Few sectors of the economy embody the rapidly evolving workplace like manufacturing. With swift advances in technology as well as an immense financial and employment footprint, HR departments within manufacturing companies absolutely must evolve along with the industry, their organizations, and the workforce in general in order to keep pace with the rapid change.
Of course, the rapid growth in manufacturing is, in many ways, very much a good problem to have. However, effectively steering organizations towards a prosperous future isn't just critical for individual companies but for the entire economy as well. Accounting for 11.7 million jobs in America alone, it is incumbent upon HR to properly identify the challenges that currently exist in the sector to leverage the opportunities presented by innovation and fully utilize the sector’s tremendous potential and importance. Properly understanding these challenges is imperative before diving into potential solutions.
Manufacturing in the Global Spotlight
From a macro perspective, capturing that potential is imperative to attracting both foreign and domestic investments into the American manufacturing infrastructure. As of 2015, foreign direct investment into the sector was $1.2 trillion, representing 39% of all foreign investments in American industry. Likewise, some of the largest domestic-based corporations are rapidly expanding their financial holdings in manufacturing, as exemplified by the $1 billion Apple is investing directly into American manufacturing companies to further technological advancement.
Suffice it to say, with the intense glare of the spotlight shining directly in their direction, HR must take full advantage of their time on the industrial stage, primarily by maximizing the efficiency and effectiveness of the substantial human capital that exists within the manufacturing industry. Failure to properly address these unique challenges can severely limit the potential success that’s staring the industry directly in the face.
1. Workforce Shortage
Due to a variety of different factors – including too few graduates educated in STEM disciplines, an outdated reputation of workplaces that aren't safe, clean, or progressive, as well as the misconception by younger generations that manufacturing lacks competitive wages, innovation, and sophistication – the manufacturing workforce is shrinking.
Despite rapid and sustained financial growth within the sector, HR must quickly address the significant loss in human capital seen throughout manufacturing – a notion that will only grow in urgency within the next few years. With an average age of highly skilled workers of 56 and nearly a quarter of the skilled worker base retiring over the next decade, HR must find ways to replenish the human capital needed by every organization. Without it, companies will find it difficult to survive, much less flourish, in the competitive future.
With an average salary of approximately $77,500 a year – higher than wages found in nearly any other economic sector – pay alone isn’t enough to make manufacturing the worker magnet it was decades ago. Furthermore, with the inability to find and hire sufficiently skilled workers that don't require significant amounts of training and education to simply get started, the workforce shortage is something HR departments within manufacturing must actively work to resolve.
2. Recruitment Challenges
Obviously, successfully recruiting new, skilled talent into the workplace is critical in effectively addressing the current workforce shortages in manufacturing. To that point, 80% of manufacturers recognize the absolute importance of meeting workforce demands over the next five years.
Unfortunately, the issues posed to recruiting within the manufacturing sector are deeply rooted and, in some ways, systemic from a societal perspective. Given the specificity of many manufacturing positions – for instance, highly specialized civil engineers with specific skill sets and abilities – the nature of many of the vacant positions inherently limits the number of potential qualified candidates.
Stagnant recruiting budgets and a lack of emphasis on college recruitment has only further emphasized the issue, where manufacturing simply hasn't been competitive enough with other industries to consistently fill its proverbial workforce coffers, particularly in light of a significant shift in college curriculums and graduate expectations. As a result of these recruitment challenges, a recent report found 55% of manufacturers acknowledging a substantial shortage of people with the right skill sets in their R&D departments, finding similar numbers in marketing as well.
To successfully address these recruitment challenges, manufacturing HR departments must learn to compete with other industries – startups in particular – to start filling their talent gaps. In other words, more manufacturing corporations must adopt a market research driven strategy – or a comparable set of tools – to successfully communicate and appeal to graduates that place a high value in a startup mentality that concentrates on innovation and stimulating work.
3. Retention and Attrition
No matter the industry, most HR departments face the very real challenge of retaining highly skilled workers within an organization. Given the already substantial shortages in its workforce and recruiting abilities, minimizing attrition is absolutely critical for manufacturing companies. Unfortunately, the industry can naturally be prone to high turnover rates as people are drawn to explore new and exciting opportunities.
When coupled with an often insufficient investment in employee growth and development – from both a professional and personal perspective – as well as the common perception of stagnant pay packages, lackluster benefits, and a poor work environment, combating high turnover rates can be an uphill battle. The advancing average age of the manufacturing workforce only further compounds the turnover.
4. Low Employee Engagement
In order to leverage the power and insight provided by its workforce, the manufacturing industry must vastly improve its ability to create and foster engaging work environments. At an estimated 25% employment engagement level, the sector trails the national average by a full 8%, despite recovering more than 1 million positions since the financial crisis of 2008. In other words, although there has been significant job growth throughout manufacturing in recent years, it has a done a poor job of properly engaging its expanded workforce.
Especially without proper employee feedback and communication tools, this poses a unique challenge to HR departments within the manufacturing sector due to the sheer size of the workforce as well as its tendency to spread its employee base throughout multiple locations and across great geographical distances. In many companies, leadership and senior management might be in a completely different city, state, or even country than the bulk of its workforce.
To minimize the impact of these differences in location and region, manufacturers would be best served developing healthy and constant contact with the trade unions that are so vital to communication between management and employees. Trade unions are uniquely capable of bridging the inherent gaps in that vital communication that are created strictly by distance, providing an effective channel for organizations to engage their employee base as long as the power of the unions are respected and always kept in consideration.
5. Global Competition
The responsibilities of HR in manufacturing become even more impactful and complex given the significant rise of global competition. As if a tight labor market, recruiting insufficiencies, and a rapidly aging employee base weren't challenging enough, manufacturers must be able to successfully compete with international firms to attract a finite number of exceptional talent and innovators.
To further complicate matters, given the substantially lower labor costs paid by manufacturers outside the Western world, HR must do everything possible to increase productivity and output levels in order to remain competitive in the global marketplace. This means that HR must create an engaging environment that is able to maximize the productivity, innovation, and commitment of every single employee within every single department just to counteract the lower labor costs enjoyed by the foreign competition.
6. Training and Development
As easy as it might be to point towards high turnover rates and recruitment woes as the primary factors behind the significant staffing issues within manufacturing, training and development are two areas that are just as vital. It is essential for HR to provide adequate training to all employees in order to keep them current with the latest developments within the industry and best prepare them for upcoming challenges.
Likewise, training and development are critical in developing the personal and professional growth that is crucial in creating greater levels of employee satisfaction and stimulation. Along with the much-needed changes that need to take place in recruiting procedures, employee retention, and worker engagement, efficient and effective training and development systems are at the top of the list of things HR must concentrate on in order for the manufacturing industry to stay competitive within the global marketplace.
At Hyphen, we help manufacturing companies harness the tremendous insights offered by employee feedback, leveraging that insightful people data into powerful strategies that can guide a company through a cutthroat and demanding industry. The most effective solutions to solve manufacturing employee woes lie within the companies themselves – it is Hyphen’s mission to help organizations unlock those solutions.