You don’t need to be an economist to grasp the scale of America’s post-COVID-19 labor shortage. You need only to look out the window as you drive past industrial parks and commercial hubs — each “help wanted” and “now hiring” sign a symbol of the struggle to find workers. According to a recent survey from Deloitte, finding the right talent is now 36% harder for manufacturers than it was in 2018, part of a trend that could leave as many as 2.1 million jobs unfilled by 2030.
A recent survey of 500 Ohio manufacturers by my organization, MAGNET, revealed that 73% of respondents see the labor shortage as hampering their growth. Put simply, this is a lot of potential production and wealth left on the table each day.
But manufacturers know that hiring new workers is only one challenging piece of the human resources puzzle. Equally vexing, especially now, is the effort to retain the employees they have — particularly those with skills and training — and prevent competitors from poaching them with better offers or bigger bonuses. Once employers get past “Why work here?” they need to constantly answer the question: “Why stay here?”
Some manufacturers are trying short-term incentives such as signing bonuses, but that method has limited utility. Sure, these offers may get folks to sign that first contract. But a successful retention strategy requires smart investments across organizations — in wages, training, technology, and community engagement — to make manufacturing a more appealing career, and to create a future that employees can aspire to.
Here’s how companies can get started.
Raise Wages And Invest In Training — With Intention
Loyalty can be hard to come by for employees making $15 an hour, so pay raises can help companies keep good workers. But even then, some of their best employees are going to leave. It’s frustrating to train people just to watch them take new skills elsewhere — especially when it can take two to five years for an entry-level worker to become fully self-sufficient. But that’s the reality of today’s market.
While you can’t stop everyone from leaving, you can take a strategic approach to keeping more of your most important people. Perhaps you focus raises on the top 50% of performers and assume high turnover among the rest. Whichever approach you choose, apply benchmarks, understand how your pay schedules stack up, and identify who is most poachable.
Whatever route you take, a significant pay raise is still far cheaper than replacing skilled workers. As I have previously explained, increasing one worker’s hourly wage by just a few dollars will cost you about $7,000 over a year. Replacing that same worker will likely cost $15,000 when factoring in lost productivity, recruiting, onboarding, and training.
Manufacturers are also starting to realize that training, even if an employee leaves, is not a sunk cost. Gaining a reputation for providing effective training on-site and forming sector partnerships to build pipelines for new workers will pay off in the long run because it will attract incoming talent.
Ohio’s Alliance for Working Together is one such example of a successful partnership. The manufacturers involved sponsor a robotics competition at local public high schools to start building a talent pipeline. Many companies have recruited from these competitions, especially those that took on a critical role in running them. And in 2019, after struggling to hire computer numerical control, or CNC, machinists, the firms formed an apprenticeship program with community college credits.
This initiative, highlighted in a recent MIT report on the future of U.S. manufacturing, is a prime example of how manufacturers — collaborating among themselves and with other stakeholders in their communities — can create a sustainable local environment for their own success.
Improve Culture And Create Career Paths
Some causes behind the manufacturing workforce decline involve social forces such as the college-or-nothing ethos that became pervasive in the ’80s and ’90s, which led many young people to dismiss a career in manufacturing or skilled labor.
But the industry itself shoulders much of the blame. The social contract that underpinned industrial labor relations has eroded, in large part because of the predilection for temporary workers, high-profile factory closings that wrecked local company-town economies, and decreased employment resulting from outsourced labor and automation.
This social contract promised loyalty between companies and employees and can be reconstructed if manufacturers create a culture where people believe they can build a career. A recent survey from the Manufacturing Institute echoes this sentiment: The top reasons employees stick with their employers were enjoying their work and feeling secure in their job.
Applying a continuous improvement mindset to strengthen company culture is one way to do this — especially if it’s fueled by employee surveys that can inform such improvements. Another approach is regular communications with high performers about when and to what levels they can advance within the company. This shows you value them and can give you a heads-up before the employee decides to make a move.
Be A Pioneer
I work with hundreds of manufacturers across Northeast Ohio, and I’m often asked what sets dynamic firms apart from many others in a region with shrinking workforces and diminished profitability.
There are a few common factors outlined in MAGNET’s new Blueprint for the future of manufacturing in the region: High-performing companies are often early adopters of smart technology; they are agile enough to seize market opportunities; they are led by people constantly asking themselves how to innovate operations. But more than anything, these manufacturers have put in years of sweat equity.
They include companies like Automation Tool & Die of Valley City, Ohio, which worked with other local manufacturers and colleges to form the Medina County Manufacturers Partnership, aiming to bring state-approved apprenticeship training to their community and to raise awareness about the lucrative high-tech careers that manufacturing can provide.
And they include Cleveland-based welding giant Lincoln Electric
By building reputations as pioneers, innovative companies understand that a rising tide lifts all boats — because their success will encourage others to adopt the same ethos and practices. When a potential employee envisions their future in manufacturing, they’re more likely to choose the company that showed up at career fairs, that built pipelines to universities, and that launches careers through on-site training.
What if that same employee decides in a couple of years to take their talent elsewhere? Well, as frustrating as it might be to accept, that’s just business. Even the best companies recognize that they might keep just two or three of every five employees they train and cultivate. But they don’t throw their hands up in despair. They keep investing in their people.
Rebuilding the social contract between employers and employees. Generating excitement around manufacturing careers. Cultivating a culture of mutual growth and uplift. These factors — not signing bonuses or other temporary salves — will define the future of U.S. manufacturers and their workforces.