Managing Labor Assets

The United States, and indeed, much of the developed world, is in the midst of a curious labor quandary. Even as the business journals report massive layoffs in the manufacturing sector—affecting hundreds of thousands of employees—manufacturers themselves are complaining of difficulties in hiring skilled workers.

What’s really going on?

A new survey, which was developed by the Manufacturing Institute of the National Association of Manufacturers (NAM), and jointly undertaken with Deloitte Consulting LLP, points out some alarming statistics. According to the survey report, released November 2005, “the largest manufacturing country in the world can barely find the skilled employees it needs to remain competitive in the global economy.”

Specifically, 81 percent of survey respondents cite a shortage of qualified workers overall; 90 percent indicate a moderate to severe shortage of qualified skilled production employees; and 83 percent say that these shortages are impacting their ability to serve customers. The largest shortages occur in the areas of technical and skilled labor, and for scientists and engineers, with only 39 percent of respondents indicating a shortage of “qualified” unskilled production employees.

Clearly, the labor dichotomy is centered on the issue of skilled versus unskilled employees. Unskilled labor positions will continue to be outsourced to countries with lower labor costs, or will be replaced by automation. The challenge for manufacturers is to replenish the pipeline of skilled technical labor.

Fixing the pipeline

“The pipeline is broken,” said Keith Nosbusch, chairman and chief executive officer (CEO) of Rockwell Automation, speaking at the company’s recent Manufacturing Perspectives summit in St. Louis. Saying manufacturing is one of the few businesses that create wealth in an economy, Nosbusch noted that the pipeline needs to be repaired from the education systems to industry. “ We [Rockwell Automation] have committed 60 percent of our charitable giving toward education, targeted more at the elementary and middle school levels.”

One way to manage labor assets is to invest in the education system. Another is to invest in your employees through training programs. Speaking at the same Rockwell Automation event, Bill Taylor, president and CEO of Mercedes-Benz U.S. International Inc., noted that the Mercedes factory in Alabama, which is responsible for 20 percent of the company’s revenue, enjoys an industry-low turnover rate of 1 percent, and an attendance rate of 99 percent. According to Taylor, employees go through 57 hours of assessment on teamwork and the ability to learn and communicate. “After assessment and training, I feel our ‘team members’ can work anywhere.”

In addition to education and training, employers need to manage labor assets through excellent communication programs. In his new book, “Performance Without Compromise,” Charles Knight, chairman emeritus of Emerson, calls this “communicative management.” Writes Knight, “Employees can maximize their contributions to Emerson, only if they fully understand the strategy, plans, opportunities, challenges and economic realities of the plant and division. Every Emerson employee can answer four essential questions… What cost reduction are you working on? Who is the competition? Have you met with your management in the past six months? Do you understand the economics of your job?”

Leading manufacturers—such as Emerson, Mercedes and Rockwell Automation—understand how managing labor assets impacts the bottom line. Management strategies, such as investment in the education system, comprehensive assessment and training, and two-way communications, will maximize return on the labor asset.

According to the NAM report, the key message is that competitive wages and benefits are just the starting point in attracting and keeping employees—but it goes beyond the paycheck. “[Employees] want transferable skills that make them valuable to their current employer and the broader marketplace.”

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