The staff at Manufacturing.net reports, “U.S. manufacturers may be losing up to 11 percent annually of their earnings as a result of increased production costs stemming from a shortage of skilled workers, according to a new study from Accenture and The Manufacturing Institute.” [“Skills Shortage Threatens Earnings And Growth Of U.S. Manufacturers,” 15 May 2014] Some of the insights gained from this survey include the fact that “80% of executives report a moderate to severe shortage of highly skilled workers”; “75% of executives report a moderate to severe shortage of skilled workers”; and, “61% say it is difficult to hire the skilled people they need.” According to the study, executives are bullish on the economy and half of them “plan to increase production by 5% or more in the next five years.” That’s the good news. The bad news is that, in order to achieve this and lacking skilled or highly skilled employees, companies are going to have to increase overtime for the skilled employees they do have. The shortage of skilled employees is also reflected in an increase in downtime, with 62% of executives indicating that downtime has increased at least 5%.
The Accenture/Manufacturing Institute report suggests five short- and medium-term strategies that can help companies strengthen the talent supply chain. The best long-term strategy, as discussed below, involves reforming how we educate our children. The first strategy recommended by the study is for companies to “take advantage of digital technologies to make skills training available any time, anywhere.” According to Michaels & Associates Learning Solutions, “eLearning has the power to increase information retention rates by up to 60%.” That is a clear advantage if you want to increase your employee knowledge and skill level quickly.
The second strategy recommended by the study is for companies to “collaborate with educational institutions to upskill current employees and build a pipeline of future skilled workers.” This is a strategy I’ve discussed in the past and one that makes a lot of sense for both the public and private sector. One of the biggest concerns you hear nowadays is that college graduates are finding the job market grim. What that really means is that they are leaving college without the skills they need to fill positions that are available. Public/private collaborations need not wait until students seek higher education. Elizabeth Narehood, Managing Director of the Future Focus Foundation in Virginia, reports that public/private collaborations are being established at the high school level. [“Cultivate STEM Talent to Grow Your Bottom Line,” Area Development, 24 April 2014] “Industrial, educational, and government leaders,” she reports, “are joining forces to build the robust STEM talent pipeline necessary for U.S. companies to compete in the global economy.” She continues:
“National statistics illustrate a vastly inadequate STEM talent supply with future projections portraying an even more dismal employment landscape. According to the U.S. Department of Commerce, jobs in STEM are expected to grow 17 percent by 2018 — nearly double the growth of other fields — yet only 16 percent of college graduates have degrees in STEM fields. This, compounded by society’s precarious perch on the cusp of baby-boomer retirements, has looming negative implications for industry retention and growth. A call-to-action fueled by this ‘perfect storm’ is delivering groundbreaking collaborations … between the public and private sectors.”
The third strategy recommended by the Accenture/Manufacturing Institute study is for companies to build “standardized skill sets and employee engagement using certification programs.” There are some established programs, like ACT’s WorkKeys® program, which is “a job skills assessment system that helps employers select, hire, train, develop, and retain a high-performance workforce.” I’m familiar with the program because the spouse of one my employees is an ACT-certified job profiler. Using these kinds of programs not only helps refine and focus skills training but helps with employee assessments and other human relations challenges as well.
The fourth strategy recommended by the study has its roots in the middle ages; namely, “utilize apprenticeships to build a highly skilled workforce.” Although this may sound like an expensive strategy, the ROI is apparently pretty good. One proof of this is the fact that Germany fared much better during the great recession than many countries, largely due the robustness of its medium-sized companies (so-called Mittelstand firms). In September 2010, Jana Randow (@jrandow) and Aaron Kirchfeld (@ak_mna) called these firms “nimble, hungry, and global.” [“Germany’s Mittelstand Still Thrives,” Bloomberg BusinessWeek, 30 September 2010] Randow and Kirchfeld continued:
“Outsiders may think of global champions like BMW and Siemens roaming this landscape, but it’s the Mittelstand — family-owned companies with fewer than 500 employees and annual sales of less than 50 million euros — that employs more than 70 percent of German workers and contributes roughly half of the country’s GDP.”
Ralph Wiechers, chief economist at the VDMA machine makers’ association, told Randow and Kirchfeld, “The Mittelstand is the defining element of our economy.” Randow and Kirchfeld claimed that one of the key elements that make the Mittelstand model successful is an apprentice system that “ensures that Mittelstand companies have a steady flow of qualified workers.” They explained:
“[Mittelstand firms] take on 83 percent of all apprentices in Germany, more than their share of total employment. The apprenticeship system has roots in the Middle Ages, when master craftsmen across Europe taught young men the skills of stonemasonry, carpentry, and roof-making.”
Looking at the success of the German model, it should come as no surprise that the Accenture/Manufacturing Institute study recommends the apprenticeship model as one way of addressing the skilled worker shortage. For more on this subject, read my post entitled “The Mittelstand Model Remains Desirable.” The final strategy recommended the study is for companies to “expand the candidate pool by hiring for potential rather than ‘perfect’ fit.” Programs like ACT WorkKeys can help you do this. The Manufacturing.net article concludes, “Successful companies, according to the report, spend training dollars as part of an overall strategy designed to address critical skill shortages, with clear objectives set for the short-, medium- and long-term.”
The long-term strategy begins with education. In a post entitled “Success Starts with Critical Thinking and Problem-solving Skills,” I wrote, “One of the reasons that I, along with a few colleagues, founded The Project for STEM Competitiveness, was to help get a project-based, problem-solving approach into schools. As an employer of people with technical skills, I am naturally interested in ensuring that, in the future, I will have an adequate employee pool from which to draw; but, as a parent, I want to ensure that our children are equipped to succeed in a changing world.” The following infographic from edutopia provides a good overview of why STEM education is so important.
There is simply not enough interdisciplinary, project-based learning taking place in American schools. If the U.S. is going to remain competitive in the years ahead, this has to change. Everybody seems to agree that the U.S. education system is need of serious reform; but, there is no consensus among stakeholders about how this can be achieved. Whatever strategy is adopted, it must be able to teach our children how to cope with a future that is yet to be defined. The jobs that many of them will fill have not even been imagined.