Manufacturers Forge New Workforce Solutions
Against long odds, U.S. industrial businesses are finding creative ways to attract and retain much-needed workers
Even before COVID-19, the U.S. manufacturing sector faced challenges with hiring and retention, which became more acute during the pandemic.
Today, industrial business leaders and their investors are finding creative ways to fill jobs and retain workers to keep up with demand.
The industrial sector has long been plagued by worker shortages as baby boomers retire and younger workers lack either the interest or the skills to fill open jobs.
The pandemic exacerbated the problem by creating widespread labor shortages that continue today. The U.S. Chamber of Commerce estimated in March that there were 693,000 open manufacturing jobs in the country.
Laura Fischer, managing director on the human capital management and payroll consulting team at professional services firm Sikich, notes that machinists, operators and technicians are among the most difficult roles to fill, due to a shortage of required skills.
Jobs perceived as dirty or dangerous, such as those in foundries or otherwise involving heat, are especially difficult to staff, adds Shannon Gabriel, vice president in the leadership solutions practice at TBM, a manufacturing operations and supply chain consulting firm.
Geographic migration poses yet another challenge to recruiting, says Russell Greenberg, founder and managing partner at Altus Capital Partners, a private equity firm with offices in Connecticut and Illinois. Census data shows that the Northeast and Midwest regions lost residents between 2021 and 2022, while the South and West experienced positive net migration. A declining local population means an even smaller talent pool, regardless of whether the company operates a foundry or a pharmaceutical plant. “Geography is an obstacle more so than any one niche of manufacturing,” Greenberg says.
In many ways, the deck is stacked against manufacturers, yet they show no intention of downsizing. Responding to the latest Sikich Industry Pulse in March, 92% of manufacturing and distribution executives said they plan to maintain or expand their workforce over the next 12 months.
Being Flexible
The labor dynamics within manufacturing have prompted businesses to adjust compensation. More than half of manufacturers (53%) in Sikich’s March survey said they increased wages by 5% to 8% over the prior 12 months, while 22% of respondents said they’ve increased wages by at least 9%.
Yet there are signs that the focus is shifting away from pay in lieu of other perks.
TBM’s Gabriel has seen growing interest in vacation benefits among workers. “They don’t want to work six days a week. They don’t want to work 80 hours a week, if they’re salaried,” she says. “They want to have paid time off.”
Interest in such benefits is especially high among younger employees, Gabriel adds. “That definitely shows with newer generations that are coming into the workforce. Work-life balance is the most important thing to them.”
Remote or hybrid work arrangements have become a larger part of the conversation since the start of the pandemic, too, particularly as manufacturers compete for talent with industries that offer this benefit.
Related content: Manufacturing Success: A Look at the Manufacturing Sector
Manufacturing work often requires employees to be physically present. But after receiving requests for hybrid work from support staff at its industrial portfolio companies, Blackford Capital found a workaround. The Grand Rapids, Michigan-based private equity firm implemented what it calls a “4-10” concept at many of its plants, wherein most factory workers and support staff work 10-hour shifts Monday through Thursday. Any overtime labor is then done on Friday.
“In the best-case scenario, folks get a three-day weekend; worst case, they at minimum get their full weekend, Saturday and Sunday,” says Carmen Evola, managing director at Blackford.
Manufacturers are increasingly attuned to the needs of current or prospective employees, with an eye toward providing benefits they can’t get elsewhere.
One of Fischer’s manufacturing clients began offering a 9 a.m.-3 p.m. schedule to accommodate employees with children. “Parents can still be with their kids before and after school, and it’s worked really well to attract and retain employees,” she says. Another client, which employs Hispanic workers, offers free English classes.
The worker shortage and skills gap have led manufacturing businesses to look beyond their typical pools of job candidates, such as retirees interested in returning to the workforce part-time or refugees, according to Fischer.
For its part, Washington, D.C.-based private equity firm HCI Equity Partners hopes to tap into military veterans transitioning into the private sector. In July, HCI announced a partnership with Headlamp, an organization that helps military veterans find civilian jobs, and Sutton Growth Group, a professional services firm focused on training. The collaboration will identify veterans for positions at HCI’s portfolio companies and provide training for their new roles, says Doug McCormick, co-founder and managing partner at HCI.
A U.S. Army veteran himself, McCormick notes that veterans tend to have a difficult time finding jobs after leaving the service. “I would argue it’s not because of a lack of will; it’s not because of a lack of skill set,” he says. “It’s a lack of a broader understanding within the business community around how those skill sets can translate to a new environment.”
As part of the program, 10 veterans will work within an HCI portfolio company for a five-month internship, during which the Department of Defense covers relocation costs, salaries and benefits. When an intern is hired full-time at an HCI portfolio company, the private equity firm will fill the internship slot with another veteran, so that 10 participants are always in its program.
A month after the new initiative was announced, McCormick says several veterans are already participating.
It’s all about looking in new places, being more inclusive and finding talent wherever you can.
Doug McCormick
HCI Equity Partners
Tapping into the veteran talent pool is just one example of the creativity U.S. manufacturers will need to employ to fill jobs. “It’s all about looking in new places, being more inclusive and finding talent wherever you can,” McCormick says.
Engaging Talent
Business leaders and investors acknowledge that finding workers is only half the battle. Keeping them around can be equally challenging.
TBM’s Gabriel emphasizes the importance of thoroughly vetting candidates during the hiring process, providing them with onboarding and training, and integrating them into the company. “You have unskilled workers who are coming in, working the line, who have no idea how to do their jobs,” she says. “They’re working side by side with highly skilled, tenured operators, who are frustrated with the new employees’ lack of speed and accuracy.”
That’s led to a high rate of so-called “quick quits,” where new workers resign within 30 days. Gabriel estimates that about 50% of new hires quit in that timeframe.
Related content: Recruiting and Retaining Talent in a Post-COVID World
The manufacturing industry also struggles with the related problem of absenteeism. Employees who don’t feel connected to their work or employer are less inclined to show up every day. Two years ago, Blackford Capital embarked on a series of small group meetings to understand what Evola describes as “the good, the bad and the ugly” at its portfolio companies, including high rates of absenteeism at some.
Burgaflex, a maker of tube and modular hose assemblies for the heavy-duty truck market, was among the companies whose leadership and manufacturing teams met with Blackford to discuss improvements. Before this endeavor, Burgaflex had an absentee rate of about 12.5%.
At the time, contract laborers made up about a quarter of the workforce at the Fenton, Michigan-headquartered company—a common practice within the industry, Evola notes. The company has since stopped using temporary employees entirely, with the goal of creating a more stable workplace with less churn.
Over the same two-year period, Burgaflex improved the employee experience through repairs to the parking lot and upgrades to its facilities, plant renovations and new office construction, Evola says. Burgaflex also implemented a new program that pays hourly workers a bonus if they meet safety, quality, productivity and attendance goals. He notes that Burgaflex’s absenteeism rate has since dropped to below 3%. “It’s been an incredible transformation,” he says.
There may be no silver bullet for solving manufacturing’s talent woes, so prioritizing the needs of each business and its local workforce will likely remain a focus for investors and management teams. Efforts to change manufacturing’s reputation as an unsafe or dead-end profession can come from a private equity partner’s investments and upgrades, particularly for safety practices.
By effecting changes that protect and educate workers and make work more enjoyable, manufacturing may yet become an appealing career path for a new generation.
“People think manufacturing can be dangerous,” says Altus’ Greenberg. “If you do the right things to impact safety programs and education, it’s a very clean and safe environment where [workers] add a lot of value and you can get good wages.”
Katie Maloney is Middle Market Growth’s content director.
Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.
