As the top presidential contenders tout the importance of manufacturing to U.S. economic vitality and articulate how they would prolong its resurgence, there are worrisome clouds on the horizon. In particular, the domestic industrial sector, within just a few short months, may be forced to confront a rather perplexing dilemma: a fast-shrinking supply of key leadership and managerial talent.
It's not all gloom and doom, of course. Industrial activity continues to heat up. Manufacturing output accelerated for a fourth-straight month in February, according to the Institute for Supply Management. The ISM's closely followed index, in fact, reached an eight-month high of 54.5, up from 54.1 in January.
Readings over 50 indicate growth.
Manufacturers are driving the two-year-old economic expansion domestically, spurred by the rebuilding of inventories, corporate purchases of new equipment and a now-stable auto industry. As further evidence, the Bureau of Labor Statistics said manufacturing employment in February rose by 31,000 jobs, all of it in the durable goods sector. Since a trough in January 2010, according to the BLS, durable goods manufacturing has added some 444,000 jobs.
Several looming factors, though, could derail the momentum, sans any proactive or inadvertent remedies. Two obvious concerns are the upward spiral in domestic gas prices, which could crimp consumer spending, and an uncertain European economy largely dependent upon the resolution of its debt crisis.
A third not-so-obvious factor is the dwindling experienced labor pool. Manufacturing across sectors now confronts a "hollowed-out middle" among its employment ranks. The dwindling supply of experienced hands in middle- and even upper-management positions, coupled with rising demand for seasoned manufacturing talent, could ultimately stem the industrial resurgence in the United States.
How did we get into such a predicament? In the prior decade, we witnessed significant facility contraction and consolidation due to a weakening U.S. economy (and the fallout from 9/11), coupled with dramatic automation and productivity improvements.
Middle managers felt the brunt of the employment cutbacks, while lower-level workers saw the elimination, almost overnight, in career-growth prospects and opportunities for promotion. Without these prospects, ambitious and talented workers could not gain the valuable experience to advance with their employers, many that ultimately took their skills and ambitions elsewhere.
Now, boards are growing increasingly concerned over a shortage of talented managers to backfill an aging executive suite, creating a void that's quickly widening.
We're even starting to see a few companies decide to postpone or abandon acquisitions altogether due to the lack of experienced hands to manage the integration or the combined companies. In short, the dearth of strong leaders capable of taking on bigger roles is starting to pose a threat to U.S. manufacturing growth and innovation.
So where is the next generation of our manufacturing leadership talent going to come from?
Creative Leadership Recruiting
As a start, manufacturers must get more creative in their hiring and talent-development strategies. That means thinking out of the box when it comes to mining for potential talent.
A creative alternative is to closely examine the specific skills needed to be successful and to fulfill your company's strategic goals. If you're in the energy sector, do you really need to stay in the same sector to recruit new talent? The short answer is no, assuming you have a clearly defined profile for skills you're seeking.
One of Korn/Ferry's largest clients in North America is Bruce Power, a provider of nuclear power. Globally, there are hundreds of nuclear reactors being built or refurbished, resulting in a limited supply of available talent with specific experience in nuclear power generation. Tackling this issue head on, Bruce Power has successfully recruited from other industries with workers who have similar skills, including the automotive sector, to help close the gap between supply and demand.
When hiring externally, manufacturers also must begin to focus their most aggressive pursuits on the core leadership skills that are the most difficult to find and develop. There are numerous public studies on the competencies that are the hardest -- and easiest -- to find and develop today. Companies don't need to spend as much time, energy and resources on finding and recruiting the "low-hanging" fruit.
Industrial companies also need to get creative in building their internal succession pipelines, and continually search for top talent wherever it resides in the organization. Forward-thinking manufacturers are deploying scientifically proven, quantitative-based methods for assessing their workers on a large-scale basis and identifying those who possess "learning agility," the best single indicator of an employee with high potential.
Develop Internal Talent
Industrial players must deploy these and other strategies to overcome the specific hurdles posed by today's market realities and workforce dynamics:
The "high tech/low tech" intersection: Over the past decade, industrial companies have seen the rapid infusion of "high tech" into their processes and products; automation, digital applications and the Internet have become core to their success. Yet, for the most part, these companies have limited experience or savvy in recruiting and developing "high-tech" talent.
A younger, more mobile workforce: The best engineers and financial executives are in high demand and often see themselves as "free agents." Difficulty in maintaining a tenured workforce has cultivated a "buy" versus "build" talent culture. As a result, a lower premium is placed on developing internal talent, but that's become an invalid, lazy approach.
The dizzying pace of change: Due to the seismic shifts in market dynamics, it's harder to develop leaders capable of setting a clear strategy and motivating a workforce toward common objectives. Likewise, the profile of the ideal leader is shifting as business dynamics change, making it more difficult for boards and senior executives to identify and develop their high-potential employees.
Despite these obstacles, some companies are actively developing their leadership pipeline. Critical components of this strategic endeavor include:
Disciplined succession planning: Companies with strong management bench strength continuously evaluate the performance and potential of their leaders, identifying succession candidates and proactively developing them.
Robust leadership development: The most forward-thinking firms don't just put their managers through staid training programs; they set up on-the-job development opportunities, rotational assignments and coaching/mentoring opportunities customized to individual needs. As a result, leaders are exposed to an array of developmental assignments to prepare for larger roles.
Leadership (as opposed to supply-chain mastery) as a core competency: Most organizations struggle to develop leaders who have both manufacturing expertise and the leadership ability to inspire and motivate. Some companies have decided it's virtually impossible to ask one leader to do both and have purposefully developed and promoted both manufacturing experts ("high professionals") and broader general managers ("high potentials") to fill the distinct roles.
A "build" versus "buy" human capital strategy: Many companies tend to look externally to fill key leadership roles, rather than developing and promoting internal talent. Hiring from the outside, while often necessary, creates risks, ranging from lack of cultural fit to foment of dissent among jilted internal candidates. Often, corporate recruiting teams don't even consider internal candidates when filling key positions. This mix needs to change.
Preparing for the unknown: Corporate leaders who exhibit the most potential possess "learning agility." This quality, the ability to succeed and thrive in new and challenging conditions, is a trait that can be quantitatively measured and developed. Companies must quickly learn to focus on measuring, developing, and leveraging learning agility wherever it resides in their organizations. In the process, they will create leaders ready to lead amid great uncertainty.
In the long run, creativity in the development of talent is just as important as the development of new products and efficient manufacturing processes. A competitive advantage is developing for the select few who can harness and apply their innovative abilities and creativity in the development of their internal leadership and management talent.
Bill Westwood serves as senior partner in Korn/Ferry's industrial practice. Korn/Ferry is a leadership talent development and recruitment firm with about 80 offices in 40 countries. Westwood joined Korn/Ferry in 2000 and has directed a number of large, executive-level assessment engagements for prominent clients. He also led the initial global rollout of the integration of assessment into Korn/Ferry's executive search practice. Westwood previously worked as Motorola's director of global leadership and organization development for the Communications Enterprise.
Westwood can be reached at [email protected].