After enduring a protracted downturn and shedding 5.7 million jobs, 33 percent of their workforce, American manufacturers are leaving money on the table — and it’s ironic that a labor shortage would force them to do that.
A recent study from Accenture and The Manufacturing Institute reveals that companies may be losing up to 11 percent of annual earnings due to rising production costs stemming from a dearth of skilled workers.
Engineers, IT professionals and skilled tradespeople such as mechatronics technicians are hardest to find says Amy Cell, senior vice president of Talent Enhancement for the Michigan Economic Development Corp.
“We’re seeing rising wages and overtime and a potential impact on quality due to increasing turnover as new hires struggle to assimilate into the manufacturing environment,” she says.
An archaic image and outdated talent management practices are just some of the reasons why manufacturers are behind the eight ball when it comes to recruiting a new breed of factory worker who possesses technical, communication and math skills.
Nearly 75 percent of companies are reporting a moderate to severe shortage of skilled resources, and unless rectifying steps are taken, millennials will continue to seek greener pasture in places like Wall Street and Silicon Valley.
Here are several proven short-term strategies for closing manufacturing’s talent gaps.
Win head-to-head recruiting battles
In a competitive marketplace, it’s imperative to win direct competitions for available talent. Science and engineering degrees in the U.S. have increased by 19 percent since 2009, which should be good news for manufacturers.
Unfortunately, midsize manufacturers are getting outhustled by large companies and high-tech firms who dangle sexy projects, internships and job offers in front of science, technology, engineering and mathematics majors during their sophomore and junior years.
“Midsize manufacturers start too late,” says Jim Adams, vice president and partner of the Engineered Products and Services Practice at Strategy&. “By the time they get to campus in February or March, the top seniors are taken and they’re fighting over the leftovers.”
Providing guest lecturers, hosting student projects and networking with professors are low-cost ways to build relationships with budding professionals and preview their potential.
Manufacturers need to re-engineer their career track, professional development programs and communications strategy if they want to attract millennials, says Matt Mani, vice president and partner with Strategy&.
“Manufacturers take a fragmented approach to career development and that’s hurting their ability to compete for younger workers,” he says. “It’s not just an HR problem; it’s holistic.”
For instance, manufacturers are having a hard time attracting finance majors Adams says. Meanwhile, G.E. Capital is touting rotational training programs, lateral moves, stretch assignments and promotions based on performance instead of time and grade. Consequently, the financial powerhouse has no problem attracting the best and the brightest.
Manufacturers need to involve younger professionals in campus recruiting, update their image and shift their engineering model to attract and develop STEM graduates, Mani says.
Since millennials are more likely to hunt for work on social media, communicate by text message and are drawn to socially responsible employers, manufacturers need to implement some major shifts in their recruiting strategies to appeal to this idealistic segment of the labor market.
Younger workers are looking for more than a paycheck, they want to make a difference, and most importantly, they want to work for a company whose values match their own. Involving young, energetic professionals in campus recruiting can help to change manufacturing’s staid, dated image.
“Other industries have created competence centers or centers of expertise led by senior engineers,” he says. “The oil and gas industry, for example, is pairing newly minted engineers with seasoned veterans who provide mentorship and training across a variety of disciplines and specialties.”
Mani points out that providing cross-specialty education and upskilling not only entices career-focused newbies it increases manufacturing capabilities and scale.
When all else fails, offering premium pay and an employee-centric work environment can help manufacturers poach experienced talent from competitors and retain top performers.
A climate survey may expose employee burnout or other issues in round-the-clock production environments that can be solved with schedule or shift changes, Cell says.
“Understanding and resolving the root cause of turnover and becoming a preferred employer can give manufacturers a competitive advantage in head-to-head battles for available talent,” she says.
Accelerate talent development
With an estimated shortage of 600,000 industrial workers nationwide, unions, businesses and educators across the country are uniting and investing millions in training to build a larger, highly skilled manufacturing workforce. Best of all, alliances with trade schools and community colleges can increase the flow of custom-trained candidates in a matter of weeks.
Companies should optimize and customize the training programs toward their specific needs by engaging with the institution and treating them like a partner, says Gardner Carrick, vice president of The Manufacturing Institute, an affiliate of the National Association of Manufacturers.
“Donate equipment, offer internships, externships or apprenticeships or guarantee interviews and job offers to trainees to influence the curriculum, schedule and graduation standards,” he says.
For instance, Ed Youdell, president and CEO of the Fabricators & Manufacturers Association and its charitable foundation, Nuts, Bolts & Thingamajigs, credits a Utah manufacturer’s apprenticeship program and relationship with Ogden-Weber Tech College with helping the firm add 140 trained workers over the last five years.
Ogden-Weber has responded to local manufacturers’ immediate hiring needs by creating competency-based, self-paced training programs that enroll a new class every Monday.
“In Michigan, recent high school grads alternate eight weeks of classroom training with eight weeks of hands-on training at local manufacturers,” Cell says. “They tackle increasingly challenging assignments and become fully productive in six months. Employers achieve ROI in just 12 months.”
Offering bonuses or retroactive pay increases is another approach to new hires who enhance their skills by completing certification or training programs within the first year. Or, creating a marketing campaign targeted toward returning veterans with technical backgrounds.
Approximately 180,000 veterans will enter the civilian job market every year. And according to a recent study by the Apollo Research Institute, employers rate veterans as stronger in teamwork, work ethic and ambition than civilian recruits.
If you want exclusive access to graduates, follow the lead of DeWys Manufacturing and create an in-house university. DeWys students receive hands-on training in areas such as powder coating, welding, brake press and machining and graduate in just 12 weeks.
If you’re unable to buy or build a highly skilled manufacturing workforce, borrowing talent might be a viable option.
Major staffing firms like Kelly Services and Manpower can help manufacturers balance supply with demand and close talent gaps by providing experienced manufacturing workers on a contingent basis, Youdell says.
“Staffing firms are good at recruiting so small and midsize manufacturers get the benefits of their expertise, branding, talent pool and national reach,” he says. “They may be willing to administer custom training programs. Plus, manufacturers get preferred rates and you have the option of converting top performing contingents to full-time status.”
Nearly half of all students enrolled in STEM programs in U.S. universities are from foreign countries. Students studying under an F1 visa are eligible to work in the U.S. under the OPT visa program for 12 to 18 months after graduation Cell says. F1 students can even transfer to H1B by obtaining a suitable sponsorship position with a sponsor company.
“Foreign students are a viable option for closing STEM talent gaps on a short-term basis,” Cell says. “And they may provide a long-term solution to shortages of IT and engineering talent under certain circumstances.”
Long-term solutions: build a talent pipeline
Almost 80 percent of manufacturing jobs are held by workers between the ages of 45 and 65, according to ThomasNet.com’s Industry Market Barometer®. And as many as one-third are planning to retire in the next few years. With the younger generation rarely considering careers in the manufacturing industry, it’s time for manufacturers to change perceptions and build a robust talent pipeline to head off future shortages. Here are four tips:
- Showcase your environment
Inspire a new generation of manufacturers and dispel outdated myths by hosting open houses on a regular basis and participating in Manufacturing Day. Let high school and local college students, teachers and community leaders see your clean, high-tech environment and the evolution of careers in manufacturing.
- Engage future workers
In Pennsylvania, 19 teams of middle schoolers created videos using the theme: What’s so cool about manufacturing? Contests, games and collaborative lab schools are a great way to engage with future engineers, designers and technicians.
- Organize summer camps
Every summer, thousands of middle and high school students across the U.S. get exposed to manufacturing design process, CAD, manufacturing machinery, engineering and vocational training programs that no longer exist in public schools, Youdell says.
“Each camp is unique in its own way and addresses local needs, so involvement from manufacturers is key” he says. “The camps connect students with local industry businesses, faculty and staff who serve as mentors and coaches.”
- Offer scholarships and grants
Not every manufacturing job requires a four-year degree. Meet future hiring needs by offering training grants or community college subsidies to high school students or by participating in a subsidized training and employment program run by local governments.
Snapshot of manufacturing employment
Manufacturers are doing more with less as the industry resurges
After bottoming out in 2011, manufacturing employment is on the rise. Employment, however, may never return to pre-recession levels as highly skilled workers and strategic investments in technology push productivity levels.
Manufacturers are managing the shortage of skilled labor by boosting productivity and output, says Stuart Hoffman, chief economist with PNC Bank.
“Today’s manufacturing professional is more highly skilled and trained,” he says. “As a result, manufacturers are able to do a whole lot more with fewer employees.”
Hoffman offered this snapshot of manufacturing employment and the conditions that are fueling productivity.
How have manufacturing employment levels changed?
Manufacturing jobs represented 22 percent of all nonfarm payrolls back in 1977, but today, they account for only 9 percent of total employment. The sector lost roughly 2 million jobs from 2007 to 2009 or 15 percent of the manufacturing workforce, and employers have only added 300,000 jobs since the recession ended including 180,000 positions in the last 12 months.
How are manufacturers managing to do more with less?
Costs have risen more slowly due to a potent combination of steady oil prices, lower energy costs and productivity gains. Some companies have cut production costs by reusing materials and components and becoming more energy efficient. As a result, output has risen to pre-recession levels and profitability is higher.
How can state governments help?
Governments don’t create jobs but they can create the right environment to foster employment growth. To that end, some states have lowered taxes, taken steps to reduce energy prices and sponsored workforce training and development programs. Job seekers don’t necessarily need a four-year degree to work in manufacturing, so state-sponsored training programs are a boon to individuals as well as manufacturers who are looking to hire a new breed of worker.
Stuart Hoffman is chief economist with PNC Bank.