unfilled Positions 210 5%-7% THE HIGH-TECH Outside Recruits 180 INDUSTRY DEMAND Local Outside Commuters 150 Labor Recruits IN SILICON VALLEY and 10%-12% Workforce 120 Voluntary Gap 90 Movers 63%-69% Commuters 60 16%-18% 30 0 1997 2010

NOTE: (1) INDUSTRY CLUSTERS INCLUDE SEMICONDUCTOR, COMPUTER/COMMUNICATIONS, SOFTWARE, BIOSCIENCE, AEROSPACE AND DEFENSE, INNOVATION/MANUFACTURING SERVICES AND PROFESSIONAL SERVICES. (2) PROJECTED BASED ON ANNUAL GROWTH RATE OF 2.2% (PER ASSOCIATION OF BAY AREA GOVERNMENTS), ASSUMING GAP REMAINS AT ONE THIRD OF THE HIGH-TECH INDUSTRY DEMAND.

SOURCE: A.T. KEARNEY WORKFORCE INITIATIVE SURVEY; SANTA CLARA VALLEY TRANSPORTATION AUTHORITY; ASSOCIATION OF BAY AREA GOVERNMENTS, EMPLOYMENTDEVELOPMENT DEPARTMENT

5 High-Demand Skills

The study identified that within the workforce gap there are six skill clusters that are in particularly high demand in Silicon Valley. These skill clusters are defined by a unique set of specific skills appli- cable to multiple industries and job positions as shown in the chart.

The study found that electronics engineers and software programmers are the most difficult to recruit in Silicon Valley. These skill clusters have the highest number of open positions among survey respon- dents by a wide margin and typically take longer than average to fill. As a result of the short supply, these skills are specifically recruited from outside the Valley. Based on research interviews, late generation software programming skills such as C, C++, Java, Visual Basic, etc., and component design engineering skills were in the highest demand.

WITHIN THE WORKFORCE AVG. TIME SKILL HIGH DEMAND TYPICAL TO FILL TYPICAL GAP, SIX SKILL CLUSTER DESCRIPTION TECHNICAL SKILL JOB TITLES POSITION INDUSTRIES(1) CLUSTERS ARE PC/LAN Skills necessary for UNIX, Novell, Micro- LAN/system adminis- 4-5 months All industries IN PARTICULARLY Administration supporting business soft, Windows NT, trator, PC repair, HIGH DEMAND computer infrastructure TCP/IP help desk

Enterprise Skills necessary for SAP, Windows NT, Database administrator 5-6 months All industries Information supporting complex UNIX, Oracle, People- systems/information Technology information systems and soft, Relational analyst Support applications database design

Late Skills necessary for C, C++, Visual Basic, Programmer, software 3-4 months Software, semicon- Generation specification and develop- HTML, Java, engineer, computer ductor, aerospace Software ment of software Windows NT, UNIX scientist and defense, Programming applications professional services

Design Skills necessary for Semiconductor design, Electrical engineer, 3-4 months Semiconductor, Engineering specification and develop- communication network engineer, computer/ ment of electrical or systems, circuit theory computer engineer communication, telecommunication aerospace and systems defense

Manufacturing Skills necessary for Electromechanics, Technician: e.g. test, 2-3 months Semiconductor, Technician fabrication, assembly, vacuum theory, laser equipment, process, aerospace and testing of product and technology, chemistry field service defense, bioscience, equipment repair computer/communi- cation, innovation/ manufacturing services

Technical Skills necessary for Technical skills in Product marketing 3-4 months Semiconductor, Marketing marketing of high-tech engineering, manage- manager, sales & computer/ products and services ment skills, knowledge marketing engineer, communications, of electronic commerce business development software, aerospace manager, marketing and defense communication specialist

NOTE: (1)INDUSTRY CLUSTERS INCLUDE SEMICONDUCTOR, COMPUTER/COMMUNICATIONS, SOFTWARE, BIOSCIENCE, AEROSPACE AND DEFENSE, INNOVATION/MANUFACTURING SERVICES AND PROFESSIONAL SERVICES

6 HIGH-DEMAND SKILLS

The average time to fill open positions in Silicon Valley is 3.7 months. The study found that the time to fill open positions ranged from one month for production/assembly technician to over six months for an enterprise hardware administrator. A number of “hot” skill clusters take over four months to fill on average including mechanical/industrial engineers (5.2 months), enterprise software administrators (5.1 months), system integrators (4.8 months), and technical sales/customer service (4.5 months). The study found a strong correlation between the time to fill an open position and the number of open positions by skill cluster.

These findings correlate with the unemployment rate in Silicon Valley which continues to be below the national average.

THE AVERAGE AVERAGE TIME TO FILL SELECTED POSITIONS IN MONTHS TIME TO FILL AN Enterprise Hardware Administration OPEN POSITION Mechanical/Industrial Engineer IN SILICON VALLEY Enterprise Software Administration IS 3.7 MONTHS System Integrators Sales/Customer Service–Technical Sales/Customer Service–Non-Technical Finance/Audit Office Administration PC Service/Maintenance Electrical Engineering Silicon Valley Average Marketing Software Programmers Graphics/Web Design Electronics Technicians Warehouse Distribution Procurement Production Assembly

0123456

SOURCE: A.T. KEARNEY WORKFORCE INITIATIVE STUDY, SEPTEMBER 1998

7 Employment Costs

The study determined that on average, the workforce gap represents an incremental cost of $6,000 to $8,000 per Silicon Valley high-tech employee. The workforce gap is costing the seven major Silicon Valley industry clusters $3– 4 billion a year in incremental hiring and opportunity costs.

Components of these incremental costs are: • Turnover costs, • Salary premiums, • Internal hiring costs, such as HR staff, hiring managers time to interview, referral fees, • External hiring costs, such as search firms, contractors, temps, external communications, • On-boarding and ramp-up costs, such as orientation, set-up, training, certification/ licensing, relocation and • Productivity loss/opportunity cost such as delayed product launch, lost sales, lost innovation, lost intellectual capital, low productivity during ramp-up.

The tight job market increases the time-to-hire and employee turnover rate resulting in substantial hiring cost increases. On average it costs a Silicon Valley employer 2.6 times the annual salary to fill a position, whereas the national average is 1.5 times. Silicon Valley has a turnover rate that is twice the national average, further driving up hiring cost. The study also found that Silicon Valley employers are paying a salary premium of approximately 10% over the national average, after normalizing for cost of living.

ON AVERAGE, ANNUAL WORKFORCE GAP COSTS INCREMENTAL COST COMPONENTS THE WORKFORCE IN BILLIONS IN PERCENT GAP REPRESENTS Total=3–4 billion annually Salary Premium 5 - 6 Hiring Costs AN INCREMENTAL 8% Hiring Costs Salary Premium COST OF $6,000 23% Productivity Loss/ TO $8,000 PER Opportunity Costs SILICON VALLEY Turnover Costs Productivity Loss/ HIGH-TECH 2 Turnover Costs Opportunity Costs EMPLOYEE 33% 36%

Current Silicon Minimal Gap Valley Gap Scenario Scenario

“I’ve followed the workforce gap project closely and with real interest. As a high-tech start-up in Silicon Valley, my company feels the impact of the disparity between job creation and qualified job applicants directly. Our success over time will be largely dependent on our ability to attract skilled people; and certainly the pool of talent and the environment of ‘can-do’ is one reason we decided to set up business here. We support Joint Venture: Silicon Valley’s efforts to help address the workforce gap as it clearly is in everyone’s best interests to keep the Valley competitive.”

ARIF JANJUA, VICE PRESIDENT AND GENERAL MANAGER, SARAIDE.COM

8 EMPLOYMENT COSTS

Companies often underestimate the opportunity costs and productivity loss associated with the work- force gap. In order to understand the full cost of the workforce gap to business, a total employment lifecycle cost approach was used.

The employment lifecycle follows: position opens➝identify candidate➝screen candidate➝bring on-board➝ramp-up productivity➝full productivity.

This holistic approach to employment cost calculations assists in determining the true magnitude of the economic impact of the workforce gap to Silicon Valley high-tech firms. The study results indicated that direct hiring, on-boarding and ramp-up costs, which are the focus of most hiring managers, only accounts for 8% of the total incremental direct and opportunity costs for Silicon Valley. In fact the true economic cost drivers of the workforce gap are productivity loss/opportunity costs and turnover costs.

FOR THE SILICON SILICON VALLEY TOTAL EMPLOYMENT COST CALCULATIONS VALLEY TOTAL Productivity loss when an open position, due to growth or turnover, is left unfilled: EMPLOYMENT COST • Delayed product launch • Lost innovation • Lost sales • Lost customer relationship CALCULATIONS, • Lost intellectual capital • Low productivity during ramp-up WORKFORCE RECRUITMENT WAS UNFILLED POSITIONS VIEWED AS AN INTERDEPENDENT SYSTEM

EDUCATION QUALIFIED AND TRAINING CANDIDATES HIRING PROCESS EMPLOYEES

Pipeline of a qualified • Internal and • On-boarding and labor supply external hiring ramp-up costs costs • Training costs

UNFILLED POSITIONS

When an employee leaves one company for another: • No opportunity costs/productivity loss for Silicon Valley as a whole • Cost related to replacing employee due to turnover is incurred

“The amazing productivity of the Silicon Valley workforce perhaps masks the real challenge we face in continuing our robust economic performance. Companies, schools and colleges, and the civic leadership of the region must all work together to maintain and nurture the ‘pipeline’ of motivated and trained workers in our own backyard. Through a comprehensive educational outreach program, Intel Corporation has committed resources to improving science, math, engineering and technology education through programs that promote the effective use of technology in the classroom. Programs that involve the schools, private industry and concerned leaders work best and we will continue to support and participate in these efforts.”

JAMIE VAN DE VEN, GENERAL MANAGER, INTEL

9 EMPLOYMENT COSTS

The Total Impact of the Workforce Gap

In addition to the costs to employers, workforce shortages in Silicon Valley also drive significant costs to individuals and the community. The tightening of the local labor market increases the need to look outside of the region for employees. Currently, approximately 17 percent of all high-tech industry cluster employees commute in daily from the surrounding Bay Area counties, which strains the local infrastructure. The true economic cost of the workforce gap is greatly underestimated if costs to indi- vidual quality of life and community traffic congestion and pollution are not considered. The result is that the workforce gap threatens the continued growth of the high-tech industry and the economic vitality of Silicon Valley.

IN ADDITION WORKFORCE SHORTAGES IN SILICON VALLEY DRIVE SIGNIFICANT COSTS TO TO COSTS TO EMPLOYERS, INDIVIDUALS AND THE COMMUNITY EMPLOYERS, WORKFORCE COSTS TO EMPLOYERS • High total cost of recruitment due to high employee SHORTAGES IN churn SILICON VALLEY • Constrained growth due to lack of qualified candidates • Loss of intellectual capital or competitive advantage ALSO DRIVE as talent moves out of Silicon Valley SIGNIFICANT Total Demand

COSTS TO INDI- COSTS TO INDIVIDUALS VIDUALS AND • High housing costs – rents jumped 30% in Santa Clara over the last two years AS A WHOLE, THE THE COMMUNITY Gap • More time wasted on commuting WORKFORCE GAP Local THREATENS THE Labor • Increased worker “burnout” and decreased work/life balance ECONOMIC VITALITY Pool OF SILICON VALLEY • Reduced sense of belonging and loyalty to companies • Increased responsibility to self-train and update skills

COSTS TO COMMUNITY • Increased demands on transportation infrastructure • Increased pollution from congestion and traffic • Increased division of “haves” versus “have nots,” particularly as it relates to home ownership • Outflow of skilled talent to other regions • Outflow of companies to other lower cost regions

“As an organization whose mission is to prepare young people to be informed and contributing citizens of Silicon Valley we are particularly interested in anything that effects the quality and preparation of this region’s workforce. Joint Venture: Silicon Valley’s Workforce Gap report is a call to action for us and for everyone concerned with keeping our community economically strong into the future.”

DEBORAH BARBER, ASPECT TELECOMMUNICATIONS AND CHAIRMAN OF THE BOARD, JUNIOR ACHIEVEMENT OF SANTA CLARA COUNTY

10 Closing the Workforce Gap

In order to build a supply of qualified job candidates with the latest skills, there must be more coordi- nation and communication between educators, community groups, and businesses in Silicon Valley.

As part of the overall study design, the current resources devoted to addressing workforce shortage issues were analyzed. It was found that local community colleges and four year universities are signifi- cant sources of workforce training and that selected non-profit organizations have programs in place to address education and workforce skill gap issues. In addition, there are several industry associations which have programs that range from specific skills training to awareness building. Although schools, employers and community organizations are taking steps to close the workforce gap, their efforts so far have been fragmented and unsustainable.

Community colleges and training programs have worked with businesses to accommodate employer needs; however, these relationships are often one-on-one and on a short-term basis. Without adequate resources, it is difficult for them to provide state-of-the-art equipment or to continuously revise cur- riculum to meet business needs. They are aware of the potential benefit of sharing resources, but there has been little cross-district coordination to date.

Individual companies have led initiatives with educational institutions, but such partnerships are highly dependent on the company’s performance. Hands-on experience such as internships and co-op programs have been highly effective training methods for Silicon Valley companies; however, there have not been enough of them to have an impact on the workforce gap.

Business associations and non-profit organizations have taken steps to form education and business partnerships, but such efforts tend to be narrow in focus and in scope. Individually, it is difficult for these organizations to play a major role in bringing together the education and business communities.

The Workforce Study indicates a clear need for a comprehensive and regional approach to addressing the employment needs of Silicon Valley. A collaborative effort by education, business and civic lead- ers to address the workforce gap can result in a more sustainable economy for the region and greater opportunities for Silicon Valley’s residents.

EXAMPLES OF CURRENT EFFORTS

• ORACLE’S PROMISE–donated $100M to provide network computer access to every child in America • CISCO NETWORKING ACADEMY PROGRAM–spent $20M to instruct students on how to build and manage computer/server networks • HEWLETT-PACKARD SILICON VALLEY GRANTS COMMITTEE–awards about $800,000 annually to non-profit and educational institutions • SEMI SCHOOL-TO-CAREER PROGRAM–partners with education to foster better awareness of the semiconductor industry • JUNIOR ACHIEVEMENT–partners with industry to teach kids how business works • METROPOLITAN EDUCATION DISTRICT FOUNDATION–serves academic and vocational needs of the community by raising funds and overseeing programs • SILICON VALLEY MANUFACTURING GROUP–established Workforce Silicon Valley for high school and community college students to gain experience in workplace • NORTH VALLEY JOB TRAINING CONSORTIUM–develops an efficient and effective employment training system • TECHNOLOGY NETWORK–facilitates industry collaboration of Silicon Valley technology companies for education reform and legal reform through political lobbying

11 Student Awareness of Silicon Valley Careers

A significant portion of the study was devoted to learning about how Silicon Valley students perceive high-technology as a career path–if at all. The development of “home grown” students as new members of Silicon Valley’s workforce is of enormous importance and as the remainder of the report reveals, many of our students have only limited awareness of high-tech as a career opportunity or of the requirements such a career will demand of them academically.

To ensure full utilization of Silicon Valley’s “homegrown” talent, area secondary students must be prepared to enter high-tech fields. A survey of 1,160 eighth-graders and high school juniors, however, indicates that local students are not well-informed about Silicon Valley careers and consequently, are not building the skills required for these opportunities. The student survey revealed that to increase the supply of qualified workforce participants, Silicon Valley schools need to foster student interest in “hard subjects” such as math, sciences, computers, and engineering.

When asked how well they understood a broad array of careers, students indicated a low awareness of high-tech careers; however, most students are aware of programmer and engineering jobs (69 percent rated these as ‘3’, have some familiarity, or ‘4’, understand well).

OF A BROAD ARRAY HOW WELL DO YOU UNDERSTAND THE FOLLOWING CAREERS? OF CAREERS ON A SCALE OF 1 (NO CLUE) TO 4 (UNDERSTAND WELL) — CONSOLIDATED 8TH AND 11TH GRADE STUDENT SCORES(1) POLLED, STUDENT High-Tech Careers Lawyer AWARENESS OF Doctor/Nurse HIGH-TECH Farmer CAREERS IS AT THE LOWER END Administrative Assistant OF THE SPECTRUM Sales and Marketing Engineer Computer Programmer Graphic Artist Web Master/Designer Politician Technician IT/Network Manager Technical Writer Factory Assembler Financial Analyst Quality Assurance Manager

0% 13% 26% 39% 52% 65% 78%

NOTE: (1) FAMILIARITY SCORE IS THE TOTAL OF RESPONSES ‘3’ (HAVE SOME FAMILIARITY) AND ‘4’ (UNDERSTAND WELL) TO THE QUESTION ABOVE.

“Even students whose parents work in high-tech know little about the opportunities, and even less about what they should be doing in school to qualify for a 21st-century career.”

JOANNE JACOBS, EDITORIAL, SAN JOSE MERCURY NEWS, 5/10/99

12 STUDENT AWARENESS OF SILICON VALLEY CAREERS

Thirteen percent of eighth-graders and 12 percent of high school juniors included computer science/ engineering at the top of their list of “coolest” jobs in Silicon Valley. However, 51% of the students answered “don’t know”.

STUDENTS LIST WHAT DO YOU THINK IS THE “COOLEST” JOB IN THE SILICON VALLEY? CONSOLIDATED 8TH AND 11TH GRADE STUDENT SCORES COMPUTER SCIENCE AND COMPUTER Don’t Know ENGINEERING AT Other TOP OF THE LIST Computer Science/Engineering OF “COOLEST” Graphic Art/Design JOBS IN THE Engineering SILICON VALLEY Computer Graphics/Web Design Medical Business CEO

0%7% 14% 21% 28% 35% 42% 49%

Students were also asked to name subjects needed to prepare them for jobs in high-tech companies. Although 75 percent of eighth-graders and high school juniors listed computer related courses as being important, a low percentage of students from both grade levels perceived math and science as relevant to high-tech careers.

MATH AND SCIENCE WHAT KIND OF COURSES DO YOU THINK ARE REQUIRED FOR JOBS IN HIGH-TECH COMPANIES? CONSOLIDATED 8TH AND 11TH GRADE STUDENT SCORES(1) ARE NOT PERCEIVED TO BE AS RELEVANT Computer AS COMPUTER Don’t Know RELATED COURSES Math FOR SUCCESS IN A Other HIGH-TECH CAREER Reading/English Art/Drama/Speech Chemistry Electronics Physics

0%10% 20% 30% 40% 50% 60% 70%

Greater than 90 percent of the students indicated that they plan to pursue higher education after high school. While the majority of students are undecided on their college majors, computer science is one of the more popular future majors.

NOTE: (1) SCORES EXCEED 100% SINCE STUDENTS COULD INDICATE MULTIPLE SUBJECTS.

13 STUDENT AWARENESS OF SILICON VALLEY CAREERS

Furthermore, students indicated a strong preference for liberal arts courses over math and science when asked which subjects they liked the most. When asked the corresponding question, about which classes they liked least, math topped the list. Reasons cited for not liking subjects: “no interest” and “class hard” were cited most often.

STUDENTS LIKED OF THE SUBJECTS YOU HAVE TAKEN, WHICH ONES DO YOU LIKE THE MOST? LIBERAL ARTS CONSOLIDATED 8TH AND 11TH GRADE STUDENT SCORES(1) COURSES MORE Art/Drama/Speech THAN MATH AND Math SCIENCE Computer P.E./Sports Reading/English History/Social Studies Algebra 1 Biology Foreign Language Woodshop Chemistry

0%5% 10% 15% 20% 25% 30% 35%

OF THE SUBJECTS YOU LIKE THE MOST, WHY DO YOU LIKE THOSE SUBJECTS? CONSOLIDATED 8TH AND 11TH GRADE STUDENT SCORES(1)

Class Fun Have Strong Interest Has Real World Applications Like Teachers Class Easy

0%5% 10% 15% 20% 25% 30% 35%

According to the student survey, family, media and advertising play a significant role in informing students about careers. The influence of career counselors is only secondary. Of the 28 percent of students who use career counseling services, only a third have become more aware of Silicon Valley careers.

FAMILY, TV AND HOW DID YOU HEAR ABOUT THE CAREERS YOU CHECKED AS “UNDERSTAND WELL”? THE MEDIA ARE CONSOLIDATED 8TH AND 11TH GRADE STUDENT SCORES(1) IMPORTANT Parents/Siblings/Relatives INFLUENCES THAT TV/Media/Advertising HELP STUDENTS Teachers UNDERSTAND A CAREER WELL Books/Maps Other Students Summer Job Career Counselor(2)

0%10% 20% 30% 40% 50% 60% 70%

NOTE: (1) TOTAL SCORES EXCEED 100% BECAUSE STUDENTS COULD INDICATE MULTIPLE SOURCES OF CAREER INFORMATION. 14 (2) AS NOTED, THE SCORES ABOVE ARE FOR CAREERS THAT THE STUDENTS “UNDERSTAND WELL.” CAREER COUNSELORS MAY BE PROVIDING BACKGROUND INFORMATION ABOUT A WIDE SPECTRUM OF CAREERS AND COLLEGE CHOICES. THEY MAY NOT BE THE PRINCIPAL SOURCE FOR HELPING STUDENTS UNDERSTAND A CAREER WELL. STUDENT AWARENESS OF SILICON VALLEY CAREERS

Female high-tech career awareness is consistently lower than that of males; however the most dramatic discrepancy is between Hispanic students and white and Asian-American students.

THERE IS A AWARENESS OF HIGH-TECH CAREERS VARIES ALONG ETHNIC LINES(1) ON A SCALE OF ‘ 1 ’ (HAVE SOME FAMILIARITY) TO ‘ 4 ’ (UNDERSTAND WELL) — CONSOLIDATED 8TH AND 11TH GRADE STUDENT SCORES(2) SIGNIFICANT VARIATION OF

Hispanic Technician HIGH-TECH African American CAREER AWARENESS White Factory Assembler ALONG ETHNIC Asian-American LINES IN THE STUDENT Engineer POPULATION

IT/Network Manager

Computer Programmer

Quality Assurance Manager

Web Master/Designer

Technical Writer

Average(3)

0% 12% 24% 36% 48% 60% 72%

NOTES: (1) SAMPLE SIZE OF ETHNIC POPULATIONS WERE: HISPANIC–214, AFRICAN AMERICAN–35, WHITE–562, ASIAN–179, OTHER–168. (2) FAMILIARITY SCORE IS THE TOTAL OF RESPONSES3' ‘ (HAVE SOME FAMILIARITY) AND ‘4 ’ (UNDERSTAND WELL) TO THE FINDINGS ABOVE. (3) AVERAGE IS AN EQUALLY WEIGHTED SCORE OF THE EIGHT CAREER CATEGORIES SHOWN.

“The development of academic skills sufficient to meet the demands of our Valley’s primary employers in high- technology is of critical importance. To sustain our competitive advantage our workforce must have the best education and job training local schools and community colleges can offer. Our company participates with and supports the many organizations that are partnering with our schools to make this happen.”

PATRICK V. BOUDREAU, SENIOR VICE PRESIDENT, HUMAN RESOURCES, CIRRUS LOGIC

15 Implications for Silicon Valley

The driving force of the Silicon Valley economy is technology, specifically, specialized clusters of technology firms and talent. Nearly 40% of Silicon Valley’s workforce is employed in technology- related industries, and many more jobs are tied to the health of these industries. These clusters are dynamic; constantly innovating and changing as evidenced by the recent explosion of Internet companies in the Valley(1). While the Valley’s economy has considerable strengths, the question for the future is whether this dynamic economy is sustainable.

Since 1995, employment has been growing much faster than the local labor force, causing a tightening in the regional labor market and creating a workforce gap between skilled labor resources required and the regions ability to meet that demand.

The workforce shortage is becoming an increasingly critical impediment to the growth of high-tech companies in Silicon Valley and threatens the economic vitality of the region. Employers indicated three key drivers of the workforce shortage:

• Limited supply of qualified candidates, • High housing costs in Silicon Valley which affects attraction and retention of talent, and • High wages which hinder small to mid-size companies’ ability to hire.

The incremental cost of the workforce gap to the high-tech industry in the Valley is $3–4 billion annually and significantly higher when we consider the impact on community and quality of life. In addition, student familiarity with high-tech careers does not necessarily lead to their pursuit of high-tech related majors in college, which has the potential to jeopardize the pipeline of future skilled workers. While there are many current individual efforts underway by local educational institutions, community groups, industry associations, and employers, none of these have affected a lasting improvement on the workforce gap.

It is necessary for employers to begin to appreciate the total employment lifecycle cost perspective in recognizing the need for cultural change. This will help educate the Valley leadership towards allo- cating the appropriate level of resources to address the workforce shortage. There is also a need to “grow the pie” of Silicon Valley labor, by increasing labor inflows, retaining or re-deploying existing workforce labor, and decreasing labor outflows.

FUTURE ACTIONS The solution that will provide a sustainable long-term impact on the workforce shortage is the collabo- ration among Silicon Valley stakeholders on a region-wide basis. Opportunities for the Workforce Partnership Initiative of Joint Venture: Silicon Valley Network are to define key success factors to decrease the workforce gap by:

• Encouraging participation among all stakeholders to address the workforce gap issue, • Facilitating linkage of curriculum development between business and education for training programs in high demand skill clusters, • Taking steps to raise the student awareness of and excitement in high-tech careers; and increased interest in building the necessary fundamentals to participate in these job opportunities, and • Expanding the focus and scope of current internship, externship, job mentoring and cooperative education programs.

NOTE: (1)CONTACT JOINT VENTURE: SILICON VALLEY NETWORK FOR A COPY OF ITS INTERNET CLUSTER ANALYSIS, CONDUCTED BY A.T. KEARNEY, 1999

16 Joint Venture: Silicon Valley Network

Joint Venture is a non-profit organization with a vision of building a sustainable community collabo- rating to compete globally. We bring people together from business, government, education, and the community to identify and to act on regional issues affecting economic vitality and quality of life in Silicon Valley. We serve as a catalyst, a neutral forum where the private and public sectors come together to drive toward results.

A.T. Kearney is one of the world’s largest and fastest growing management consulting and executive search firms. With a global presence spanning every major and emerging market, A.T. Kearney provides strategic, operational and information technology consulting and executive search services to the world’s leading companies. The firm’s Global High Technology Electronics Practice, located in the heart of Silicon Valley, specializes in serving those companies that are creating the technologies that enable the Internet Age, and assists companies across all industries in the development and imple- mentation of e-services and e-commerce strategies. The Practice addresses a variety of management issues ranging from business strategy development to acquisition analysis, and assists high-tech companies ranging from Fortune 100 to venture capital-backed start-ups build and grow their busi- nesses and management teams. Its consultants provide expertise that is backed by years of industry and professional services experience in the semiconductor, software, computer equipment, networking and consumer electronics industries. The Global High Technology Practice has also developed strong links to Silicon Valley’s high tech- nology business and civic communities by sponsoring pro bono engagements and partnerships with a selective set of organizations, focusing on key issues important to its clients. Through its sponsorship of pro bono engagements for organizations such as Joint Venture: Silicon Valley Network, the San Francisco Partnership and the Bay Area Council, A.T. Kearney applies its consulting skills to address economic growth and quality of life concerns that all Silicon Valley companies share. The Practice also partners with and supports many important Silicon Valley organizations–such as Junior Achieve- ment of Santa Clara County–through board positions and donations. SPONSORS Adobe Systems A.T. Kearney Arthur Andersen Cisco Systems

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