People management even more essential as skills gap widens

According to a new study, many of today's most profitable manufacturers assign a higher importance to implementing people management practices than to increasing customer service orientation. These leading organizations are taking proactive steps to attract, retain and develop their employees and others can and should do the same.


Many manufacturers, especially the most profitable, rank employing a top-notch workforce high on their priority list. And many of the most successful companies assign a higher importance to implementing people management practices than to increasing customer service orientation. These are the results of a new study, People & Profitability - A Time For Change, A 2009 People Management Practices Survey of the Manufacturing Industry.

The study, conducted in May 2009, was commissioned jointly by Deloitte, The Manufacturing Institute and Oracle, analyzes the future importance and current performance of people management practices relative to a manufacturer's business success. It also reveals the challenges manufacturers are facing with talent shortages and offers strategies to address them. The report serves as a supplement to the 2005 Skills Gap Report, issued jointly by Deloitte, the National Association of Manufacturers (NAM) and The Manufacturing Institute, an affiliate of NAM.

Now more than ever, manufacturers need to embrace new and progressive talent strategies in order to maintain profitability and stay competitive, according to the study. Even during the current economic downturn, nearly one-third of companies report a moderate to serious shortage of skilled workers, and most foresee increased shortages ahead. This may seem counter-intuitive, but it suggests that many companies that have experienced layoffs may be simultaneously recruiting for specific types of employees, with specific skills and capabilities, in specific locations.

Regional talent shortage disparities also emerged from the study. In the Midwest, for example, 26 percent of manufacturers surveyed reported moderate to serious talent shortages. In the Southwest, 50 percent of companies reported such shortages.

"Fundamental change has never been more necessary in the way companies attract, retain and develop their employees," said Richard Kleinert, principal, Deloitte Consulting LLP. "The challenges that lie ahead have the potential to cripple manufacturing as we know it."

Kleinert recommends manufacturers take proactive steps to prepare and engage workers for the future. To support this effort, The Manufacturing Institute recently launched the NAM-endorsed Manufacturing Skills Certification System to help develop talent and enable U.S. manufacturers to compete successfully in the global marketplace.

The study reveals that manufacturing organizations have new aspirations for addressing skilled labor shortfalls, but they rely on old tactics and progressive tactics have failed to gain traction. For example, while people management practices still may be championed by human resource executives, they must also be embraced by all levels of leadership and line management.

"It is important to align people management processes and strategies with the overall goals and strategies of the company," said John Barcus, vice president, Oracle industries business unit for manufacturing. "When executives place emphasis on talent management and retention by moving focus from the HR organization to the lines of business, you see a greater ability to align individual effort with business objectives. [This leads] to improvements in employee contribution, satisfaction, and retention."

According to the study, the largest gaps between where people management practices are going and where current performance is today are in the areas of strategy, talent acquisition, talent development, performance expectations, and technology deployment.

The study recommends manufacturers focus on the following areas:
• Collaborative people management practices that involve all levels of leadership and management;
• Development and implementation of measures and analytics by which to measure the value of talent instead of simply the cost;
• Deployment of technologies to support the attraction, development and productivity of employees; and
• Adoption of people management practices designed to attract, retain, motivate and develop critical skills.

"In the face of a global recession and intense international competition, American manufacturers must differentiate themselves through innovation and a highly skilled workforce," said Emily DeRocco, president of The Manufacturing Institute. "Companies need to invest more in employee training and make workforce skills a top strategic priority. Our education system must also do a better job aligning education and training to the needs of employers and job-seekers."

Despite dramatic changes in the economy since the release of the 2005 Skills Gap Report-A Survey of the American Manufacturing Workforce, the top three overall drivers of future business success over the next two to three years remain the same. According to survey participants, these are:

1. New production innovation: 65 percent in 2009 vs. 49 percent in 2005
2. High-skilled, flexible workforce: 50 percent in 2009 vs. 75 percent in 2005
3. Low-cost producer status: 43 percent in 2009 vs. 45 percent in 2005

Click for more information on People & Profitability - A Time for Change, A 2009 People Management Practices Survey of the Manufacturing Industry , and to download survey findings.

- Edited by Renee M. Robbins, managing editor, MBT


See also:

Skills enhancement: Supply chain, operations groups partner

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