How to Confront the Talent Crisis in Manufacturing

A strong manufacturing base is viewed as fundamental to the economic success and effectiveness of the U.S., both in terms of its role in the economy and its function as a job engine. Yet, the results of a recent survey of U.S. manufacturers conducted by Deloitte with the National Manufacturing Institute highlight a worsening talent shortage that threatens the future of the industry.

Among the survey's 1,123 respondents, 67 percent reported a moderate to severe shortage of available qualified workers and 56 percent anticipate this shortage to grow worse in the next three to five years. Additionally, results reveal that 5 percent of current jobs are unfilled because qualified candidates cannot be found. When asked to look ahead three to five years, respondents indicate that access to a highly skilled, flexible workforce is the single most important factor for their future business success, well ahead of other factors, including new product innovation and increased market share.

The manufacturing industry, like many industries, is undergoing a rapid evolution spurred by technology advances, globalization and shifting demographics. An aging and retiring workforce, combined with technological advances, outmoded talent recruitment and management processes, and continued global expansion are taking their toll. The shortage of qualified workers has been a serious issue for years, which begs the question, what must be done differently in order to achieve the results necessary to be effective, especially in the face of growing global competition?

The talent challenges facing U.S. manufacturers are, to some extent, illustrative of the challenges facing a host of industries worldwide. As such, understanding the factors contributing to this performance-threatening skills gap is instructive.

The jobs most difficult to fill are those with the greatest impact on performance. The most significant need is in the skilled production sector, which may also face the largest skills shortages in the near future, as an increasing number of workers age or retire. Shortages in skilled production jobs, such as machinists, operators, craft workers, distributors, and technicians, are taking a toll on manufacturers' ability to expand operations, drive innovations, and improve productivity.

Nearly 75 percent of respondents indicated that workforce shortages or skills deficiencies in these areas are significantly impacting their ability to expand operations or improve productivity. Fully 80 percent of respondents indicated that machinists, operators, craft workers, distributors, and technician positions will be hardest hit by retirements in the upcoming years. Recruitment is exacerbated by the persistently poor perception of manufacturing jobs among younger workers; among 18-24 year-olds, manufacturing ranks dead last among industries in which they would choose to start their careers.

High unemployment is not making it easier to fill positions, particularly in the areas of skilled production and production support. As many as 600,000 jobs are going unfilled simply because manufacturers are unable to find people with the necessary skills. Some respondents suggest that the national education curriculum is not producing workers with the basic skills needed, a trend unlikely to improve in the near term.

As the industry has changed -- redesigned and streamlined production lines, more process automation -- the nature of the work required is changing. Manufacturers surveyed indicate that current trends actually demand more skilled workers. This changing nature of work is consistent across manufacturing industry sectors and companies of all sizes. All employers will continue to require more from their employees; all are feeling the impact of an increasingly acute talent crunch.

Inadequate problem-solving skills topped the list of the most serious skill deficiencies in their current employees, followed by a lack of basic technical training and inadequate basic employability skills. Notably, inadequate math, reading, and writing skills weren't seen as being as serious as other concerns in most sectors; some sectors such as aerospace and defense, and process manufacturing rated lack of technical training as their most serious deficiency. While national and state educational curricula efforts may be discretely addressing certain skills, there continues to be a lack of broader problem-solving abilities. Skills such as critical thinking enable employees to digest, analyze, and communicate information, and are essential across a broad range of disciplines.

The manufacturing skills gap is reaching threat levels. While manufacturers recognize the importance of recruiting and developing talent, many continue to depend on outdated, informal approaches for finding talent, developing skills, and improving performance. Continuing to employ the same approaches may not effectively close the education gap.

Manufacturers should consider and pursue more creative approaches to recruitment and talent management to ensure they have the skilled workforce necessary to perform competitively. Workforce planning is important, but not nearly enough. Fresh approaches, such as employer branding, can generate big results when pursued with more traditional approaches. New performance tools and formal processes should be playing a larger role in manufacturers' talent management plans.

Finding talent with the required skills is only part of the solution. Manufacturers should develop talent. While a majority of respondents indicated they have performance management tools in place, they continue to rely heavily on informal methods. Formal career development programs and competency modeling can power the momentum of internal development efforts. Additionally, without these tools, it's difficult to measure the impact of training efforts. It's critical that companies develop an innovative workforce plan, create a talent pipeline, and engage both current and future employees. An effective plan should connect business and talent goals, provide ways to measure progress and performance, and leverage technology to help recruit and retain talent.

While there is no single solution, there are some demonstrated methods manufacturers can take to mitigate the growing skills gap, which also have benefit for other industries. Knowledge management solutions can address the brain drain as older workers retire, taking with them valuable knowledge and experience. Capturing critical information and sharing it with newer and younger workers helps reduce training time, can improve collaboration and communication, and even speed time to market by leveraging previously-developed programs. Older workers can phase into retirement by scaling back hours while helping younger colleagues acquire knowledge and skills. Mentoring programs enable experienced workers to provide coaching and advice. Employers can also leverage local community colleges or trade schools to supplement skills.

While the challenges facing manufacturing may sound dire, if addressed proactively they are surmountable. Over the next decade, manufacturing will be confronted with multiple fundamental business and talent threats, and opportunities. Many are paying close attention to how this critical industry confronts these challenges.

Jeff Schwartz is a principal with Deloitte Consulting LLP's Human Capital practice. He is a regular contributor to Business Finance, sharing his perspective on executive talent development, where the next generation of finance leaders will come from and some of the best practices organizations are applying in addressing these issues.