The Return of US Manufacturing

Friday, February 03, 2014

Ask the average citizen on the street about where most manufacturing takes place and you are liable to be told, “not in the US”.  But is that really true?  In the last year, the Washington Post, Bloomberg-Businessweek, Forbes, CNBC, NBC News, CNET, Time, Tampa Bay Times, and others have all reported on the return of manufacturing to the US.  Both domestic and foreign manufacturers are building facilities in the US and employing US workers in them.  This reversal of “off-shoring” or “re-shoring” is occurring as the cost to manufacture in foreign countries is rising while the cost of manufacturing in the US is declining, relative to each other.  In addition to labor cost, transportation and inventory costs are lower for US based manufacturing compared to goods shipped from Europe and China.  However, re-shoring may not bring with it the numbers or types of jobs lost when manufacturing was off-shored years ago.  Increased automation is demanding fewer but higher skilled workers.

One barrier to re-shoring lost manufacturing is the reported lack of skilled workers available to design, build, run, and maintain the highly automated manufacturing equipment used in many of the high tech processes employed in today’s factories.  A. Gary Shilling writing for the Bloomberg View points out that 4% of degrees in the US are in engineering, versus 17% in Asia and 34% in China.  Shilling believes that increased use of robotics and technologies such as 3-D printing and cold spraying will add to the competitive position of US manufacturing by 2020.  But these and other advances in manufacturing technologies require highly trained and talented individuals in engineering, science, math, computer and the biological sciences.

We have heard it before; the US is not producing enough graduates in the Science, Technology, Engineering, and Math fields or the so-called STEM degrees.  Yes, employers are seeking workers with STEM degrees and backgrounds; however, the most talented engineer is of little value if they lack the communication skills to convey their thoughts lucidly via the written or spoken word.  Employers want and need well-rounded workers who know and understand technology and how that technology can be effectively applied to their business to make that business more competitive and produce products and services consumers wants to buy.

While many public and private primary, secondary, and post-secondary schools are developing programs to teach STEM and to train teachers to teach STEM courses, many businesses can not afford to wait for students to move through the educational system.  Many employers, including the US military, are offering apprentice programs in an effort to build a pipeline of current and future STEM candidates.

As with any other talent pool, STEM candidates must be sourced, recruited, and managed.  There has to be a “goodness of fit” match between the organization and the worker to ensure the goals of both are in alignment.  Many of the same motivational factors apply to STEM and non- STEM talent.  Are there opportunities to advance within the organization?  Are there opportunities to learn new technologies?  Are there opportunities for peer recognition within and outside of the organization?

The Long Term Unemployed

Friday, January 31, 2014

 

During the Great Recession a significant number of workers have been unemployed for what is commonly defined as a “long term” of six months or more.  There is a belief the longer a worker is unemployed, the less likely they are to be reemployed.  This lack of employability exposes a number of social and business issues which impact the individual, their family, and their community.  Regardless as to why a worker is unable to find employment, recruiters and hiring managers may perceive the long term unemployed candidate differently those with a shorter duration of unemployment.

 

Released on January 8, 2014, The Conference Board Help Wanted OnLine Data Series for December 2013 stands at 5,297,100 vacancies.  While 5.2 million vacancies may sound like an impressive number of job openings, it is equal to about half the number of unemployed.  The January, 2014 monthly report by the U.S. Bureau of Labor Statistics places the number of unemployed US workers at 10.4 million as of December, 2013.

 

Place yourself in the corporate recruiter’s shoes.  The assignment is to locate a mid-level non-CPA US tax accountant for a corporate location.  The organization is a manufacturer of consumer paper and tissue products with operations in virtually all US states.  The candidate must have 3-5 years of corporate income tax experience in 15-20 states and use of online tax preparation software by at least one of the top accounting firms.  Although this is not a supervisory role, they will be expected to “lead” the work of 2 accounting clerks.  The candidate should have a 4 year degree in Business Management, Accounting or Financial Management; an MBA would be considered a plus.  Any significant skills gap in the candidate’s background would cause you not to consider them.  Your assignment is to deliver 3-5 of the top rated candidates to your customer.

 

Over time many organizations have flattened their management structures so that employees are often expected to know more and do more.  At the same time, those management levels left may become overwhelmed with day to day operations.  Therefore, hiring decisions take on added importance in the light of selecting the “right” person for the job.  Even a top rated candidate whose skills are optimum but lacks the interpersonal communications skills will not be a good pick.

 

It is understandable that an organization who can only afford one tax accountant is going to look for one that is highly employable with an up-to-date skill set.  A tax accountant, who has been unemployed for a significant period time, albeit through no fault of their own, may still demonstrate their employability.  Voluntary work with religious and community groups, supplemental education efforts, temporary and part-time job assignments, and self-publishing blogs are all ways that any unemployed person can maintain their skills and demonstrate their employability.

 

So isn’t the question, not so much about how long a person is unemployed, but rather what did they do while they were unemployed?

Succession Strategy for Family Owned Businesses

Friday, January 17, 2014

As the sole owner of a multi-generational small family business, many owners hope one or more of their children will desire to follow them into the business and take over direction of the company at some point.  Small business owners are often concerned with safeguarding the continued operations of an organization that has possibly taken many decades to establish.  Often such businesses have a small but highly dedicated workforce to whom the owner feels a strong commitment and attachment.  Owners may be concerned with any transfer of ownership that might endanger the ongoing operations of the business and the employment of workers who may have given years or decades of their lives to help make the organization successful.  However, today’s reality is that many children have no desire to follow in the footsteps of a grandparent or parent into the family business.

While there are a number of legal and tax implementations for the transfer of ownership and control of any business entity, family owned businesses are at greater risk than other organizations.  Professional advice for tax, legal, governance, and succession issues and planning should be sought out early and updated as circumstances change.

Unique among organizations, small family businesses often rely on a few key long term employees who have helped build and maintain the operational success of the enterprise.  Such key members of the business’ talent team recognize the risk to the organization and their own self preservation should the organization fail due to the lack of succession and transition planning.  However, one of the greatest risks is the child who succeeds the parent may not have the same passion, desire, motivation, knowledge or skills needed to successfully run the business.  Concerned with their own self preservation, key talent members may look elsewhere taking with them not only their talent but competitive knowledge.

Retention of this cadre of employees is essential to any transition of any business, especially for a small family owned and closely held organizations.  Due to their roles in the organization key talent members may be acutely aware that some transition of leadership or ownership is imminent.  Retention bonuses work well if the goal is to maintain a core of individuals through the initial changeover from the prior to the new ownership team.  However, when that change is from parent to child, the changeover is more about who is at the helm rather than who or what owns the business.

Small family business owners are often reluctant to give up any portion of ownership, a.k.a., control.  Nevertheless, if the goal is to save the organization, distribution of ownership to a select group of non-family members may be the only option.  The “family” can maintain majority ownership while sharing minority control to those key members of the business.  So what was once planned to be “Smith and Sons” may become “Smith, Jones, and Wilson”.

Survival of a small family business hinges on the commonly shared vision of Smith and Jones and Wilson.  Even as minority owners, Jones and Wilson have a strong motivational buy in to its continued and long term success.

Leadership Deconstructed and Reconstructed

Friday, January 10, 2014

 

If you think being a leader is easy, try it when there is someone shooting at you!  The parallels between military and civilian leadership qualities are numerous.  Just because your rank is displayed on your epaulets does not automatically bestow leadership abilities anymore than a CEO’s name plate does.  Rebecca "Becky" Halstead, USA, Brig. Gen., retired, outlines 30 fundamental Leadership Principles based on her 27 years of military service in her recently released book, “24/7: The First Person You Must Lead Is You”.  Throughout “24/7”, Halstead weaves a broadcloth of leadership values based on family and faith, and foremost, integrity.  Halstead holds the distinction of being among the earliest women to graduate from the US Military Academy at West Point and the first women to command a US combat unit.

 

The business literature is peppered with self-help books on management and organizational leadership.  What makes “24/7” different from the host of others?  Halstead asks the reader to hold up a mirror to themselves and look introspectively at how they lead themselves and others.  She makes a convincing case that until you demonstrate to those around you that you process the prerequisites for leadership, you are merely ordering others and not leading.

 

In “24/7” Halstead points out that we own the responsibility and accountability for our successes and failures.  She candidly draws a focus on her own successes and failures, noting that leaders have to be keenly aware of their own strengths and weaknesses.  Along this same line of thinking, leaders have to know when to trust the judgment of others and rely on their expertise.  Halstead makes it clear that as a leader, you set the tone for how you organization operates.  If you lack the moral, ethical, and integrity qualities demanded of a leader, your organization will exhibit those same qualities.  In other words, “You reap what you sow”.

 

In today’s hyper competitive world, it is easy for an organizational leader to take the quick way out of any situation.  Halstead draws the reader’s awareness to the fact at times we as organizational leaders must “chose the harder right over the easier wrong”.  Such actions may at times place us at odds with others to the point of being detrimental to our personal and professional well being.  She reminds us that leadership is a privilege, not a right, we have to earn and maintain that privilege though a continuous demonstration of our value systems.  We may fail at times, but it is precisely at those times that a leader’s true value systems, or the lack thereof, becomes apparent.

 

Hardly a day passes without a public or private person being singled out for mis-conduct.  Halstead reminds us that no one is exempt from leadership failure, even those in which we place the highest degree of trust and faith.  However, she also reminds us that those of us who are in leadership roles have a duty to coach and mentor others towards becoming better leaders.

 

While it may be an over simplification, “24/7”’s leadership style can be summarized as strict, professional, demanding intermixed with lots of common sense, faith, and heart.

2014 Economic Impact on Talent

Friday, January 3, 2014

 

Evidence is mounting, 2014 will be a better year for the economy, businesses, and job hunting employees. CNNMoney, Forbes, and the Society for Human Resource Management (SHRM) are suggesting the US and global economies will see positive growth in 2014.  So with 2013 proving to have been a good year for many businesses, what’s the problem with 2014 being an even better year?  Competition for talent and the cost of that talent is going to heat up in 2014.

 

CNNMoney: Europe is on the re-bound, US housing is recovering, the Fed will back-off on QE2, and unemployment is falling.  Result: Increased competition for goods and services is up, available labor is down, and costs will rise.

 

Forbes: Global economies look significantly brighter in 2014.  US growth will outpace Europe, but lag behind China.  Result: Increased competition for resources, including labor.

 

SHRM: US job creation up over 2012 and 2011, 25% of employers will add jobs, more college graduates to be hired, technology labor cost up by 5%, active and passive jobs seekers on the rise.  Result: Increased competition for labor, labor will cost more, and renewed focus on talent management.

 

Josh Bersin a contributor at Forbes and founder of and principal at Bersin by Deloitte suggests organizations in 2014 will face renewed challenges in the battle over talent.
 

● Talent Acquisition Is a Global Issue

● Continuous Skills Training

● Coaching vs. Over Forced Ranking

● “Holistic Work Environment”

● Career Development Center Stage

● New Skills Needed for HR

● Reinvent/Re-Brand Talent Acquisition

● New and More HR Technology

● Talent Data Moves To Forefront

● HR Becomes “Data Driven”

 

What Bersin is describing is nothing less than revolutionary changes in how employers must embrace their management of human resources, a.k.a., talent.  Yes, many organizations have begun the process of implementing some or even all of these transformations.  So, what is the big deal, it is on my To Do list.  The problem is the world is changing faster than many organizations and those organizations are losing the war on talent and thus on customers, clients, and their ongoing existence.

 

What is the path forward?  Know thy organization!  If you are responsible for managing talent in your organization, know who your customers are and what their needs are today, tomorrow, and next year.  If your organization manufactures or provides services, what, where, and how do they produce products or deliver services.  Who are their customers and when and how do they sell those products or services.  What skills are needed in your organization’s mills, plants, factories, stores or offices?  Where are those facilities located?  What does the demographic, census, and other data (Big Data) look like at these facilities?  Do you have data on who, when, where, and how current and past employees were hired and how well they performed?  Gap analysis; identify the gaps between your customer’s expectations and your ability to delivery.

Wage Stagnation: Renewed Focus on Benefits

Tuesday, December 31, 2013

In the constant struggle to retain an organization’s talent, employers must use all of the resources at their disposal.  This is especially true during this extended period of wage stagnation most employers are experiencing.  It is easy for a top performer to be enticed away by a competitor with a 25% or 50% of an increase.  Even a well educated employee can fail to consider the true financial impact of jumping ship, particularly if it involves relocation of family members.  A number of years ago I worked for an organization where my primary role was oversight of retirement plans.  I was approached by a senior organizational member for help in understanding an offer from a competitor.  I was able to help him appreciate the loss of future retirement benefits if he were to accept the offer at this point in his career.  Ultimately, he decided to stay.

In the December 18^th release of the “2013 State of Employee Benefits in the Workplace Series”, the Society for Human Resource Management (SHRM) concluded that that “the use of benefits as retention tool in not widespread among HR professionals”.  SHRM’s study reported that between 2012 and 2013, the percentage of organizations using benefits to retain talent had fallen 2 percentage points from 20% to 18%.  For those employers who do attempt to use employee benefits to retain talent; health care, retirement, and flexible work benefits were the top 3.  However, the sobering fact is this accounted for only 60 out of 335 survey participants.

Considering the cost of employer provided benefits average 30% of an employee’s total compensation, how is it that organizations are not using benefits to dissuade top performers from walking?  As reported in SHRM’s May 2013 “Workplace Visions, 2, 2013”, the top issue for CEO’s in 2013 was “Human Capital”, per the Conference Board’s, 2013, “CEO Challenge 2013 Summary Report”.  Again, why are over 80% of employers failing to leverage every possible tool to retain their talent?

Human Resource functions are often lightly staffed and one of the first organizational units to be reduced, outsourced or eliminated during down times.  Since 2007, most HR functions have been impacted, yet at the same time organizations expect HR to provide the same or even expanded levels of support.  HR staffs may not have the tools to help employees understand the value of their benefits relative to a competitor’s.  Often by the time HR learns of a top performer leaving, it is too late, the employee has already terminated.  Employers with multi locations often have no local HR support and many regional and site managers do not have the time, knowledge, skill or tools to leverage their organization’s benefits retention power.

With 30% of the cost of production tied up in employee benefits, it is a missed opportunity not to leverage benefits as a retention tool.

Non-Profit Organizations Facing Brain Drain

Friday, December 27, 2013

 

Non-profit organizations (NPO’s), including religious, educational, philanthropic, health care, labor unions, and professional associations are facing a critical talent drain as Baby Boomers retire over the next five years.  A recent study [highlights] by the Plan Sponsor Council of America and sponsored by the Principal Financial Group reports that almost 70% of NPO’s will be forced to replace most retirees and over a third will report difficulties finding replacements.  Over 50% of NPO’s project they will lose 10% to 20% of their workforce to retirement.  While the study focused on 403(b) plan design, eligibility, participation, and administration, the study points to a serious pending loss of talent.  The survey is available for purchase at:  2013 403(b) Plan Survey.

 

Faced with such a significant loss of talent, NPO’s will have to go head-to-head with for-profit organizations to acquire the required talent to meet their missions.  While there has always been a tug-of-war between private for-profit and non-profit organizations, however with both sectors feeling the burn of Baby Boomers’ forthcoming retirements, talent acquisition and retention will take on an increased sense of urgency.  Candidates with advanced degrees in the sciences have typically leaned towards schools of higher learning for teaching and research opportunities, those same skills are increasingly sought by the private sector.  Organizations such as Bain& Company actively seek masters and PHD level applicants for consulting and internship positions, the same candidates often sought out at many NPO’s.

 

Organizations cannot compete for talent solely on the merits of their benefits and retirement plans.  Even the most altruistic candidate can be swayed by cash and non-cash opportunities, as well as work culture.  Both for-profit and non-profit employers will be faced with the challenge to present applicants with a total package.  This challenge will demand a new level of flexibility in the design and administration of the employer-employee relationship.  Organizations will be faced with situations which necessitate the retention of their current talent while acquiring their replacements.  Phased retirement could be one tool smooth the transition from an employee with decades of service to their replacement.  Many of us entered the workplace in a “phased” manner, working part-time, summer jobs, internships, and finally full-time employment.

 

While the loss of organizational talent is not a pleasant prospect, it does bring with it the opportunity to re-design and re-invent how work is done for many employers, including NPO’s.  Concepts such as Creative Destruction can be applied to job level tasks in an effort to bring about workplace change from “we have always done it that way”.  A self-managed and cross-functional team culture could appeal to the mind-set of many Generation X and Y cohorts as potential Baby Boomer replacements.  Finally, leveraging of technology for non-profits is just as vital as it is for their for-profit counterparts if they are to focus on their mission.