The “skills gap” or skilled worker shortage is a hot topic in industrial workplaces, but why and how bad is it? A recent Tooling U-SME study of more than 850 U.S. manufacturing companies revealed that 64 percent of respondents reported significant setbacks due to a shortage of skilled laborers. The U.S. Bureau of Labor Statistics and the Boston Consulting Group estimate that roughly 264,000 machinists will be needed in the next five years. Meanwhile, research and consulting firm Deloitte has predicted that a staggering 2 million U.S. manufacturing jobs will be vacant by 2025.
The studies all seem to agree that the demand for skilled workers is increasing and this demand is not being met for a variety of reasons. Unfortunately, they also conclude that the resulting shortage will likely persist or even get worse.
Plants that are short-staffed, particularly those needing skilled workers, stand to suffer serious losses that extend far beyond daily challenges. On a day-to-day basis, these facilities may experience strain on existing staff members and increased limits in machine availability. Plant personnel will need to work extra hours and take on added responsibilities for which they aren’t trained. As a result, repairs and maintenance may be performed incorrectly or not at all, and machines may break down, prompting expensive repairs, reduced productivity and investment loss.
According to Deloitte’s survey, 60 percent of respondents said they rely heavily on overtime to meet demand, and almost half of them reported using third-party labor contractors to compensate for unfilled skilled positions in the workplace. These methods may get the job done, but this comes at a high cost to the company’s financial and human capital.
Respected efficiency models like Six Sigma and lean manufacturing emphasize the importance of autonomous maintenance, employee ownership and empowerment. A staff burdened by unrealistic expectations or too many responsibilities will not be capable of effective autonomous maintenance or a sense of empowerment in their work and will likely develop frustration and resentment.
Productivity and financial setbacks are also significant, as numerous breakdowns translate into frequent repair costs, additional labor and lost yield opportunity. Even brief stoppages or slower equipment operation (due to unreliable machines) can add up quickly with devastating results. Tooling U projected one manufacturer would experience an 11-percent loss of annual earnings - $4.6 million - just from not having appropriately trained personnel in the right plant positions.
Employers have several options, but perhaps the most immediate and impactful involve competency modeling, succession planning and training. A 2013 study by Manpower Group indicated that 53 percent of skilled trade workers in the United States were 45 years old or older, and at least one-fifth of them were between 55 and 64 years of age. In spite of this, a troubling tendency to overlook or underestimate this growing problem seems to prevail. Approximately 54 percent of Tooling U’s respondents reported that no company-wide plan was in place for addressing the aging workforce or existing gaps. Deloitte found similar results. Respondents indicated that they had methods for developing talent within the existing workforce, but they were informal and therefore impossible to track or measure for effectiveness. Only 31 percent even had a formal career-development program in place.
Managers must begin by establishing a competency model with clear-cut expectations for employees’ knowledge, skills and abilities. This strategy is woefully underutilized. Only 17 of Deloitte’s respondents reported using competency model tools. By utilizing data-driven information on where a workforce is lacking and pairing this with clearly defined expectations, standards and goals, managers can gauge which areas to target in terms of training and career development. The end results will vary based on the workplace, but the most essential step is to implement an analytical approach. Informal workplace training, unreported stoppages and vague information on personnel skills and job requirements only facilitate confusion and mask the source of recurring problems.
As part of a competency model, managers can make note of the age and impending retirement of senior employees and plan for them to train younger staff members before they leave. This is an extremely valuable and cost-effective strategy for preserving the experienced workers’ knowledge base, particularly because these individuals can offer insight specific to the machines and conditions in their workplace.
For many short-staffed plants, competency modeling and training may be far too demanding in the face of daily operations challenges. Consulting groups like Noria exist to help companies in these types of circumstances. Consultants can provide expertise and effective solutions without consuming the limited time and energy of overworked personnel. Once competency models have been created, managers can then make informed decisions on how and where to train their staff.
Studies show that manufacturers who are at or near world-class levels of continuous improvement and workforce development also exhibit world-class manufacturing status. For example, 72 percent of world-class facilities met 91 to 100 percent of their production goals. Eighty-two percent had at least 80 percent machine availability, while 85 percent generated at least a 10-percent gross profit. Considering this relationship between consistent workforce development and high performance, the growing skills shortage makes training a necessity for any business wishing to stay competitive.
Finding a skilled workforce in an era of aging workers, scarce new talent and higher demand will be extremely difficult. However, accomplishing this will be critical for growth and sustained success. Outdated recruiting methods continue to be a major problem. Traditional recruitment assumes that qualified workers are out there waiting to be discovered, but this is increasingly untrue.
Creating a talent pipeline with local vocational or higher education institutions is an excellent long-term strategy for companies anticipating a gradual, steady decline in skilled labor. One organization in Tooling U’s survey adopted mandatory training of 50 hours each year for all employees and collaborated with local high schools and colleges to create a strong recruitment plan. As a result, the company has an employee turnover rate of only 5 percent, compared to the industry average of between 23 and 30 percent. The company also has a thriving intern program and has significantly lowered workers’ compensation claims.
In conjunction with educational collaborations, organizations must also consider branding themselves as excellent employers that offer young people gainful opportunities and meaningful careers. Higher education and four-year degrees have long been favored as the most cost-effective decision for high-school students, but this is rapidly diminishing as tuition costs skyrocket and collegiate-level jobs are not as guaranteed as they once were. Technical schools and faster gainful employment in companies that need skilled labor can be a very attractive option for students if presented well.
It is important to note that any effective skills-gap solution requires substantial investments of time, money or both. Given the costly nature of both the shortage and its prospective solutions, it is wise to consider outsourcing certain steps to companies that specialize in data gathering, engineering solutions, recruitment, etc. Accurate company statistics - the first element in making an informed selection - are particularly crucial and can serve to positively impact problems that extend beyond staffing.
Regardless of the industry or individual circumstances, any plant will benefit from an accurate, well-conducted needs assessment. A great first step for employers looking to address their skills gap is to obtain a third-party assessment and then use the results to pinpoint exactly what they need in a new hire. Third-party consultation can also be helpful or even necessary in other phases, such as workforce development and recruitment. The more urgent or time-sensitive the problem, the more beneficial third-party outsourcing becomes.
All possibilities aside, employers should make informed decision-making their greatest priority. Investing time and money in an accurate understanding of their unique circumstances and needs will guarantee selection of the best available options at every juncture.