Employers, job seekers must both adapt to meet new market realities

There have been many changes in recent years to the employment landscape for both employers and job seekers. For example, social networking is having a significant impact on how job searches are undertaken by both employers and candidates.

But that’s not where the need to adapt stops. La Tina R. Johnson, Ed.D., workforce director of Job Link Services at Cuyahoga Community College, says employers are increasingly having difficulty finding the right talent in the Northeast Ohio workforce.

“A high school diploma is no longer enough to qualify someone to land a job that pays a good wage,” she says. “Individuals need to have up-to-date skills and, where applicable, have stackable certifications that show progressive skill attainment in order to advance within their career.”

And as candidates improve their skill sets through training and education, Johnson says employers should find ways to onboard candidates who have the right skills, but lack industry experience.

Smart Business spoke with Johnson about the region’s hiring environment and how employers and job seekers can both get what they want.

How do employers and job seekers each view the regional employment environment?

Beyond up-to-date technical competencies, and proven industry knowledge and experience, employers are increasingly looking for candidates with excellent soft skills — chief among them the ability to effectively communicate — so the employee can work well with others within the company and be an outstanding representative of the company when interacting with customers. Employers frequently talk about closing the soft-skills gap they see in workplace etiquette, work ethic, communication and customer service.

Employers are finding that a lack of soft skills leads to retention issues — candidates have the technical qualifications to land a job, but they can’t keep it. This isn’t something employers are willing to invest time or resources into fixing, so candidates need to apply self-awareness and self-discipline to ensure they arrive to work on time and with the proper motivation, and avoid unnecessary call offs.

Job candidates express concern that there aren’t enough available jobs in the market and that they often do not have the qualifications desired for positions that are available. Regarding the latter, it’s important to understand that the job market is changing and employers expect more out of their workforce. This means candidates who find they’re often unqualified for these positions need to get additional training so that they’re among the better candidates for the region’s in-demand positions. This could mean undertaking training or education to facilitate a transition into another industry.

What would you consider to be the barriers that make it difficult for employers and job candidates to connect?

It’s typical for employers to want candidates to have a certain number of years of experience in a field. This may narrow the pipeline of applicable candidates who are just finishing school or have taken courses to facilitate a transition to a new industry. To open the door to candidates who lack the experience, but have the skills to do the job, employers should consider creating more internship opportunities to help candidates transition from academia to the workforce, or be willing to give them an opportunity to showcase their talent in entry-level positions that have a clear upward trajectory.

Candidates, on the other hand, should understand that a transition to a new field won’t come at the same wage or salary they had in their previous role. They shouldn’t be too quick to dismiss entry-level roles because they offer a chance to get work experience and show value to employers, which creates opportunities for advancement. Take into account the whole opportunity, including skill building and the value of the entire compensatory package.

Employers today have put an emphasis on culture and have higher expectations of candidates. That means job seekers need to be willing to build up their technical skill set and improve soft skills to land and keep a job. And employers need to reconsider job qualifications to welcome transitioning candidates who may not yet have the experience, but are otherwise prepared to hit the ground running.

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Training and continued education are central to success in public safety

Over the next few years, career fields in public safety — police officer, private security, corrections officer, emergency medical technician (EMT), firefighter, paramedic, 911 dispatcher and others — are expected to grow their demand for qualified candidates. This increase in demand has brought with it a greater emphasis on training.

“This is a period of time in the U.S. in which we have put greater value on our safety,” says Clayton A. Harris, chief of police at Cuyahoga Community College and dean of the college’s Public Safety Center of Excellence. “When the country went through the financial crisis, in many cases security services were among the first to be cut. That’s not the case anymore. Security is considered a necessity, and that has organizations reconsidering how that department functions as a part of the whole.”

He says there is a demand for well-trained security professionals who are capable of employing the latest techniques and technology as organizations look to offset attrition related to the aging workforce.

“There is a constant need to replace outgoing people,” he says.

Smart Business spoke with Harris about what public safety candidates and working professionals need in order to be successful.

What kind of training is needed to pursue a career in public safety?

Those interested in a career in public safety need to prepare to take the requisite state examinations. The Ohio Peace Officer Training Commission creates criteria to become a certified officer in the state.

Generally, candidates need their high school diploma, which is a prerequisite to enter into the required academies. In addition, candidates must pass a background check and a physical agility test. Once those are passed, candidates attend a police academy, which can be run by different agencies. Large cities typically have their own academy; community colleges also have a basic police academy. An academy takes students through more than 600 hours of training that should prepare them to pass the state examinations.

With other career trajectories, such as corrections officer, the candidate must be employed by a county, which has its own corrections academy or contracts with an agency like Tri-C to run an academy on its behalf. Once a person has been hired and sworn in as a corrections officer, he or she will undertake an additional 200 hours of training and take the certification test.

Security guards have a 140-hour basic training program that, once completed, sets them up to take the state exam. The criteria for firefighters, paramedics and EMTs are similar in that there is a training academy that prepares candidates for the state exam.

How can those currently working in public safety keep their skills current?

Staying current is essential for people working in the public safety field. That’s easier nowadays because there is a great deal of information available on the web. Large groups, such as the International Association of Chiefs of Police and the U.S. Department of Justice, for example, make research available that covers trends, equipment and more. In addition, there are many public safety publications and websites, professional associations, and local, state and regional organizations that help professionals in the field stay up to date.

How has technology impacted training and tools used on the job?

In order to be effective in the public safety field, candidates and professionals must take advantage of the latest tools and technology, much of which requires training to use correctly and be successful. For example, the technology that has made body-worn cameras possible has improved exponentially, as has the technology around the design and use of bulletproof vests, improving their capability to stop certain munitions. Technology has also impacted investigative techniques and the equipment used to investigate crimes. Police need to be aware of these changes and remain up-to-speed enough to employ them.

When I hire an officer, he or she must be able to show competence when using the latest technology or it’s hard for me to build that person up to someone who can be effective in the field. It’s critical that candidates are exposed to the latest technology and gain some knowledge on how to deploy it effectively.

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Candidates with the right skills can have a future in manufacturing

Manufacturing in Northeast Ohio is a more than a viable career option. The industry is leading the region in employment opportunities and is contributing considerably to Northeast Ohio’s economy, which is why the need for workforce training is critical.

“There may be many people interested in manufacturing who don’t believe they can do the work because they lack the necessary skills or don’t know what opportunities exist,” says Alicia Booker, vice president of manufacturing at Cuyahoga Community College. “Fortunately there are intermediaries that can teach these skillsets, translating the needs of employers to future employees.”

Smart Business spoke with Booker about job opportunities in manufacturing and the skills needed to be successful in the industry.

What are the skills needed in today’s manufacturing industry?

There are essentially two levels of skills. The first level includes the more traditional technical skills required of mechanics, HVAC technicians, machinists and welders. Those with these skills are still in demand. There’s a gap in the talent pipeline, however, largely because of a drought in vocational opportunities — shop class, for instance.

The other level includes the soft skills, such as critical thinking, communication, troubleshooting, and writing and organizational skills. The nature of work has changed in manufacturing. People don’t just work with their hands. They need to be able to think critically about the impact their job has on the other aspects of a project and solve problems.

Another consideration for those in the trades is the ability to create a pathway to management. Having the skills needed to get an entry-level job is one thing, but there is a need for people to move up to management, which necessitates an understanding of the regulatory environment that surrounds a company, sales, customer service, etc.

What areas of manufacturing are expected to have the most job growth?

The segment with the most anticipated growth is transportation — automotive is expected to be strong, but the emerging growth is in aerospace. Fabricated metals is an area of growth as the defense and medical industries call for lighter materials that have greater levels of performance. Food manufacturing is also contributing to growth in manufacturing, as is steel-based machining. The oil, gas and coal industry is seeing resurgence, but not in a significant way. However, if it picks up it will be a huge economic feeder in Northeast Ohio.

What misconceptions are keeping some from pursuing a career in manufacturing?

There’s a belief that manufacturing jobs are dirty and unsafe; require little skill, so they’re geared toward those who are not college bound; and have a high potential for layoffs. That’s a significant misconception, especially in advanced manufacturing. Factory floors are generally much cleaner today than they have been and much of the work has a digital component. Much of it requires highly skilled people to perform.

How can those people currently working in manufacturing keep up with new technologies or gain new skills?

There has to be a commitment to gaining new skills, whether employers help with that through talent and professional development, or people develop their own skills and grow through education.

At some shops, it’s a collaborative environment in which robotics work with and alongside people. That’s contributing to the expectation that Northeast Ohio manufacturers could see a 70 percent productivity increase by 2025. That leads to more opportunities and jobs, but those jobs will require a higher level of skills.

The key for job seekers will be getting the knowledge required of roles in new technologies, such as 3-D printing and the internet of things. Automation technology is also broadening its presence, but that doesn’t necessarily displace workers. People are needed to do programming and conduct an analysis of the end product to troubleshoot the equipment.

Job candidates need to prepare for how the nature of manufacturing work is changing. The same can be said for employers. Companies must change and adapt to keep up with industry advances.

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Nurses are in high demand. Here’s how to become one.

There is a very high demand for registered nurses (RN), both in Northeast Ohio and nationally.

“Nurses comprise the largest segment of the heath care workforce and there is a shortage of qualified nurses to meet increasing demands in the region and across the country,” says Vivian Yates, Ph.D., dean of the Division of Nursing Education at Cuyahoga Community College.

She says the Cleveland Hospital Association has projected that by 2020, there will a shortage of 3,500 nurses in 23 Northeast Ohio counties. Just in the Cleveland area there is a shortage of 750 nurses. And nationally, it’s estimated that there will be 32,000 open positions for nurses by 2020.

Smart Business spoke with Yates about the nursing profession and what those interested in this career field must do to get their start.

Why are there so many job openings projected in the nursing field?

There are a lot of reasons for the nursing shortage. Among them is that baby boomers, as they age and their life expectancy increases, are entering the health care system in larger numbers. More nurses will be needed to take care of that population.

In the nursing industry, there is a high number of retirements occurring. Nationally, half of all working nurses are over the age of 50, so it’s anticipated that there will continue to be a large number of job vacancies to fill.

Also there are now a wealth of alternative career opportunities for women that have opened up in the past two to three decades. In the past, nursing and teaching were the primary career options for women. Now they have many more opportunities to excel in other fields.

Demand for nurses is coming from across the health care industry. Traditionally, most nurses were employed in hospitals. But now that more of the older population desires to live in their homes longer, there is an increased need for nurses in home care, community care, long-term care and ambulatory care. Additionally, changes in health care policy are affecting how and where nurses are utilized.

What skills do health care organizations looking for from newly graduated RNs?

Nurses should be able to perform health histories and health assessments, interpret patient information and make decisions about needed actions, counsel and educate patients, provide health promotion information, perform health care interventions and coordinate patient care in collaboration with other health care professionals. Additionally, health care organizations are looking for nurses with good decision-making and critical-thinking skills. They must be able to assess a situation and make critical decisions on the spot.

What would put someone in the best position to succeed as an RN long term?

Nursing school is the place to start for those who want to become an RN.

In the past, a diploma in nursing through hospital-based schools of nursing was the most common route. Today the most popular options for nursing education are to earn an associate degree through a community or technical college, which prepares nurses for a defined technical scope of practice, or a bachelor of science degree in nursing through a four-year college or university. The bachelor’s degree prepares graduates to engage in a broad scope of practice across all health care settings.

Those who want to specialize in a specific area of health care will need a graduate degree in nursing — either a master’s, Ph.D., or Doctor of Nursing Practice.

What should someone considering a career as an RN understand about the profession?

Candidates must be comfortable in a health care environment. These settings can be demanding, so it’s important for them to have an understanding of the expectations of the nursing profession.

Additionally, nursing candidates should sharpen their math and science skills, which are the foundation of nursing education. Some may need to take additional classes to be sure those skills adequate.

Nursing is an exciting career with diverse opportunities and great earning potential for both men and women. Nursing provides an opportunity to make a direct impact on the lives of others.

Insights Education is brought to you by Cuyahoga Community College

Soft and hard skills are needed to fill in-demand jobs

In Northeast Ohio and across the country, employers are looking for skilled candidates to fill in-demand jobs. Regardless of industry, employers are putting an emphasis on communication and creativity, looking for those who can offer fresh perspective and innovation to a too often stagnant menu of offerings.

Smart Business spoke with Paul Cox, dean of Creative Arts, and Michael Huff, dean of Hospitality Management, both at Cuyahoga Community College. They offer their perspective on how the next generation of candidates is gathering the skills needed to fill critical roles in this region and beyond.

What should employers know about those with a creative arts education?

Creativity, broadly, is applicable to all jobs, even those more closely associated with science, technology, engineering and math skills. Those running manufacturing companies are more often saying creativity is a key attribute in an employee. They say they don’t necessarily need more people to build their products, for instance, they need people instead to reimagine the concept of their products to create something new.

Creativity is a habit of mind, a skill that’s applied to invent new and better ways to accomplish objectives. It can also help in other aspects of business life regardless of industry or technical discipline, for instance being comfortable making presentations to groups of people, being brave enough to expose a new idea to others and to confidently confront failure.

In what fields can those with a creative arts education be employed?

Each discipline has its own job prospects. For example, those with an education in recording arts often work in live sound — from major music artist tours to conferences. Visual communication students are helping large corporations with web and print designs, as are photographers who are showcasing companies’ products and events.

But regardless of whether the student was educated in filmmaking, music or journalism, what they all share is an entrepreneurial spirit. Many of them start their own businesses and promote themselves as if they’re their own brand. They also network and collaborate with others to finish projects and grow their enterprises. These are highly desirable attributes regardless of industry.

What are the career paths that are available to students with an education in hospitality?

Hospitality is a people industry that emphasizes serving others. There’s significant demand in Northeast Ohio and nationally for qualified talent to fill these positions today and in the future. The Department of Labor is projecting a 14 percent growth in culinary and hospitality service careers through the next 10 years.

Those with an education in culinary receive a good foundation in advanced culinary techniques, preparing them to work in various aspects of the culinary industry. That education also includes training in the managerial skills needed to work in a supervisory role in kitchens, along with experience to get started on the path to becoming a sous and executive chef, or training to do specialty work in baking, pastry professional or personal chef.

Degree study in restaurant and food service management prepares students for food service supervisory and management positions. Those can include positions in specialty restaurants, country clubs, at major event venues, commercial food service operations and large companies.

What are the core skills of those with an education in hospitality?

Many institutions of higher education are integrated into the local industries that they serve — their programs not only teach the Xs and Os, but often these programs stress the communication and critical thinking skills needed in these business applications. Chefs and managers alike must be able to communicate with servers, vendors and customers clearly to be successful.

Those with an education in either hospitality or the creative arts are learning critical skills employers want in high-demand industries. Because educational institutions are so involved at the working level with area businesses, more job candidates are entering the workforce with both the theoretical knowledge and practical understanding of how to operate and thrive in their fields.

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How the sector-based training model could be a solution for you

Traditionally, individual companies have driven the training that higher education institutions create to solve skill gap shortages, with those companies working separately to develop workforce skills and a pipeline of qualified candidates.
Sector-based training takes a different approach.

Industry players work together to create common job descriptions, skill set requirements and applicant pools. By sitting around the same table, companies within that industry cluster can achieve economies of scale and increase training efficiency.

“We have a core group of unemployed and underemployed in Cleveland who can take advantage of some of these jobs, if given the proper training. They can be the workforce that you are seeking,” says William H. Gary Sr., executive vice president of Cuyahoga Community College’s (Tri-C) Workforce, Community and Economic Development Division. “We want to begin now, to ensure the future economic vitality of this region, and that these individuals and others seeking to advance their careers can benefit.”

Smart Business spoke with Gary about sector-based training and how he hopes to see it utilized in Northeast Ohio.

What is an example of this kind of training?

With the forthcoming Republican National Convention and downtown development, Cleveland’s hospitality industry expects exponential growth — at the same time the industry is shifting to be more focused on customer service and technology. In response, Tri-C invited hotel general managers to a focus group to discuss their challenges and talent shortages.

The general managers were receptive to a sector approach for addressing both short- and long-term needs. Short-term training solutions, such as boot camps, will fill some of their immediate needs, in order to meet the expected demand. Right now, we’re developing camps designed to accelerate customer service training, which is a key aspect of meeting their employment needs.

Leaders in the restaurant industry also heard about the focus group meeting and asked if they could be included as well.

What other industries can benefit from this approach in Northeast Ohio?

The largest potential is for industries that drive the region’s economy — those that face talent shortages while projecting a lot of future growth. It also works better for industries with specialized skill set requirements and clearly-defined career pathways. Here, that could include manufacturing, information technology, health care, construction and public safety.

You mentioned this is being adopted throughout the country, what do you mean?

There are examples nationwide of sectorial approaches to addressing workforce development need in critical skill areas. In the Washington, D.C., and Northern Virginia areas, in order to address a critical shortage of skilled and credentialed nurses, the community college, in collaboration with area hospitals and health care organizations, collaborated to create a Healthcare Alliance Consortium. By pooling financial resources, engaging K-12 schools and working with an independent consultant, the consortium created a sustainable workforce development system and model for addressing the workforce needs of an entire industry sector.

How do you get organizations that compete with each other around the same table?

Competitiveness is a key obstacle, but not insurmountable, especially in Northeast Ohio. It’s important to remember, however, that a sectorial approach doesn’t have to be in lieu of individual organization recruitment strategies. It can be institutionalized in parallel with existing workforce development strategies. The value proposition is increased efficiencies, reduced training and recruitment costs, standardization, access to greater pools of resources, and the development of a sustainable workforce systems approach to addressing workforce challenges and skills shortages.

Not only is the cost lowered, because you’re training larger pools of candidates that benefit the entire industry, but it also develops common standards and skill set requirements and credentialing across the industry. Then, no matter where your potential employee receives training or works, hopefully he or she will have a set of standard credentials that are portable and acceptable throughout the state.

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How to prepare your staff with the right skills to become supervisors

The most successful companies employ a blend of internal development and strategic external hiring. But when you promote from within, you must be sure those front-line employees are ready to take on their new roles.

It’s common for rock star individual contributors who exceed in their current job to be promoted as a result of successful performance. But when they move up the ranks to manager, they often haven’t had the opportunity to develop the skills and behaviors needed to be successful — and as a result the transition from peer to supervisor can be very difficult.

Employees should be given opportunities — preferably in advance — to learn how to coach, manage performance and hold others accountable, says Jody M. Wheaton, M.S., SPHR, executive director of Client Solutions and Programs at Corporate College, a division of Cuyahoga Community College.

“Research tells us that the No. 1 reason supervisors fail is lack of interpersonal skills,” Wheaton says. “And when you break down lack of interpersonal skills, that’s soft side leadership behaviors like how do we handle conflict, how do we communicate, how do we interact with others.”

Smart Business spoke with Wheaton about formal learning and supervisory development programs that can provide your staff with the foundational skills supervisors need.

What are the advantages of promoting from within?

Not only does it benefit employees, it also helps your customers and company.

Establishing and developing internal staff helps attract, retain and engage top talent, because really bright people want to work for a company where they have clear growth opportunities through development and promotions. In addition, studies have found that younger generations today expect to advance more rapidly.

A culture of development and advancement encourages employees to not only work hard, but also be engaged because they are working toward something.

At the same time, by hiring external employees who bring something new to the table, you add new thoughts, outside experiences and diversity. And you motivate current team members to work hard and earn the advancements in the organization.

How should organizations set up a development program?

Begin with defining what the organization needs leaders to do in order to achieve business goals, and then develop a clearly defined talent strategy. Assess your talent and develop programming focused on high potential and high performing talent. Ensure your managers and leadership team are equipped to coach employees and have frequent conversations about career advancement, including a developmental action plan to address goals.

When high potential employees have frequent informal (mentoring, coaching, etc.) and formal (supervisory training) opportunities to learn the ropes, they’re better prepared when the right opportunity arises. When they aren’t fully prepared, the experience can be frustrating for both the team and new supervisor.

Also, remember that learning and development take a shared approach. The employees who want to develop their skills should be held accountable, while the company provides support.

But it doesn’t stop there — on-boarding a new supervisor is something many companies overlook. Give a new manager a mentor or network of professionals for guidance. It’s a continuous process of coaching and providing support to help him or her learn and grow in that new role.

What do you tell employers who feel they don’t have the time and resources for this?

Successful companies put their talent first, and make the investment in ongoing development because they do see the returns. Proper allocation of training budgets and resources requires understanding the needs of the business. Resources need to focus on those initiatives that are most critical and can maximize the training investment. Training providers that are agile and can customize delivery methods and content, tailored to your audience, help focus the efforts and add depth of expertise to your internal training or HR bench.

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How to ensure your company has qualified talent over the long term

When you ask business owners what keeps them up at night, that list likely includes how to ensure their company continues to have qualified talent for the next five, 10 and 20 years.

This is a global issue that must be addressed because talent is both the most costly and most valuable need across all industry sectors. And even with the growth of automation, IT and technology, right now in the U.S. about one-third of companies have a talent need.

“It’s always one of the first things we hear from companies when they are looking to move into an area or expand their operations — they want to know about the workforce,” says Alicia Booker, vice president of operations, Workforce, Community and Economic Development, Cuyahoga Community College.

“There are no easy answers, and that’s why this is an issue,” she says. “We do need more investment and company engagement, but the reality is that this isn’t just a company problem. We all have to invest in, commit to and work together to find a solution.”

Smart Business spoke with Booker about developing a long-term organization strategy that will help keep your talent pipeline topped off.

What are you seeing with the workforce environment today?

There’s been some growth, even though it’s not at prerecession levels. Jobs are returning from overseas, but the job creation doesn’t mimic what was previously here. And wages haven’t come up to where they were. Companies are constantly trying to balance their need to grow and take on more projects against managing costs.

Right now is one of those times where we have three or four generations in the workforce. Over the next five years, about 30 percent of Northeast Ohio’s workforce is projected to decline as many who kept working during the recession retire.

The 10th annual Talent Shortage Survey, by ManpowerGroup, looked at the top reasons employers find it difficult to fill jobs: lack of available applicants (33 percent), lack of experience (19 percent) and a lack of technical competencies (17 percent). Only 10 percent of employers said the lack was because individuals wanted more money.

How can organizations better use strategy to address their talent pipeline?

Use all opportunities to combine training with work. Work with area community colleges and higher education institutions to develop curriculum, internships and apprenticeships. If this is too much to take on yourself, take an industry sector approach. Not only does this help you get candidates with the right core competencies, it gives your company more access to people to help make sure you have the right fit. The on-boarding process is smoother, which helps you avoid getting qualified people who just end up across town.

Don’t wait until you have need. It’s probably too late at that point. It takes time to find the right people or train them up, so you need to be intentional and strategic. Analyze your resources to see what you don’t have, and then seek help where you need it. Also, look within your organization for opportunities to upscale your existing workforce. With developmental training, you’ll have talent replacement so you can promote from within and then backfill entry-level employees.

Look for alternative ways to source people, so you can expand your recruiting tool chest. Everyone has gotten so database driven, where candidates apply online and are sorted in or out through analytics. If you’re not producing quality or quantity candidates, either look at alternative pathways to get more people in or do a better job of on-boarding and screening.

Once people come on board, you can’t leave them alone. On-boarding programs at all levels should accumulate them to your company and its culture. You also need someone in HR who keeps talent as a focus.

There’s been an increase of employees looking to other countries to find the skilled people they need, but that doesn’t mean you can’t get them here in Northeast Ohio by taking a long-term approach that develops the right core competencies. However, just like market changes, you have to stick with it through the ups and downs. Don’t give up on talent development, even if your business needs to change a bit.

Insights Education is brought to you by Cuyahoga Community College

How to get your workforce ready for the newest wave of technology

If you want to see where manufacturing technology in Northeast Ohio is heading, look to the automotive and aerospace industries. For example, mass customization has evolved so manufacturers can make SUVs a different color in the middle of a production run or outfit vehicles with customer options on cue.

These companies and their suppliers, who are increasingly near-sourced, are focused on automation and programmable logic controllers or PLCs, robotics, micro-electro-mechanical systems or MEMS, Nano technology, 3-D printing and Industry 4.0. Started by the Germans, Industry 4.0, is said by some to be the next evolution of manufacturing.

“It’s where you take everything along the production and assembly lines and connect it together through cyber or computer technology so that you can use all that power and information to chain together decisions in the most efficient manner,” says Dave Bredenbeck, program manager of precision machining at Cuyahoga Community College. “It’s a different way of looking at it. A skilled tradesman would be monitoring the decisions these machines come up with, instead of fully making the decision from the beginning.”

Smart Business spoke with Bredenbeck and Lam Wong, associate dean of engineering at Cuyahoga Community College, about how these technologies allow manufacturers to work smarter, and why you need to develop the skills to support this now.

How do you think these technologies will influence the region?

Industries like automotive have embraced connectivity, and other sectors are starting to see the advantages. Cisco systems can be described as the backbone of IT; Cisco has embraced this next level of manufacturing, so the infrastructure is already responding.

This is also coming from the top down. The big players have money to build up these systems and develop them — and over time that trickles down to their vendors, who need to embrace it to stay relevant. Just like with CNC machines and robots, eventually the technology standardizes and becomes cheaper for smaller companies.

Manufacturers — and other companies indirectly affected by the industry — must be ready to plug into this connectivity and already be re-thinking their work processes and training. Workers are still needed, just not in the same way.

How should employers stay on top of these trends?

Monitor the industry leaders, keep in touch with colleges and universities, and do a self-assessment of where your company is at with the Internet of Things.

Manufacturers often are too focused down on the immediate. You need to map out what your needs will be, in order to plan for the big picture. For example, employers ask higher education institutions for graduates to fulfill their short-term needs, but they don’t have time to serve on advisory committees that develop new curriculum and training programs.

Even if you aren’t ready to commit to these technologies, start thinking about getting your people ready, by hiring new talent, cross-training and up-scaling your current workforce or filling in other gaps.

What kind of training do you recommend?

Traditionally manufacturers have hired engineers, but in the future it’s going to be critical to have IT expertise. Health care has already gone through this with the development of health information technology and electronic records. Clinicians had to learn about IT, and IT experts had to develop clinical backgrounds.

For manufacturing, higher education is beginning to train students to understand software, IT and automation, as well as developing mechanical and problem-solving skills. Companies are going to need people who can connect the dots between machines and repair complex systems and sensors. New graduates must learn so much more from IT and wireless communication to data mining.

Train your people now for the next job that they’re going to have. Survey your employees to determine who would like to learn new skills, while also vetting new hires for skills in these technologies. Don’t ignore this because it’s difficult to juggle your current workflow with training for the future — it’s going to happen whether you’re ready or not.

Insights Education is brought to you by Cuyahoga Community College

How the new OTC derivative regulations could impact the market

Scott Fung, DBA, Associate professor of finance, College of Business and Economics, California State University, East Bay

Busy executives probably haven’t read Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, so they may be surprised by the broad impact of the regulatory changes to over-the-counter (OTC) derivatives trading. In addition to fundamentally changing the way the market operates, the new laws could impact your bank’s appetite for risk, your ability to borrow funds and even your company’s hedging strategy.

OTC derivatives are traded and negotiated  without going through an exchange or other intermediaries to hedge or speculate on risk. They were largely unregulated until this act.

“Any time there’s a fundamental change in the way a market operates executives need to understand the big picture,” says Scott Fung, DBA, associate professor of finance for the College of Business and Economics at California State University, East Bay. “At a minimum, the changes require increased knowledge of the interdependent relationships between the various parties, better decision making and a review of your risk management strategies.”

Smart Business spoke with Fung about the potential impact of the new derivative regulations and how executives should prepare.

Why should executives pay attention to the new derivative regulations and their market impact?

Following the financial crisis, policymakers decided that a lack of transparency and regulations in the OTC derivative market caused system-wide instability, so they created a regulated environment and increased the oversights and reporting requirements.With any legislation, there are reverberations throughout the business community and the possibility of unintended consequences, especially when the derivatives market provides the following key economic functions:

  • Price discovery. Derivatives trading provides key information on the value of the underlying assets and serves as a predictor of future prices.
  • Operational advantages. The derivatives market offers lower transaction costs and additional market liquidity.
  • Informational and allocation efficiency. Derivatives trading enhances available market information and resource allocation.
  • Business advantages. Derivatives allow companies to engage in risk management by facilitating hedging strategies and by reconfiguring risk and return trade-offs. The market allows unwilling risk holders to transfer risks for a fixed price, which frees up cash for other investments and business expansion.

What are the legislation’s key provisions and who will be impacted?

The new legislation establishes the regulatory framework for the governance of the OTC derivatives markets and vests oversight authority in the Commodity Futures Trading Commission and the Securities and Exchange Commission. The intent is to provide greater oversight and transparency for derivative transactions such as credit default swaps, commodities and equity swaps. Although the regulations primarily apply to swap dealers and major swap participants, they also impact commercial end-users, financial institutions and corporations. Key provisions include:

  • Changes in execution processes and price discovery of OTC derivatives.
  • Changes in central counterparty clearing and clearing requirements, trading activities, capital requirements and margining of OTC derivatives.
  • Changes in the reporting of transactions and record-keeping requirements.

How are these provisions likely to fundamentally alter the OTC derivatives market?

The structural changes are supposed to improve the efficiency, stability, innovation and sustainability of derivatives markets by reducing the possibility of default, system-wide risk and financial crisis. In turn, this will improve the stability and functionality of the markets and financial institutions, ultimately impacting U.S. and global businesses. But it is unclear how these regulations will impact transaction costs, margin and collateral requirements. It’s also unknown whether they will actually curtail risk or tighten the credit market by limiting financial institutions’ hedging options along with their ability to customize derivative contracts. It will be interesting to see if the regulations produce changed trading activities and characteristics, so stay tuned.

How will the regulations impact U.S. businesses?

Any regulation that impacts the market or financial institutions impacts businesses because there’s an interdependent relationship between the various parties. Ultimately, the performance of financial markets and financial institutions affect corporate decision-making, financing opportunities, risk management and so forth. Possible benefits include enhanced functionality and stability of financial institutions, better performance of derivatives contracts, and the opportunity for end-users and institutions to better manage risk. Plus, the increased transparency and availability of information along with additional oversight could increase market participation, thereby boosting market liquidity. Possible downsides of the legislation include cost increases resulting from system complexities including transaction costs, collateral and margin requirements, and diminished customization capabilities.

How should executives prepare for the new regulations and the subsequent market changes?

Executives need to understand the interdependent relationship between financial markets, financial institutions, their suppliers and clients to see how their capital supply and financial resources could be affected. They should consider how they’re managing risk, as they may benefit from the enhanced usefulness and performance of derivative contracts. They also should look out for emerging opportunities and new financing products that may spring up. Executives need to understand the regulations’s intricacies to uncover new opportunities for risk management, financial innovation and ultimately value creation.

Scott Fung, DBA, is an associate professor of finance for the Department of Accounting and Finance, which is part of the College of Business and Economics at California State University, East Bay. Reach him at (510) 885-4863 or [email protected]

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