The Affordable Care Act’s (ACA) employer mandate is delayed until Jan. 1, 2015. The employer-shared responsibilities of the ACA, also referred to as “pay or play” rules, impose penalties on large employers that do not offer affordable, minimum value coverage to their full-time employees and their dependents. For purposes of these rules, a large employer is one that employs on average at least 50 full-time employees (including full-time equivalents) on business days during the preceding calendar year.
Smart Business spoke with Amy Broadbent, vice president at JRG Advisors, the management arm of ChamberChoice, about what employers can expect with this delay.
What does this delay allow employers to do now?
The pay or play rules were originally set to take effect Jan. 1, 2014. The delay will provide business owners additional time to understand the rules and make decisions about providing health care coverage, including:
- A final determination as to the number of full-time equivalent employees.
- The look-back period that will be the basis for the calculation and coverage requirements.
- The decision to ‘play’ — sponsor employee health insurance, or ‘pay’ — pay the penalty for not sponsoring employee health insurance.
- An opportunity to compare the plans and pricing available on the insurance marketplace (public exchange) versus what is available in the private marketplace.
Why did the federal government decide to hold off on implementing certain provisions?
According to the U.S. Department of Treasury, the delay of the employer mandate penalties was required because of issues related to the reporting requirements and rules that apply to insurers, self-insuring employers and other parties that provide health coverage. The administration’s decision was based on concerns about the complexity of the requirements and the need for more time to implement them effectively.
The additional implementation period will be used to consider ways to simplify the new reporting requirements with the ACA. With these rules delayed, it would be nearly impossible to determine which employers owed penalties under the shared responsibility provisions. Therefore, these payments will not apply for 2014.
What about the rest of the health care reform law?
The delay does not affect any other provisions of the ACA, including an individual’s access to premium tax credits or coverage through an exchange. Open enrollment within the public insurance marketplace is scheduled to begin Oct. 1, 2013, so that individuals not insured otherwise can have coverage in place by Jan. 1, 2014.
It is uncertain how the new deadline will impact guidance that has already been issued.
Although the employer mandate is delayed, many employers have non-calendar year benefit plans — meaning their contract renewal date could come prior to Jan. 1, 2015 — and will want to be in compliance with the ACA prior to Jan. 1, 2015.
What are employers’ next steps?
Employers should consider ‘staying the course’ and continue to plan and implement a strategy beginning Jan. 1, 2014. If nothing else, these employers will have gained a year of experience in addressing cost-sharing, coverage requirements, employee perception and reaction to the employer-sponsored plan versus the public marketplace, administrative issues, etc. They will be in a better position beginning Jan. 1, 2015.
On the other hand, if the delay would be deemed unconstitutional at some point later this year or next, and the penalties would take effect Jan. 1, 2014, these employers will find themselves protected.
The pay or play regulations issued earlier this year left many unanswered questions for employers. The employer mandate delay gives the IRS and Treasury the opportunity to provide more comprehensive guidance on implementing these requirements. Your adviser should continue to monitor developments and keep you informed of the latest updates.
Amy Broadbent is a vice president at JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7250 or email@example.com.
Insights Employee Benefits is brought to you by ChamberChoice
When D. Kevin Horner took the reins of Mastech as president and CEO in 2011, he had the confidence of the company’s leadership and board of directors, but the people in the business were saying, “Why him? He’s never been in the staffing business. What does he know?”
“Frankly, it was a very reasonable question,” Horner says.
Horner is an experienced IT professional, having been in the arena for the previous 30 years at Alcoa, where he served as CIO of business units in Europe and North America. Horner ended his time at Alcoa as the CIO of the entire company. Alcoa and Mastech, however, are two very different animals.
“There were some things I was very well prepared for because of my CIO experience, but there were also some gaps,” Horner says about entering his first CEO role.
In addition to his prior experience, Horner had one other ace in the hole — he had been on the board of Mastech since 2008, giving him a good grasp of the 1,000-employee, $103 million IT staffing firm’s daily business.
“Part of it was right place, right time,” Horner says. “Part of it was I was well-known by the board and part of it was I didn’t run a restaurant for the last 30 years. I had been inside of the IT services business for a very long time and I understood the IT staffing industry reasonably well.
“In fact, I understood it from the other side of the table and I knew a network of CIOs out there who are always looking for resources.”
IT industry employment in the United States is at an all-time high. The marketplace is rich in its desire for talent and there is not enough talent to go around. Before Horner could get Mastech immersed in all that opportunity, however, he had to fix a few problems the company was experiencing before its previous CEO left.
Here’s how Horner meshed his CIO background with his excitement to lead and grow a company as a first-time CEO.
Grip the situation
Coming from a $25 billion organization to a $100 million company offers plenty of differences. The same could be said when it came to the differences in Horner’s experience as a CIO and the duties he was now undertaking as a CEO.
While Horner’s experience had him prepared for a lot of what he would have to do on a daily basis, there were a few voids that he had to fill as he began to lead Mastech.
“At Alcoa we had customer and employee satisfaction measures, service performance measures. We benchmarked externally, managed our cost structure and we dealt with global culture,” he says. “That mechanism for running the organization really did prepare me to run a company.
“The second big thing that we did that really prepared me was a systemic companywide link between IT projects, innovation and business value delivered. That connection of results or outcomes back to accountability and commitment for achieving those results really helped now that I am where I am.”
Horner also drove a standardization program at Alcoa and across the world, which taught him that process matters when you try to create scale. While process matters, people matter more.
“Mastech is a people business and our product is talented people who get linked to our customer’s job needs in the marketplace.”
Some of the gaps that the CIO job didn’t prepare Horner for included those regarding strategy.
“Strategy for the business is a CEO role, which is now mine,” he says. “That’s a blessing and a curse. That doesn’t mean I didn’t do strategy, because I did, but it was either in response to business strategy or an influencer to business strategy.
“As the CEO, you are business strategy. That’s a key piece of what your job is.”
Uncover the issues
As Horner got settled into his new position, he didn’t have much time to sit back and enjoy the view from the corner office. He was quickly analyzing Mastech and moving forward.
“I met with my board with a preliminary set of thoughts and a preliminary action plan 10 days after I took the job,” Horner says. “Within 10 days I knew that I had a segmented business that, to put it mildly, as a board member I didn’t see the detailed segments and sub-segments of, I saw things on a rolled-up basis. On a rolled-up basis it looked like there was improvement happening and so on.”
Within the first five working days, Horner found out that Mastech had a segment of business whose cost far exceeded its revenue. That segment was a reasonably significant part of the company that clearly wasn’t working.
“As we peeled back the onion on each segment of the business, I didn’t sleep a whole lot in those first couple of weeks, but it was really easy to see that we had a couple of problems,” he says. “In that particular business, it was clear we needed to close several locations and change the executive leader who was running the business.
“We closed two locations, restructured the organization around two P&L heads, eliminated an executive leadership role, and challenged the remaining two P&L heads to grow what was left of the ‘old organization.’”
Mastech had another large-scale area where Horner realized that the cost structure to run the business far exceeded the scale of the business.
“It wasn’t that the people were bad,” he says. “The business was just not growing at a rate that would support the cost structure. So we adjusted that cost structure.”
Horner made these business analyses and decisions within his first two weeks at Mastech.
“By my 10th day at Mastech we had a short-term action plan to fix some basic issues,” Horner says. “We had board support for the actions, and we had an implementation plan for the actions. We executed one in the first month and the second one in the second month.”
To discover these kinds of problems within a business you haven’t run before, you have to have an idea of where to start digging. In Horner’s case, that meant understanding financials.
“On the first working day of every month at Alcoa, I knew the IT cost for the entire company around the world,” Horner says. “At Mastech, financial understanding and business analysis wasn’t a core competency for the line management, other than our CFO. Fortunately, it was something that came fairly naturally for me given my Alcoa experience. What seemed like a very natural place to look for me hadn’t really been examined.”
Find growth opportunities
Once Horner had discovered the issues holding Mastech back and made the necessary changes, he was able to switch his focus to what would make the company grow.
“It’s often easy to figure out which things you need to stop,” Horner says. “It’s much harder to figure out what you need to start.”
What became clear to Horner in the first 10 days was not only did Mastech have places in the company where the cost side of the business far outweighed the revenue side, which he quickly took care of, it also had pieces of the business that were growing significantly, but were cash starved because of unprofitable activity.
“When we stopped doing those unprofitable things we were able to divert the money into the side of our business that was growing,” he says.
“Our issue was fundamental — we had job requisitions for that talent that in the past we weren’t even working, let alone filling. Our initial conclusion was we had a capacity problem. We needed to add more capable people to our talent search and recruiting function.”
Within Horner’s first 13 months, the company more than doubled the size of its recruiting organization.
“We doubled the capacity for finding talent and linking it to new job opportunities and that’s how we grew. We also committed to investing in training and development for that new recruiting talent.”
Compared to its public peers Mastech has grown relatively quickly. There is only one public peer that has grown faster than Mastech in either 2012 or to date in 2013 and it’s a company that did a large-scale acquisition.
“We’re growing at one and a half or two times our public peers,” Horner says.
Now that Mastech is firing on all cylinders, Horner has to make sure the growth is sustainable, which starts with ensuring demand for IT talent continues with the company’s clients.
“You have to continually build relationships with your customers and you have to continually ensure that the demand side of that equation is there and will be there,” he says. “For us, it becomes consultant-centric really quickly. It becomes building relationships with the consultants and helping a consultant believe in the fact that Mastech is going to be a good option for their next job and their next five jobs after that so I can help them grow their career and grow their skill base.”
How to reach: Mastech, (412) 787-2100 or www.mastech.com
As a new CEO, understand what you know
and don’t know.
Analyze your business to uncover any problems.
Focus on business areas that are growing or have growth potential.
The Horner File
D. Kevin Horner
President and CEO
Born: Pittsburgh, Pa.
Education: Attended Saint Francis University in Loretto, Pa. Majored in math and computer science with a business minor.
What was one of the first jobs you had and what did you take away from that experience?
I worked at a paint store. I learned that the customer is always right.
What is the best business advice you’ve received?
If you take care of the customer, the customer will take care of you.
What do you miss about being a CIO and what do you enjoy about being a CEO?
I am loving the opportunity to run a business and I’m loving the type of business that we are in, because we put people to work every day. I do miss some of the scale in my previous role. Moving from a $25 billion entity that’s got name recognition everywhere in the world to a $100 million company has its differences that I miss.
If you could speak with anyone from the past or present, with whom would you speak with?
I would love to sit down with Winston Churchill and Franklin Roosevelt. To see the world through their eyes in the time that they lived in it would be really cool. Also, I’m a Pittsburgh kid, so I would love to sit down and talk to former Pirates right fielder, Roberto Clemente.
As parents, we are vigilant about our children’s choice of friends. We are rightly concerned with peer influence on our daughters and sons alike, and we go to great lengths to ensure that certain people are either “in” or “out” of our children’s lives.
We know our kids will be judged in part by whom they hang with, and we know their peer group will strongly influence their attitudes and behaviors. So it is extremely important that such influences on our children and their future are healthy, honest, hardworking and so on. It’s an agenda we parents never let go of.
Yet curiously, as leaders, we seem to relax that vigilance when it comes to whom we surround ourselves with at work. This is especially true the longer we are in a job or with a company.
New employees use the caliber of the people as a key criterion in deciding whether or not to sign on, but that standard nearly disappears as time goes on.
Employees are retained, bonuses are paid and promotions are given — often based solely on whether short-term business results are delivered. Concern for how employees get those results is increasingly discussed in talent reviews, but in practice, the how still gets trumped by simply achieving short-term results.
Leaders increasingly tolerate aberrations in behavior in themselves and others, under the rubric of “what is best for the business …” “what it takes to get the business …” “what we must sacrifice to deliver the business …” — and this is a very slippery slope.
Before you know it, you find yourself confronted by issues of ethics, accounting adjustments, product quality and contamination issues, workplace injuries, abuse of company property, etc. Not to mention facing unwanted attrition of the “good guys” who see the situation clearly and vote with their feet.
What’s essential for success?
A few years ago, I co-authored a study of more than two-dozen sitting CEOs of top global companies. We interviewed them to identify qualities they saw as essential for success. These CEOs reported six qualities that were most necessary and most contributory to their success:
3. Intellectual curiosity and
5. Self-awareness and humility
6. Dispassionate compassion
Underlying each of these qualities is recognition that who and how matter a lot. Great companies with sustainable high levels of performance are about far more than just business results. These companies are about people at all levels who are dedicated to their organization’s mission, who are aligned and intentional in their actions, and who model behaviors consistent with the company’s moral fabric.
They seem to understand, better than most, that tolerance of behavior that is inconsistent with those six qualities sends strong, undesirable signals to the rest of the company that, as long as you deliver results, the rest doesn’t matter.
What is incredibly oxygenating is that, as with our children, surrounding ourselves and populating our companies with the right people — those who lean in to their work and who model high integrity, courage, resilience, self-awareness, and humility — creates a magnet for more like them.
People want to be a part of a winning culture and a winning team. They want to be proud, not just of what they did, but also of who they did it with, and how. We must never forget this. Who you surround yourself with still tells the world a lot about you. Just ask your parents.
Leslie W. Braksick, Ph.D., MPH, is co-founder of CLG Inc., coauthor of “Preparing CEOs for Success: What I Wish I Knew,” and author of “Unlock Behavior, Unleash Profits: Developing Leadership Behavior That Drives Profitability in Your Organization.” Braksick and her colleagues help executives motivate and inspire sustained levels of high performance from their people. Reach her at (412) 269-7240 or firstname.lastname@example.org. For more information, visit, www.clg.com.
Say the word “innovation,” and immediately you think about business legends like Steve Jobs and Jeff Bezos, as well as the companies they created – Apple and Amazon. Too often, however, we focus on the people who have been tabbed as innovators and the companies that develop those breakthrough products, services and solutions, such as Apple’s iPod and iTunes, or Amazon’s marketplace and unique ecosystem.
True innovation goes much deeper than a single leader’s vision. It is an all-encompassing philosophy that permeates an organization and defines its purpose for being. For me, at least, I prefer to think about innovation in its broadest terms, extending its definition to include corporate cultures and innovative management styles. Think about how Facebook and Microsoft are run, and how at both organizations employees are a key factor in the idea creation, or ideation, process.
Now, think about the breakthrough products that eventually went bust. Hopefully, you don’t have a basement full of Beanie Babies, boxes of Silly Bandz, or a home library filled with laser discs. It is more common to land on a singular breakthrough product that temporarily revolutionizes your industry rather than develop a product through a process that’s repeatable or scalable. And, just as true, no matter how innovative and creative your management team’s style may be, without the proper processes in place to push ideas through a system that takes them from mind to market, you’ll eventually have trouble keeping the lights on.
It all comes down to developing a culture imbued with innovation at its core. But this also requires having a servant culture in place where every person who works for the organization thinks about the customer first.
Consider San Francisco-based Kimpton Hotels, where employees strive to create “Kimpton Moments” by going above and beyond with guests and delivering memorable experiences.
Kimpton overcomes the inherent limitations for creating new innovative products that being a boutique hotel chain includes by approaching innovation through its employee interaction – and then rewarding employees for their creativity. For example, when team members put in the extra hours to ensure world-class service delivery, the hotel chain has sent flowers and gift baskets to their loved ones. And when they create an innovative service experience, the company rewards staff members with such things as spa days, extra paid time off and other goodies.
And then there’s the Boston Consulting Group, a management consulting firm that’s known for developing innovative business processes and systems for its high-end clientele. Part of BCG’s internal process is a focus on team members maintaining a healthy work-life balance. When individuals are caught working too many long weeks, the company’s management team issues a “red zone report” to flag the overwork.
Talk about innovation! And no product, service or solution was developed, marketed or sold.
And finally, few organizations are more innovative than DreamWorks Animation. But beyond plugging out groundbreaking animated movies, the studio’s culture embraces empowerment and innovation. Employees are given stipends to personalize their workstations so that they create whatever inspirational atmosphere they need to succeed. And, as the story goes, after completing Madagascar 3, the crew presented a Banana Splats party, where artists showed the outtakes.
Not only are these three companies known for being innovative in their respective industry spaces, they also share the honor of being members of Fortune’s 2013 “Great Places to Work” list.
So how do you take the first steps toward transformation or put those initial building blocks in place to begin the journey? There’s no magic formula, but there are some common traits – and they revolve around empowerment and establishing a culture that cares.
- Are open-minded and ask “What if?”
- Teach team members how to see what is not there and identify opportunities in the marketplace to take advantage of those gaps.
- Develop cultures where innovation thrives through open and honest communication.
- Flatten the organizational structure and recognize that innovation can come from anyone and anywhere.
- Make innovation, itself, a cyclical and continuous process.
Stop and take an internal assessment of your organization, your team and of yourself. If you can’t check a box next to each of these five traits, stop and ask yourself why. Then begin your own journey to greatness.
Sir Tim Berners-Lee recalls a time when computer users around the world were quite nervous about the power of Netscape.
“A lot of people thought, ‘Oh, wow, a clingy and controlling Web company. What do we do about it?’” says Berners-Lee, director of the World Wide Web Consortium (W3C) and inventor of the World Wide Web. “Then they weren’t worried about Netscape anymore. They were worried about Microsoft, and they worried about Microsoft for a long time. Then they woke up one day and said, ‘Wait, the browser is not the issue. It’s the search engines.’”
Today, it’s the social network that has people worried, says Berners-Lee. But whichever medium is in society’s crosshairs, he says the fear is very similar in each case.
“When you have a monopoly, it slows innovation,” Berners-Lee says. “It reduces competition, and it’s generally not good for the market. One of the most important things about the Web is it being an open platform. The ’Net is a neutral medium. I can connect and you can connect, and we can talk. That is really important to an open market and democracy.”
One of Berners-Lee’s primary missions with the W3C is to ensure the Web is being used to its full potential. But it is also to make sure it remains an independent entity so that everyone who wants to has the opportunity to tap into that potential.
“If you can start tweaking what people say or you can start intercepting their communications, it’s very powerful,” Berners-Lee says. “It’s the sort of power that if you give it to a corrupt government, you can give them the ability to stay in power forever. It’s healthy for us to not put the Internet directly under the control of the government, but to have a set of multi-secular organizations at arm’s length from government acting responsibly and taking many views.”
Still plenty of room to grow
Berners-Lee helped launch the World Wide Web Foundation in 2009 to bring the power of the Web to more people.
“Maybe now 25 or 30 percent of the world uses the Web,” Berners-Lee says. “That’s still a massive gap and a massive number of languages where there still isn’t a lot on the Web. There’s a lot of culture that isn’t represented and a lot of countries where they haven’t the backbone for a good Internet base.”
The foundation has designed and produced the Web Index, the world’s first multi-dimensional measure of the world’s growth, utility and impact on people and nations. It covers 61 developed and developing countries, incorporating indicators that assess the political, economic and social impact of the Web in that country.
“The higher level of the Web Index is looking at impact,” Berners-Lee says. “Is it really affecting the way people do politics? Is it really affecting the way you do education? Is it affecting health?”
The recent turmoil in Egypt was a wake-up call to many who are connected to the Internet, but have started to take its power for granted.
“They thought the Internet was like the air, that it would always be there,” Berners-Lee says. “And people started asking the question, ‘Who could turn off my Internet?’”
Fortunately, there are countless efforts underway from those in the technology industry not to restrict access, but to take the Web to even greater heights.
“The art is designing it to work with all kinds of devices because different customer segments are going to use different devices in different countries,” Berners-Lee says. “If you’re designing something new on the Web, you need to make sure it works on all devices.”
How to reach: World Wide Web Consortium, www.w3.org
The greatest challenge of opportunity is said to be the ability to take the next step and understand what it will take to maximize that opportunity and achieve growth. Amy Rosen knows the importance of that comprehension.
“The skill set of an entrepreneur involves understanding how to create a business,” says Rosen, president and CEO for the Network for Teaching Entrepreneurship (NFTE).
Andres Cardona, who grew up in a rough neighborhood in Miami, is one of the best examples of this entrepreneurial spirit.
“He was on the verge of dropping out of school because his mom had lost her job, and he had to help contribute to the household,” Rosen says.
Fortunately, Cardona had become involved with NFTE. His natural leadership skills, along with the knowledge he was gaining from NFTE, empowered him to do something that would not only help his family, but also other youngsters in Miami.
Cardona founded the Elite Basketball Academy, an organization that would help kids hone both their basketball and leadership skills. He began with one kid and was making 70 cents an hour. Now, he’s a CEO with more than 150 kids, a staff of employees and he’s making money. He’s enrolled at Florida International University studying finance while he runs his business and supports his mom.
“I’m sure it will be the first of many businesses he runs,” Rosen says. “This is just a kid who needed to have his eyes opened to opportunity and learn some basics about business.”
A great place to start
The mission of NFTE is to work with young people from low-income communities, such as Cardona, and engage them in a different vision of opportunity and success.
“It’s basically an entrepreneurship class where they actually go through the whole business-creation process,” Rosen says. “At the end, which really gets to our mission, we want kids to actually connect school with opportunity so they stay in school. Kids start learning how to multiply fractions because they are figuring out their personal return on investments in their new company. We want them to start much earlier thinking about their future.”
Rosen points to Cardona as an example of a youngster with a great gift. But in too many cases, with too many young people, those gifts go unrealized and the child becomes an adult with nowhere to go.
“We want them to have a vision of success and whether they become entrepreneurs and create their own businesses or bring to their jobs and their employers an entrepreneurial mindset. That’s going to give them a much better chance at success,” Rosen says.
The work being done by NFTE fits like a glove with EY’s mission to drive entrepreneurialism in the business sector.
“Our cultures are so aligned around entrepreneurialism in general and we are all running competitions and promoting the notion that we need more entrepreneurs to solve problems,” Rosen says. “Now we have partners on every single one of our boards worldwide. They don’t have to be asked to do it. They really like doing it.”
Cardona was featured at the recent EY World Entrepreneur of the Year Award program in Monte Carlo. Other budding young leaders who have risen through NFTE also have been honored by EY.
“In every city where we have an operation, they feature our winning entrepreneurs,” Rosen says. “So the kids get an opportunity to network and see what success looks like and to go to the kinds of places they’ve never been and participate that way. And they get a sense of recognition for their work.”
Rosen says there’s nothing better than working with young people to prepare them for what lies ahead.
“If you’re going to give back, why not work with kids who need it the most and actually teach them and help them to be entrepreneurs,” Rosen says. “That’s what is going to grow our economy and create stability.”
How to reach: Network for Teaching Entrepreneurship, (212) 232-3333 or www.nfte.com
Although manufacturers can expect modest 2 percent growth through the remainder of 2013, the brief lull gives opportunistic executives a chance to prepare for an uptick in business next year.
Gus Faucher, senior economist for The PNC Financial Services Group, attributes his optimistic forecast to a rise in business investments, fueled by the resolution of murky tax and sequestration issues, and the continuation of record-low interest rates.
“I think the U.S. will maintain an edge in high value-add manufacturing because we have highly skilled, productive labor,” Faucher says. “Maintaining our competitive advantage requires ongoing development of our manufacturing workforce.”
As the economic recovery proceeds, in what areas will spending accelerate most? Manufacturers of home building products and materials, furnishings, appliances and so forth should have a strong 2014, thanks to the rebound in the residential real estate market. In turn, those manufacturers will purchase more production equipment, raw materials, parts and other items. The wealth effect in real estate will stimulate growth throughout the supply chain.
Will rising global demand for U.S. made products including semiconductors, medical devices and specialized materials manufacturing propel employment gains over the next few years? Post-recession hiring will wane next year as manufacturers look for productivity gains from workers added since employment levels bottomed out in early 2010. Although manufacturing is back up to 12 million workers, that’s still well below the 2006 peak of 14.2 million. The mantra continues to be: Do more with less.
How could the expansion of the shale oil industry affect manufacturing? Shale oil exploration and extraction will be a boon to ancillary industries and all U.S. manufacturers that rely on natural gas for production, since it will lower energy costs over the long-term. Moreover, it will give America a much-needed competitive advantage in today’s spirited global marketplace.
Augustine (Gus) Faucher is a senior economist for The PNC Financial Services Group. He is responsible for contributing to the preparation of PNC’s U.S. economic forecast and alternative economic scenarios.
The Rainforest: The Secret to Building the Next Silicon Valley
Victor W. Hwang and Greg Horowitt
Regenwald, 304 pages
What makes places like Silicon Valley tick? Can we replicate that magic in other places? How do you foster innovation in your own networks? Victor W. Hwang and Greg Horowitt propose a radical new theory to explain the nature of innovation ecosystems: human networks that generate extraordinary creativity and output. They argue that free market thinking fails to consider the impact of human nature on the innovation process.
These ecosystems, or Rainforests, can only thrive when certain cultural behaviors unlock human potential. The authors provide practical tools for readers to design, build and sustain new innovation ecosystems. The Rainforest challenges the basic assumptions that economists have held for over a century and will transform the way you think about technology, business and leadership.
The Coming Jobs War
Gallup Press, 220 pages
Drawing on 75 years of Gallup studies and his own perspective as the company’s chairman and CEO, Jim Clifton explains why jobs are the new global currency for leaders. To win, leaders need to compete. The business community needs to double the psychological engagement of workers so that it can compete with cheaper labor. Perhaps most importantly, leaders need to recognize universities, mentors and especially cities as a supercollider for job creation. There’s not a moment to waste: the war has already begun.
Innovation Nation: How America Is Losing Its Innovation Edge, Why It Matters, and What We Can Do to Get It Back
Free Press, 320 pages
John Kao first offers a stunning, troubling portrait of the recent erosion of U.S. competitiveness in innovation, then he takes readers on a fascinating tour of the leading innovation centers, such as those in Singapore, Denmark and Finland, which are trumping us in their more focused and creative approaches to fueling innovation. He then lays out a groundbreaking plan for a national innovation strategy that would empower the U.S. to marshal its vast resources of talent and infrastructure in ways that will produce transformative results.
While government regulations and prices for energy and raw materials influence manufacturing competitiveness, having a talented, innovative workforce was deemed the most critical factor in a country’s ability to compete in manufacturing, according to the 2013 Global Manufacturing Competitiveness Index by Deloitte.
Unfortunately, the U.S. is lagging behind other high-wage nations such as Germany and Japan when it comes to innovation in its manufacturing sector. And we’ll continue to lose ground if executives wait for colleges to churn out science, technology, engineering and mathematics graduates.
“We can’t wait for someone else to fix it. The talent issue needs to be addressed today,” says Jennifer McNelly, president of The Manufacturing Institute, a non-profit affiliate of the National Association of Manufacturers.
Experts may not agree about the existence of the so-called skills gap, but they unilaterally concur that manufacturing executives can jump-start innovation without breaking the bank by tapping into widely available brain trusts.
Collaboration is the secret sauce of innovation, John Zegers says. The director of the Georgia Center of Innovation for Manufacturing, Georgia Department of Economic Development, says creativity doesn’t evolve from one person — it comes from inviting different perspectives.
“Whether you’re trying to solve a problem on the manufacturing floor or develop a new product, it’s critically important to garner feedback from everyone who touches the product,” he says.
Historically, manufacturers have expected engineers to be their innovative spark plugs, but the notion of the lone innovator is fading amid the shortage of engineering talent. Today, 90 percent of managers view the manufacturing workforce as full partners in solving problems, improving processes and satisfying customers, according to the 2012 Manpower Manufacturing Workforce Survey.
Moreover, cross-functional teams comprised of accountants to shipping clerks are using their detail orientation and intimate knowledge of supply chain processes to streamline procedures and create new efficiencies.
“Involvement creates ownership and ownership inspires creativity since employees feel empowered to make changes,” Zegers says. “Plus, the cost of marshaling existing resources toward a problem is negligible.”
At the same time, garnering input from people in dissimilar roles broadens a team’s perspective and buoys critical thinking by injecting a dose of cultural and ethnic diversity. Of 321 companies surveyed by Forbes, 85 percent agreed or strongly agreed that diversity is key to driving innovation in the workplace.
While many organizations want the benefits of high-stakes innovation, their culture won’t support it. Executives who resist outside-the-box ideas or penalize failure may unconsciously stifle creativity. If you champion the efforts of cross-functional teams by removing the barriers to innovation and sponsoring a culture that shuns the status quo and rewards risk-taking, the seeds of creativity will sprout and bloom, but only under the right conditions.
Close skill gaps through training and education
Manufacturing executives frequently bemoan the dearth of workers capable of mastering today’s increasingly hi-tech, team-based roles, yet the answer to the problem could be right under their noses.
About 20 percent of all American jobs are now in the STEM fields, with half of those open to workers who don’t have a four-year college degree, according to a new analysis by the Brookings Institution, who refers to these workers as the second STEM economy. Second STEM workers come from high schools, community colleges and vocational schools and are critical to the implementation of new ideas since they advise researchers on feasibility of design options, cost estimates and other practical aspects of technological development.
Manufacturers bear some responsibility for their predicament according to Manpower, since most companies are not recruiting for manufacturing talent as if they were knowledge workers and are not managing them as a knowledge workforce either.
Specifically, they’re neither developing their current employees nor building a pipeline of technically proficient talent to meet near-term hiring needs.
“There are plenty of 40-year-olds working in the industry who were trained in a different way,” says Rick Jarman, president and CEO of The National Center for Manufacturing Sciences. “The talent is there, they just need retraining and development.”
Investing in daylong seminars that use simulation to teach lean manufacturing concepts, kaizen events, overall equipment effectiveness, value stream mapping and so forth can yield big dividends, Jarman says. Workers who understand modern manufacturing concepts may enhance a company’s penchant for innovation.
Plus, ingenuity is a teachable skill. Employees can learn the fundamentals of the innovation process and start generating money-saving, useful ideas after attending a short, four-hour training course. Plus, upgrading your current staff is less risky and time-consuming than developing novices.
Since manufacturing will see a 50 percent increase in the number of mature workers over the next decade, companies should consider this workforce segment as they assess their near-to-medium-term talent acquisition strategies. Innovative organizations are pairing mature workers with technically savvy new hires to facilitate knowledge transfer and mentoring.
Indeed, some industry veterans have the ability and desire to learn advanced technical skills like computer numerical control, machine tools, computer-aided design and manufacturing programs or even robotics, if given the chance. High-potentials are being offered tuition assistance because having a technically competent workforce is critical to innovation.
“Manufacturers can’t capitalize on groundbreaking technology or invest in computer-aided machinery if they don’t have someone to operate it,” McNelly says. “This is just one example of how the skills gap can impact innovation throughout an entire industry.”
Employers can close debilitating talent shortages in as little as three to six months by raising their expectations and requesting certified workers from local community colleges. McNelly cites a pilot program in Northeast Ohio as an example of successful educational alliance. Community colleges provide NAM-Endorsed certified training to students to prepare them for advanced manufacturing careers.
“Just showing up is no longer enough,” McNelly says. “Employers need certified employees to thrive in a manufacturing environment that’s grounded in teamwork.”
Enticing high school students is a long-term solution to looming talent shortages in manufacturing. To succeed, executives need to change students’ perception of the industry.
Offer them apprenticeships and invite students to tour plants so they can see that there’s more to a manufacturing career than standing on your feet all day, says McNelly.
“Show them a distinct career path and the technical aspects of the job, or else bright students with a flair for innovation will pursue opportunities in other industries,” she says.
Cross boundaries to expand your brain trust
Augmenting the creative efforts of a modest staff by crowdsourcing ideas and suggestions from customers and stakeholders is a new approach gaining attention. According to Newsweek, Unilever established an open innovation unit to work with outside partners in 2009, which increased the share of external ideas that are adopted by the company’s business units from 25 percent to 60 percent. Even Starbucks is asking stakeholders to help develop ideas to reduce waste.
While it’s possible to solicit ideas via social media and traditional focus groups, many companies are using online discussion boards to engage outsiders in stimulating conversations with executives and engineers. The back-and-forth banter encourages participation and helps flesh-out creative ideas in real time.
If a shortage of engineering expertise and technical know-how is stifling R&D, one technique is to borrow the requisite expertise by tapping the brain trust at your local college or university.
“Many colleges and universities will gladly provide research, access to labs, professors and engineering students to local manufacturers,” Zegers says. “They can help you develop cutting edge technology or solve problems without adding to staff. They can even help defray development costs by connecting manufacturers with grants or matching funds from state and local governments.”
Collaborative R&D is another way to leverage external expertise and technology in the quest to develop cutting edge products and efficient manufacturing processes.
“Manufacturers can reach the end game faster by pooling intellectual capital and sharing the investment and the return with partners who have complementary talents,” Jarman says.
If you don’t have the wherewithal to source partners and manage large-scale projects, you can still enjoy the benefits of collaborative R&D, by engaging an intermediary.
The National Center for Manufacturing Sciences provides neutral, third-party collaborative project oversight. Or, seek out industry programs that form strong multi-disciplinary teams by matching willing partners with experts from universities, government labs and external funding sources. Collaborating with engineers from the U.S. Department of Commerce’s Manufacturing Extension Partnership or other public/private partnerships is yet another option.
The opportunities to innovate are endless, even for small manufacturers, if executives go out of their way to broaden their talent circles.
“There are more than 300,000 manufacturers in the U.S. and endless opportunities to collaborate,” Jarman says. “Some of the most creative ideas are coming from small and mid-size manufacturers who have crossed boundaries and barriers to pursue talent-driven innovation.”
How to reach: National Association of Manufacturers, www.nam.org; The National Center for Manufacturing Sciences, www.ncms.org; The Georgia Center of Innovation for Manufacturing, manufacturing.georgiainnovation.org