There are many factors pushing manufacturers to consider workforce changes — often, they need to build technology skills to pursue innovations in quality and efficiency, but that’s not the whole story.
At a manufacturing plant, technology modernization can be a complex and expansive venture. “When you think about a manufacturer updating technology, it’s often not as simple as just implementing a new system,” said Grant Thornton Growth Advisory Services Principal Jennifer Morelli. “It could fundamentally change the entire line, which then changes the footprint. I was recently in a plant built in 1973. Most of the machines were from 1973, because the machines were the entire plant. The ripple effect of modernization can be much bigger than other industries.”
The machinery of a plant can have a parallel to its workforce. “We talk about the culture of innovation and technology for the workforce, to gain efficiency, offset retiring workers and help recruit younger people who want to use newer technology,” Morelli said.
Recruitment of new workers has been one of the biggest challenges in manufacturing today.
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The need to recruit
In the latest HR leaders survey, HR leaders said that recruitment remains their top challenge.
“Look at what some of our clients in larger urban areas have experienced, where the neighborhoods around factories have gentrified,” said Grant Thornton Growth Advisory Services Managing Director Joe Ranzau. “Their staff used to come from the neighborhood, but now people have to drive an hour or more to get the same wage. In fact, I know of a large manufacturer that is selling their main facility and turning it into condos, because it’s worth more money as real estate, they’re boxed in, and they can’t get talent.”
Even when manufacturers can still recruit talent, they might struggle with retention — especially if there are other jobs fighting for their workers.
The fight to retain
The growth of wages in other industries can make it hard to keep workers — but the toughest competition might come from other manufacturers.
“In urban communities, my CXOs are saying they’re seeing workers hop across the street for a job with a small bump in pay,” said Grant Thornton Manufacturing Industry National Leader Kelly Schindler.
“In urban communities, my CXOs are saying they’re seeing workers hop across the street for a job with a small bump in pay.”
“We have one client who now has restrictions on people coming back to the company,” Morelli said. “If you take a job at a competitor, you have to stay there for a certain amount of time. Then, based on certain criteria, you might or might not be able to come back to this company.” She explained that the company got tired of job-hoppers who moved back and forth for pay increases that created a wage war between competing plants. “They just said, ‘If you get a job here, we will invest in you because we expect you to invest in us and stay. We’re not messing with the jumpers.”
However, to back up that statement, manufacturers need to show workers that the organization will value them and develop them. That often starts with understanding.
Manufacturers can be unaware of the untapped skill sets and talents in their more technical positions. “They aren’t captured on a resume, because most of the people didn’t have resumes — they don’t have a natural way to understand a person’s skill set,” Ranzau said.
Ranzau recalled a manufacturing client that was hiring people who did not speak English to perform entry-level jobs. “One of the plant leaders learned how to have some conversations with them. He realized that the janitor was an industrial engineer from Venezuela that had a lot of insight. They were able to, through conversation, realize that they actually had deeper talent than they knew and to start moving them into other positions. They then had shift supervisors start engaging more deeply with staff at all levels, to better understand backgrounds.”
Development begins with understanding — and then, you need a clear path that clarifies the motivational goals along the way.
The path to development
To help bridge the gaps in recruitment, retention and technology, manufacturers need their own development plans.
In fact, our survey respondents indicated that bonuses and advancement are especially important to the manufacturing workforce.
Training has long been an important part of the career path in manufacturing. “Manufacturing requires a specialized skill set, depending on the entity,” Morelli said. “It requires someone with technical abilities. Manufacturers are creating their own schools and training people.”
Traditionally, this training offered opportunities for advancement. “You move from a maintenance tech to a journeyman 1, to a 2, to a 3,” Ranzau said. “It’s the ability to create the entry-level positions and move them up. It even ties into recruitment. They explain the journey as part of the recruiting process — what it’s like to work there, and where you could go in your career.”
Now, the need for new recruits is even greater. A growing wave of technical specialists have reached retirement age. What can manufacturers do to bring more people into the system?
“One of the easiest things, from a marketing perspective, is to advertise you have starting pay of X and within two years you can earn Y,” Ranzau said, citing billboards and advertisements that have used this type of message to compete for attention from potential recruits. These pay increases typically tie into development.
“They pay you the base. Then, they offer to send you to a training program or tech school,” Ranzau said. “They might give you a stipend. You then have a three-year commitment with guaranteed pay. Then, at the end of that three-year commitment, you’re at a high salary. They are using it as a hook, to upskill you and provide other opportunities.”
But, what skills does a manufacturer need to train and develop in their environment?
The skills to build
It can be hard to know which skills you will need — and many of our survey respondents weren’t confident about their own organizations.
Even though development and advancement are important to recruitment and retention, many manufacturing HR leaders don’t think their organizations understand the future skills required or are successfully planning for those skills.
One skill that’s essential is often missing: Leadership.
“Respondents said that advancement opportunities are one of the reasons why people come to the organization,” Morelli said. “But they’ve said that leadership development is one of the challenges that they’re facing. That tells you what they’re talking about in advancement, versus building leaders of the future.”
“They’re teaching a technical skill when they offer developmental opportunities. They’re not teaching leadership.”
“They’re teaching a technical skill when they offer developmental opportunities. They’re not teaching leadership,” Ranzau said.
“We have a lot of long-tenured people who are retiring from the industry,” Schindler said. “It’s creating upper-level position opportunities that people can work up to." Yet, leadership development in manufacturing is often only an extension of the technical training model. The risk is that employees can be promoted to leadership roles without really learning leadership skills.
“You can end up having direct reports and manager responsibilities, but still talking to your team the same way,” Ranzau said. “That can create liabilities for the company.”
Ranzau recalled one manufacturer that was violating overtime regulations, HIPAA compliance and privacy restrictions for leave tracking. “There were managers with no knowledge or awareness of those things. Also, they motivated through fear rather than friendly competition or other means. The company had to deliberately put things in place for both regulatory compliance and to try to drive retention through some soft skills training.”
Regulatory compliance and privacy restrictions are essential topics to cover in your development plan — especially as your organization considers technology for the future.
AI and data privacy
The emergence of GenAI has pushed even more manufacturers to consider how they should be using technology to modernize.
“We shouldn’t talk about artificial intelligence just because it's a buzzword,” said Grant Thornton Growth Advisory Principal Jonathan Eaton. “I think we woefully miss the point when we do that. The broader opportunity is to talk intelligently about the use cases, the business need, the justification and then the best solution.”
Make sure to inform your workforce about your modernization plan, to help keep them invested. “It’s a matter of being inclusive, and helping people feel like they're a part of something, rather than the fear of being replaced,” Schindler said. “That inclusive environment is a culture that enables embracing the technology.” Morelli agreed that “When you are about to embark on transformation, it’s best practice to be transparent, thoughtful and deliberate about the interaction models you put in place, so it doesn't feel like it's being done to them, but with them.”
It's also important to plan your transformation because GenAI might already be driving it. “It’s in your company right now, whether or not your company's made the decision to adopt it,” Ranzau said. While GenAI and other types of AI technology have not been adopted across manufacturing, that could happen within the next two years. “It’s not here yet, but this cycle is moving faster than any other revolutionary cycle has moved.”
Our survey respondents said that they were especially likely to use AI to help support leadership functions — in performance reviews and compliance.
Yet, manufacturing respondents still had more data privacy concerns than in other industries.
“Organizations are using the data to focus on quality or focus on how to reduce downtime,” Eaton said, adding that a manufacturer’s data can also inform forecasts and planning decisions. Manufacturers need to make sure their employees fully understand AI and data security before they use solutions to drive these key functions.
“Companies are making investments in AI, but they're not making that corresponding investment in education,” Ranzau said. “Helping people understand what AI is, how they're using it, and how to protect the company's data is going to be important. I would not recommend just having one 20-minute e-learning session before you adopt it, because that leaves a lot of holes.”
“Especially for manufacturers that are starting to embark on globalization — they might not be prepared for the compliance obligations,” Ranzau said. “Even if they’re just going to Canada, or they open a shop in Brazil. Most people are aware that the EU has pretty strict regulations, but other locations have fairly strict rules as well. There’s not really one source where they can go to figure it out.”
Even individual states within the U.S. can have different regulations on how AI and other technologies can be used, or how data must be handled, stored, reported or otherwise made available when it is used for different business functions. “One company was used to being located in four states, but then they realized they had a remote worker in another state. That triggers regulations for that worker,” Ranzau said. “Many manufacturing leaders are not equipped, or do not have the mindset, to track those regulations.”
As manufacturers confront today’s biggest recruitment, retention and development challenges, it’s essential to pair the company’s development plan with a workforce development plan, to help your company and workforce grow in parallel.
Contacts:
Kelly Schindler
National Managing Principal, Manufacturing Industry, Grant Thornton Advisors LLC
Partner, Audit Services, Grant Thornton LLP
Kelly Schindler is the national managing principal of Manufacturing at Grant Thornton Advisors LLC and an Audit & Assurance partner at Grant Thornton LLP.
Saint Louis, Missouri
Industries
- Manufacturing, Transportation & Distribution
- Retail & consumer brands
- Technology, media & telecommunications
- Transportation & distribution
Service Experience
- Audit & Assurance
Jennifer Morelli
Principal, Growth Advisory Services
Grant Thornton Advisors LLC
Jennifer is a leader of Grant Thornton's Business Change Enablement practice. She advises clients across a broad range of industries on how to handle the ‘people side of change’ through organizational, process and technology transformation.
Philadelphia, Pennsylvania
Industries
- Healthcare
- Manufacturing, Transportation & Distribution
Service Experience
- Advisory
Jonathan Eaton
Principal, Growth Advisory Services
Grant Thornton Advisors LLC
Jonathan is best most recognized for his ability to help clients define their supply chain strategy in response to changing market conditions and other disruptive forces and subsequently helping
Charlotte, North Carolina
Industries
- Manufacturing, Transportation & Distribution
- Technology, media & telecommunications
- Energy
- Retail & consumer brands
Joe Ranzau
Managing Director, Growth Advisory Services
Grant Thornton Advisors LLC
Joe is a back-office transformation leader, focused on performance and profitability improvement through; strategy design, operating model re-design, cross-functional process improvement, post-merger integration, and organizational change management.
Austin, Texas
Industries
- Technology, media & telecommunications
- Healthcare
- Manufacturing, Transportation & Distribution
- Not-for-profit & higher education
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