Mentorships, upskilling may offer hope in manufacturing labor shortage

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An archaic image and outdated talent management practices are just some of the reasons why manufacturers are behind the eight ball when it comes to recruiting a new breed of factory worker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.

Mentorships, upskilling may offer hope in manufacturing labor shortage

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.

Keeping your company’s secret information secret is a matter of increased focus on protecting company intellectual property

In the last three decades, international trade has increased by a factor of seven — but unfortunately, this advance has also ratcheted up the rate of trade secret theft, an impediment that costs corporations hundreds of billions of dollars a year.

That rate of growth has catapulted multinational commerce to such prominence that it now accounts for a third of all economic activity worldwide.

principal, Zavitsanos, Anaipakos, Alavi & Mensing

principal, Zavitsanos, Anaipakos, Alavi & Mensing

“The world is getting to be a smaller place at a remarkably fast pace,” says Joseph Ahmad, a principal in the Houston law firm Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing. “When we were kids, there might have been a handful of companies that did a particular thing and probably most or all of those companies were in America.

“Nowadays, we’re seeing competition come from everywhere,” says Ahmad, who primarily represents business executives in trade secret cases and employment-related litigation. “The barriers to entry are rapidly declining, so now a lot of companies are facing competition from all over the world.”

Other factors driving the increased incidence of trade secret theft include large pockets of economic stagnation around the globe and the widespread conversion of analog business information to digital formats, which lends itself more readily to leaks and cyber attacks.

Pamela Passman, president and CEO, Center for Responsible Enterprise & Trade

Pamela Passman, president and CEO, Center for Responsible Enterprise & Trade

“In the last few years, there are a couple of key reasons why trade secret theft has grown,” says Pamela Passman, president and CEO of the Center for Responsible Enterprise & Trade, a nonprofit group whose mission is helping companies reduce counterfeiting, piracy and trade secret theft.

“One reason is the economic times we’re going through. People feel constrained, and they’re working under great financial pressure, so many people are cutting corners. Also, a great deal of companies’ information is becoming digitized and, therefore, more easily transferable.

“So instead of walking out of a place with stacks and stacks of papers, a person can walk out with a USB drive that has a huge amount of information on it.”

Increased cyber leaks and cyber attacks are also contributing to the problem, Passman says.

“There are some fairly aggressive third parties that have stepped up their activity in that area,” she says.

Ahmad agrees but points out that the lion’s share of trade secret misappropriation he encounters is a consequence of actions taken by a company’s employees or ex-employees.

“Of course, we do hear from time to time about individuals or organizations — especially overseas — who hack in to companies’ systems,” Ahmad says. “But, in my experience, that’s not a common occurrence. Most of the trade secret theft I see occurs via a current or former employee.”

That is why, Passman says, it’s essential to be straightforward with employees about your company’s policies regarding confidentiality, particularly as it pertains to trade secrets and other types of intellectual property.

“You have to be very clear with your own employees about your policies and about how serious you are about protecting your intellectual property,” Passman says. “Because that’s definitely where your greatest risk lies. And this is a critical issue both while those employees are at the company and after they leave the company.”

The labor market factor

Unemployment and sluggish job markets are also key factors contributing to the increased risk surrounding trade secret theft.

“Unfortunately, in this type of market, job seekers sometimes resort to extreme measures to gain the kind of edge they feel they need to get a job,” Ahmad says. “I’ve seen many new hires — whether consciously or subconsciously — come into a job with the belief that their value is increased if they can, as some of them would put it, ‘hit the ground running’ when they get on the job.

“In other words, they feel that with the help of their previous employer’s trade secret information, they can do a better job for their new employer. Sometimes this happens with the complicity of the new employer, but sometimes employees do it on their own, because they feel it makes them more marketable.”

What, then, are some practical strategies CEOs and their teams can employ to insulate their companies against the risk of having their trade secrets stolen? One of the important early steps executives can take is to enlist the help of a broad cross section of people in their organization to tackle the issue.

“First off, what I suggest is establishing a cross-group team of people to focus on protecting the company’s intellectual property,” Passman says. “This team should include somebody senior in the legal department, somebody senior in R&D, somebody from business development, somebody on the operations side, for example if they have a manufacturing division, and somebody responsible for procurement and the supply chain. It’s important to bring all these disciplines together and instruct them to establish some policies in this area, including trade secret policy.”

Another step that should be taken by companies that have significant intellectual property to protect is requiring employees to read and sign confidentiality agreements.

“The confidentiality agreement is first and foremost,” Ahmad says. “You have to make sure that every employee understands the significance of holding your company’s information confidential. All employees must be required to agree in writing they will do so.”

There are a number of items and types of information that companies can put into their employee confidentiality agreements to help protect their intellectual property.

One approach is to list or enumerate the company trade secrets and other types of information that are required to be held confidential. Another tactic is to include language stipulating that inventions and similar types of newly created information automatically become the confidential property of the employer.

“This helps the company in several ways,” Ahmad says. “First, you get to define what your trade secrets are and what information is expected to be held confidential and you get to formally notify the employee about it. This also enables you to make sure that whatever new intellectual property your employees develop will be the property of the company, and they will agree to hold that information confidential.”

Vetting third parties

Another area where companies seeking to protect their intellectual property need to be vigilant is conducting due diligence on third parties, such as suppliers and customers, as well as companies they may be seeking to acquire or merge with.

“For any key third parties that you’re going to be sharing your intellectual property with, it’s essential to conduct due diligence on them,” Passman says.

Due diligence encompasses activities such as research, interviews and online searches. A key part of the process is being alert to “red flags” — potential problem areas signaling that the third party may not be effective at helping co-protect the company’s sensitive information.

“Basically, you want to see if [the third party] has any red flags you need to be aware of,” Passman says. “For example, if they’ve been involved in different kinds of litigation, especially litigation involving intellectual property or trade secrets. And you’d want to explore and make sure you understand how they go about managing and protecting the intellectual property of the third parties that they in turn do business with as well.”

Regarding the employee confidentiality agreement, Ahmad says it’s unwise and potentially dangerous for a company to regard this process as a one-and-done deal. In other words, it’s insufficient to simply have employees read and sign the agreement and then file it away. Companies need to remind employees periodically about their confidentiality agreements and about the importance of keeping the company’s sensitive information private.

“Companies sometimes leave themselves vulnerable to trade secret theft loss if they approach these confidentiality agreements like a checklist,” Ahmad says. “By that I mean they can’t just have the employee read and sign the agreement, and then they knock it off their checklist and forget about it. The problem with doing this is you can be sure the employee will forget about it too.

“Many times, an employee will enter into a confidentiality agreement, and then they’ll work for the company for 10 or 20 years, and they’ll forget they even have the agreement. As a result, they don’t really respect the company’s trade secrets the way they should.”

Thus, it’s important to periodically remind employees about their confidentiality agreement — and even more important to underline that agreement’s significance when the person’s employment with the company ends.

“That’s probably the most critical aspect — how the matter is handled at the end of the employment relationship,” Ahmad says. “I’m often shocked at how many employees I see who have signed confidentiality agreements, and at the end of their employment, whether they resign or are terminated, they’re not even reminded that they have these agreements. Many of them don’t even know they have them.”

Business executives would be wise to take advantage of the employee exit interview because it represents their company’s last chance to underscore the imperative of keeping its trade secrets just that: secret.

“At the exit interview, employees must be required to sign and confirm that they understand their responsibilities in regard to keeping the company’s information confidential,” Ahmad says. “By doing that, you’re drilling in to the employee as they’re leaving the company — and presumably going to work for someone else, who just may be one of your competitors — that, ‘Hey, listen, this is serious. We take this matter very seriously.’”

How to reach: Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, www.azalaw.com; The Center for Responsible Enterprise & Trade, www.create.org

Are you doing what it takes to avoid costly litigation?

LEGAL MOTION

If you are worried about how technology issues are impacting your business, how management issues are demanding more time and how federal regulations are often a challenge to understand, you are not alone.

Setting aside bottom line concerns, these three areas are among the top legal challenges that companies are facing today. But don’t despair. The best advice is ― get legal advice, and do it sooner rather than later.

“The biggest pitfall to avoid is not involving your lawyers until there is a problem,” says Steve Zack, former president of the American Bar Association. “Legal counsel is much more cost-effective if it used preventively rather than as the crisis begins to brew.

“Any issue where your lawyer has not been a partner in your decision-making process is going to become costly,” he says. “Lawyers are there to look over the horizon with you and help you weigh your options. You’ll make more fully informed and better decisions that will save you time, money and legal headaches.”

Here are some tips to find solutions to some of today’s common problems.

Avoid the legal pitfalls of technology

Issues with technology, be it over social media, privacy or data security, are among the top concerns of companies. Many employees today are from what might be called the “TMI Generation” because they reveal too much information ― and information leaks could lead to problems.

“They don’t have a good sense of the walls that should exist between a public personality and their private life,” Zack says. “So they could wind up tweeting information on Twitter about an account or an internal project.”

Too much information can also affect the hiring process. One of the tools employers have started using to screen job candidate applications is to search Facebook and MySpace pages to eliminate the people that might not be desirable to represent their company.

“The problem with using social media is that it gives the person making the hiring decision information that in many ways that person should not have while making that decision,” says Rick Bales, professor at Northern Kentucky University Chase College of Law. “So, for example, you go on to Facebook and get somebody’s birth date, you now know how old they are.”

To avoid a possible age discrimination suit, you should have a low-level staff member do the screening.

“You should have one person who is not a decision-maker do those social media screenings who will report only that part of the information to the person actually going to make the hiring decision,” Bales says.

To protect the company, rules and policies drawn up by your attorneys for use of the Internet and social media should be included in employee manuals.

“It’s important that companies set clear standards and then train and retrain employees on those issues,” Zack says.

Issues that should be considered in the policy will vary because of the nature of the business, how it is operated and what kind of electronic devices are provided to employees. Most concerns are over limiting what can be said through social media about a company and that any social media policy will have to pass muster under the National Labor Relations Act ― employee use of company computers during work time is subject to being reviewed at any time for security and other purposes.

Data security is another technological concern. With a number of companies using cloud computing, where data is stored over the Internet at remote sites, how secure that data is and who can access it are major issues.

“It’s crucial that companies protect their customer data from hackers,” Zack says. “There could be serious liability issues otherwise.”

A data security breach can be devastating for a company, and you need to have steps in place internally in the event that something does happen. Just the case of losing a laptop computer with company information on it can cause major problems.

The cloud computing concept opens new chapters on areas of law that are evolving. If the wrong people get access to your data, do you have a claim against the Internet provider who is managing the data? What about an employee who leaves the company and has the ability to hack your site?

You should consider both the upside and the downside of social media, privacy and data security concerns with your legal counsel.

“Good legal counsel will make the journey easier,” Zack says.

Take training seriously

When it comes to management issues, there is no shortage of pitfalls to be concerned about. Probably the most historical involves promoting a high-performing worker into a management job and failing to give that person the training to be a supervisor.

“This is a perpetual problem from hundreds of years ago ― the training of low-level supervisors,” Bales says

There is a huge difference in the skills that it takes to go from a front-line production worker or sales associate to managing people.

“The skills are not necessarily transferable, and the new managers are often not well-trained,” he says. “They don’t know the slightest thing about sexual harassment law or the meaning of nondiscrimination. They haven’t had any training with working with people or dealing with workplace conflicts. They don’t necessarily know how to motivate people.”

The proper approach involves training the person and monitoring the results.

“Start at the bottom and make sure that somebody promoted from the line or the sales force or whatever into a supervisory position for the first time has adequate training and is supervised closely enough so the folks at the top can figure out what challenges that person has and what kind of training that person might need,” he says.

The downside is that there are many potential problems, for example, discrimination suits, claims of bullying and group dynamics issues.

“The person needs to be an effective manager ― very often union campaigns grow out of employees being upset with a manager or supervisor who doesn’t know how to manage,” Bales says.

Sometimes not keeping your house in good order causes headaches that could have been prevented with some foresight.

Take, for instance, employers who have the idea they should document what happens with their workers. Having records of incidents and situations may not offer the security desired.

“Employers still do a terrible job of that, by and large,” says Josh Fershee, associate professor at the University of North Dakota School of Law. “Giving someone a difficult time in one department and moving them to another department, sometimes even with a promotion or a perceived promotion, and then they get to the point where they want to terminate the employee and everything in the records indicates no problems.”

What typically goes hand in-hand with that is not having some clearly stated policies. If that is an at-will employee, he or she can be terminated at any time for cause.

“But employers periodically will make promises that as long as you do a good job or as long as sales are good, you have a job here,” Fershee says. “Well, that can change that status to some degree and those relationships are certainly something to watch out for.”

Play it safe with the feds

The number of federal regulations keeps rising over the years, and along with it comes concern of not just complying with them ― but what do they mean?

One area where misunderstanding the law is creating problems involves compliance with the Americans with Disabilities Act.

“Discrimination is something that they have to take a real amount of care to avoid and obviously comply with the civil rights laws at all levels,” says Carol Miaskoff, assistant legal counsel for the Equal Employment Opportunity Commission.

“But the positive is that the employer is able to benefit from the talents and the contributions of people with disabilities as opposed to just losing that.”

Reasonable accommodation enables employers to make some low-cost modifications that enable an injured or disabled person to stay on the job ― as opposed to being out of work.

“That seems to me to be a win-win situation for employers,” says Chris Kuczynski, assistant legal counsel for the EEOC.

Difficulties may arise over the sense of what is an accommodation for the worker.

“They need to make a reasonable accommodation, but what is reasonable?” Fershee says.  “Some instances where businesses get into trouble is that they really try to avoid hiring somebody, whether they know it consciously or not, who comes in with a potential disability, because they don’t want to have to accommodate it.”

Doing so may actually create a problem that wouldn’t have existed had they had just moved forward the way they should have. For example, if they think it is going to be too hard to accommodate someone in a wheelchair, some companies don’t want to tell the person that’s why so they just skip the application even though the person is fully qualified otherwise.

“In fact, the law generally says if you can’t accommodate, you don’t have to,” Fershee says. “Reasonable accommodation is a fairly low standard most of the time.”

You need to go to an expert in the ADA area and ask what you need to do.

“Oftentimes, the answer is something that works for everybody,” he says. “Or there’s something that doesn’t work for everybody, but it can insulate them from liability because they’ve done what they are supposed to: ‘We looked into how much it’s going to accommodate and we can’t.’ That is often a legitimate defense.”

While virtually unheard of as a term before the 1970s, sexual harassment is a concern in the workplace. Sexual harassment policies are in place at nearly all major companies, schools, universities and the military.

“It’s always a problem in the workplace for two reasons: No. 1, the perception of the person who was on the receiving end of the harassment is always different from the person who was on the giving end of the harassment. No. 2, the legal difference between banter/flirting and sexual harassment is kind of blurry,” Bales says.

The giver may perceive that it was not harassment at all. He or she may perceive it as an expression of sexual interest or as good-natured flirting or as banter while the person on the receiving end may view it very differently and take it much more personally.

“Even a trained attorney or an HR manager may not know at first glance if this is crossing the line or not,” Bales says.

An employee who has a workplace problem needs to have somewhere to go so that the employer gets notice early on and can correct the problem before it rises to the level of legal harassment.

“If this is the first time that the employer has received notice of it and the employer takes prompt action, the employer’s not going to get sued or if he does get sued, he’s going to win,” he says. “If a company is big enough and can afford an ombudsman, I think those are terrific. But if not, use someone who is functioning as an HR person.”

How to reach: American Bar Association, www.americanbar.org; Salmon P. Chase College of Law, Northern Kentucky University, chaselaw.nku.edu; School of Law, University of North Dakota, law.und.edu; U.S. Equal Employment Opportunity Commission, www.eeoc.gov