If you build it, will they come? Overcoming the talent crisis in manufacturing

If you build it, will they come? Overcoming the talent crisis in manufacturing

Posted by Ben Dollar on March 25, 2015

Blog posts here on HR Times regularly discuss ways organizations can rethink and revamp their talent programs to better support business strategies and overcome workforce challenges. Today I’d like to broaden the discussion and look at talent strategies as a way to revitalize and protect the future of an entire industry — manufacturing.

First, let’s consider the importance of manufacturing to the US economy. Every job in manufacturing creates another 2.5 jobs in local goods and services1 and every dollar spent in manufacturing adds $1.37 to the American economy.2 Also consider that manufacturing employs 9 percent of the workforce, supporting more than 12 million workers directly and 17.4 million jobs in total. Taken alone, manufacturing in the United States would be the 9th largest economy in the world.3

These are impressive numbers. Manufacturing growth since the 2008 recession is also positive, as GDP attributed to manufacturing increased from 11.9 percent 2009 to 12.4 percent in 2013,4 and data projections suggest 400,000 jobs will be added between 2015 and 2020.5

At the same time, however, manufacturing faces significant challenges, all related to talent, including:

  • Sobering retirement demographics. Led by aging Baby Boomers, 2.7 million workers are expected to retire between 2015 and 2025. At the same time, over the next decade, nearly 3.5 million manufacturing jobs will likely be available in the United States.6 This is problematic because of the…
  • Lack of replacements. Manufacturing executives indicate that finding talent with required skills is challenging. Eighty-four percent of manufacturing executives polled in the Skills Gap study by Deloitte Consulting LLP and the Manufacturing Institute agree there’s a talent shortage in US manufacturing, and they estimate that six out of 10 open skilled production position are unfilled due to the shortage. More troubling, the skills gap is expected to grow substantially over the next decade—2 million of those likely 3.5 million available jobs are expected to go unfilled. The shortage is acute in both skilled production workers and scientists, engineers, and researchers. High schools, trade schools, and colleges are not producing skilled workers fast enough to fill the gap. And the gap is significant: 70 percent of surveyed executives report their current workers do not have adequate technology and computer skills.7
  • Negative perception. Perceptual issues compound the supply problem. An outdated image of the industry as “dirty, dumb, dangerous, and disappearing”8 persists, rather than the more accurate picture of manufacturing as a modern economic engine that drives more innovation (three-quarters) than any other private-sector industry.9 Only 22 percent of Millennials surveyed globally view manufacturing as a desirable sector for employment.10
  • “Brain drain.” The combination of people retiring or leaving manufacturing to pursue careers in other industries, jobs displaced from offshoring, and weak knowledge management practices has resulted in a significant loss of manufacturing knowledge that is not easily recovered.

Manufacturing is at an inflection point: Either close the skills gap to support growth and keep and create jobs in the United States or risk increasing reliance on offshore resources. This is no small challenge, and depends on workforce strategies built around elements well known to readers of the HR Times:

  • Managing the talent pipeline like a supply chain through analytics-driven approaches to workforce planning to identify needs and take action far in advance. Too many companies are forced to react late in the game and scramble to fill holes.
  • Fostering long-term career development and growth through innovative learning practices. experiential development, and creating cultures in which learning and knowledge sharing are highly rewarded.
  • Recruiting from new sources and with a fresh perspective on the skills needed and the candidates who might ultimately be successful on the job.
  • Taking advantage of the Open Talent Economy. to tap into multiple sources of talent. The use of contractors or other “off balance sheet” workers helps to create flexible cost structures and more agility in the face of market changes.
  • Considering recruiting and employment from a marketing perspective, paying attention to the employment brand as closely as the corporate brand. Social media has created more transparency into culture, and manufacturers should take advantage of the ability to reshape their employment brands.
  • Redesigning and reskilling the HR function to address what is becoming one of the most significant challenges manufacturing companies have faced in decades.

I’ve only touched on the situation here, but our recent article in Deloitte Review, Help wanted: American manufacturing competitiveness and the looming skills gap., examines these issues and potential solutions in depth.

Ben Dollar Ben Dollar is a principal with Deloitte Consulting LLP’s Human Capital practice.

1Milken Institute and Economic Planning Institute.
2The U.S. Department of Commerce, Bureau of Economic Analysis.
3National Association of Manufacturers (NAM), “Facts about Manufacturing.”
4 Bureau of Economic Analysis, “Value added by industry as a percentage of gross domestic product,” April 25, 2014.
5Deloitte analysis based on data from the US Bureau of Labor Statistics.
6Deloitte analysis based on the US Bureau of Labor Statistics and Gallup survey.
7Deloitte and Manufacturing Institute’s 2014 Skills Gap Study.
8John Paul Williams, “How manufacturing can solve its own talent shortage crisis,” Industry Week, August 21, 2014.
9National Association of Manufacturers (NAM), “Facts about Manufacturing.”
10The Deloitte Millennial Survey 2015.