The Next Crisis: Too Few Workers

Dec. 21, 2004
Even as the U.S. economy struggles to recover from recession and manufacturing firms continue to thin their ranks, there's still talk of a skills shortage. No kidding. Here's what the experts are saying and what you can do about it.

Roger Herman is trying to get your attention -- to warn you of a looming shortage of skilled workers. U.S. manufacturing, which has shed about 2 million jobs during the last two years, faces a serious shortage of computer-literate and other technologically skilled workers, insists Herman, a business futurist and president of the Herman Group, a Greensboro, N.C.-based consulting firm. Yet, across the U.S., manufacturing managers and senior corporate executives seem not to fully comprehend the situation or recognize the challenge that lies ahead. For example, in the consumer products business of General Electric Co., a multinational corporation known for its world-class management-development practices, the skills shortage that Herman labels an impending crisis is not even on the edge of the radar screen. That's understandable -- to some extent. Under pressure from Wall Street to repair their balance sheets and improve short-term financial performance, many companies continue to focus on shedding workers and not on retraining existing employees or seeking skilled workers from outside their factory walls. "The less-savvy companies are saying, 'We don't have a problem; there are plenty of people on the street; we can relax our craze about retention,'" reports Beverly Kaye, founder and CEO of Career Systems International, Sherman Oaks, Calif. On the other hand, she relates, "the savvy companies are saying, 'It looks that way for now. But look around the corner.' " Although they are less than precisely predictive, economy-wide data from the U.S. Labor Department give credence to claims of a coming skilled-worker shortage. Projections made by the Bureau of Labor Statistics in 2001 before the Sept. 11 terrorist attacks on the U.S. showed the economy able to support 167.75 million jobs in 2010 but anticipated only 157.72 million people being available to fill them. In other words, by the end of this decade there could be a 10.03 million-person labor shortage. What's more, as U.S. manufacturers continue to shift unskilled and low-skilled work from domestic plants to plants in such places as Mexico, China and the Caribbean, "the manufacturing jobs that are going to be available are going to be more sophisticated than 'traditional' manufacturing sector jobs," states futurist Herman. However, "if you are waiting to see if you have a problem, it's too late," warns Robert Spekman, a professor at the University of Virginia's Darden School in Charlottesville. Shortages of skilled workers, in fact, already exist. Pharmaceutical firms in New Jersey, for example, can't find all the Ph.D.s, M.D.s and veterinarians they need. The consolidating and, at least until recently, profit-starved U.S. steel industry isn't attracting the graduate engineers it needs. And a just-released Accenture study shows manufacturing companies around the world generally trailing behind other firms in the percentage of workers who have the skills to achieve industry-leading performance. In Peter Cheese's mind, a shortage of so-called knowledge workers, workers with good technical skills and management abilities, has been around for some time. And, says Cheese, the London-based global managing partner for Accenture's human performance consulting services, manufacturing company executives need to better measure and understand where their knowledge worker skill needs are greatest and focus on the development and retention of key people. That job, he contends, will be complicated by the mindset of today's college graduates. Coming in at the bottom of a manufacturing company without the cutting-edge image of the high-techs and biotechs and advancing step-by-step over many years "is not typically what Generation Y is terribly intrigued by," he observes. They have a much faster moving set of demands and expectations." For example, metallurgists and process engineers coming out of college and looking for jobs "don't look too hard at the domestic steel industry," notes Chuck Hansen, a former steel industry executive and now president of the Hansen Group Inc., a Jacksonville, Fla., executive recruiting firm. The industry "is still dirty. It's still essentially in the North, in the Rust Belt. And in the winter, it's a tough business to run," he states. Manufacturing still has an "image" problem in the labor marketplace. Particularly for people who have not been in an auto plant, a medical products plant, or an electronics assembly facility recently, the image of manufacturing remains 1950s dirty. "Unless individual manufacturing companies do a better job of marketing what employment is like there and what the opportunities are, the natural tendency will be for people to choose other [places] for their talent," warns Herman. U.S. steel firms, for example, must restore the career relationships they once had with such engineer-rich schools as Lehigh University and Purdue University, says recruiter Hansen. At the same time, Kaye, who co-authored the book "Love 'Em or Lose 'Em," emphasizes retaining current employees as a way to meet the shortage of skilled workers. "Show them that your culture is unique, because for most people money is not the No. 1 factor that makes them stay," she advises. Help workers to identify job opportunities within the company. Link workers to mentors, coaches and colleagues who can offer guidance and support. Share information freely. And, Kaye also urges, let fun happen. "If I look at what it costs to replace talent, and I look at the cost of doing something about [retaining talent], it's a no-brainer," says Kaye. While she does not have specific numbers for manufacturing, Kaye puts the cost of replacing an existing employee generally between 70% and 200% of the person's salary. Its culture is a major reason that Vulcan Materials Co., a Birmingham, Ala.-based producer of construction aggregates, doesn't foresee a worker shortage in its operations. "We're a company made up of a lot of previously family-owned businesses, and those cultures stuck around," says Clay Upchurch, manager of employee development. "People like to work for an organization that is a leader in the industry, that treats people fairly, that works hard to develop [people], and [provides] good and challenging opportunities," he emphasizes. Nevertheless, relates Herman, recent studies show 30% to 40% of employees are ready to split from the current employers. They're just waiting for the U.S. economy to pick up. And that's a major reason management can't continue to conduct business as usual, Herman stresses. It needs to make what he terms "an intellectual shift" in how it works with people, with unions and in how it makes decisions about the allocation of work and resources. For example, Herman expects that some companies will provide skills upgrading for workers while asking the employees to take the training partially on their own time. Acquisitions are another way to address the skilled-worker shortage. "If you are a large firm, you buy the $300 million firm and try to grow it to a $1 billion firm. You get the people, the talent that is there, and you shed the ones that you don't want," says Carl Van Horn, a professor and director of the Heldrich Center for Workforce Development at Rutgers University in New Brunswick, N.J. But small- and medium-size companies tend not to have the focus, money or sophisticated human-resource-planning strategies to make such acquisitions. "So that's where, it seems to me, that the government or trade associations can play a role in helping them to cope with some of these issues," says Van Horn. "To a large extent, it comes down to aligning . . . the education and training institutions and establishments to the needs of those companies." Oregon, Georgia and New Jersey are among the states that are doing "a very good job," he says. Georgia, for example, has created a post-high-school certificate program that tailors manufacturing and other kinds of skills training to the needs of specific communities around the state. And through its Workforce Development Partnership Program, New Jersey provides existing workers an opportunity to upgrade their skills. In a factory where management wants to bring in computerized production equipment, for example, the state program will pay the cost of providing workers with computer-assisted machining skills. Darden's Spekman urges companies to look at the things they do best -- their core competencies -- and ask themselves where they need to be in a couple of years to remain competitive. At issue is not only a possible shortage of skilled workers, but also the question of "Do I have the right people currently with skills that can take me into the future?" he says. The answer, he suggests, may be in outsourcing in the U.S. or offshore. "If I don't have the labor, that may not be necessarily bad, as long as the person to whom I am subcontracting has that labor," he says. Spekman notes that Boeing Co., Microsoft Corp. and Texas Instruments Inc. are writing software in India and that Hewlett-Packard Co.'s customer service is being done in Ireland. At Hartford, Conn.-based United Technologies Corp. (UTC), reducing the size of the workforce has been getting more attention than the prospective shortages of skilled workers, admits Jeanne Liedtka, the company's chief learning officer. "But given that we expect to have less people going forward than we have today, we do spend a lot of time on the issues of quality of what happens on the factory floor and productivity," she emphasizes. UTC has just embarked on a major training program for its more than 10,000 front-line supervisors in businesses that range from making elevators and helicopters to manufacturing jet engines and fuel cells. The company is concerned about the working climate at the frontline and how that relates to retaining skilled workers. "A lot of what we are doing is more sophisticated than basic metal-bending. It is costly to lose people, and it is very costly to underutilize them," says Liedtka, who also is a professor at the Darden School. "Front-line supervisor training will focus on things like how to have those tough, honest and yet productive conversations with your employees about their performance," she explains. "[It's] a topic which is not exactly rocket science, but which isn't necessarily one that we're all born with an intuitive understanding of."

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