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A Shortage of Talent? Really?

Despite an abundance of unemployed jobseekers in manufacturing, many companies in that sector report they are unable to find skilled talent. The problem, experts say, is HR's reliance on specific skills and certifications instead of searching out individuals with talent and potential.

Wednesday, November 9, 2011
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The nation's manufacturers have approximately 600,000 job vacancies they're unable to fill because of a shortage of skilled applicants.

That may seem counterintuitive in an era of high unemployment, but that was the finding of a recent report from consulting firm Deloitte and the Manufacturing Institute, part of the Washington-based National Association of Manufacturers.

And unless this broken pipeline of talent is fixed, the report warns, it will hurt the companies' ability to compete.

The report shows that more than two-thirds (67 percent) of manufacturers have a "moderate to severe" shortage of available, qualified workers, says Craig Giffi, a vice chairman at New York-based Deloitte who advises the firm's manufacturing clients and assisted with the report, which is based on a survey of 1,123 executives at U.S. manufacturers from a range of industries.

Fifty-six percent of the manufacturers anticipate the shortage will only get worse within the next three to five years, he says.

Many of the hard-to-fill jobs are for positions such as machinists, craft workers, distributors and technicians, according to the Manufacturing Institute.

Manufacturers aren't the only ones hard up for talent: A new survey of 316 North American companies by Towers Watson finds that nearly 6 out of 10 (59 percent) reported problems attracting "critical-skill" employees this year, up from 52 percent last year and 28 percent in 2009.

Yet, this apparent surplus of vacancies is in stark contrast to the number of out-of-work jobseekers, particularly in the manufacturing sector, says Heidi Shierholz, an economist with the Economic Policy Institute in Washington.

She cites an August report from the Bureau of Labor Statistics showing 4.7 unemployed people for every job opening in durable-goods manufacturing and 6.9 for every job opening in nondurable goods.

"There are five times as many unemployed workers as there are openings in both categories," she says. "I've heard the stories that manufacturers are having a hard time finding skilled people. But going by the numbers, there just doesn't seem to be a demand for manufacturing workers." 

Emily DeRocco, president of the Manufacturing Institute, attributes the shortage to changing trends on the factory floor.

"Over the past five years, most manufacturers have redesigned and streamlined their production lines while implementing more process automation," she says. "In short, just as the industry is changing, the skills of the workers are changing as well."

Some experts say the recruiting difficulties of many firms isn't necessarily because of an actual shortage of skilled workers, but because companies are so focused on specific skills that they exclude many valuable potential hires.

"Companies, and HR, have moved away from hiring for potential for the last three decades," says Jason Jeffay, New York-based Mercer's global leader for talent-management consulting. "It was part of a broader change in many industries, as they tried to get more lean and efficient by de-layering their organizations and streamlining their processes."

As a result, what have historically been "feeder roles" that served as steppingstones to "final destination" jobs have been largely eliminated, he says.

"When you're implementing a Six Sigma process, you tend to overlook the fact that sometimes you have roles in your organization that aren't there from a process-efficiency standpoint, but from a talent-management standpoint," says Jeffay.

"As a result, companies ended up having to hire for skill because there was no longer any place to put these people while they 'skilled up' for a position," he says. "It fit with the business strategy that said, 'Let's have a very efficient organization with a minimum of roles. Let's not bear the cost of developing people.' "

That worked well when there was a surplus of talent, he says, but now that's going away as the boomers retire and companies find they can't replace that talent via the marketplace.

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Lou Adler says the shortcoming lies with hiring managers who, he says, tend to over-emphasize skills, certifications and years spent in specific roles because they're unable to adequately describe the actual work that a position entails. But this approach inadvertently filters out the best people, he says.

"The best people get promoted rapidly; they never have time in grade," says Adler, CEO and founder of the Adler Group, an Irvine, Calif.-based talent-management consulting firm. "So if you're focused completely on specific skills and experience, you'll end up with average people and exclude the high-potentials who have a broad mix of skills.

"A better approach would be to define the work before you define the person you're looking for, and then look for people who've done comparable work in comparable industries," he says. 

For its part, the Manufacturing Institute is deploying its Manufacturing Skills Certification System, which is designed to help companies work with schools to "build educational pathways to in-demand manufacturing jobs" and get more kids thinking about careers in manufacturing. 

Ryan Costella, director of strategic initiatives at Click Bond Inc., a Carson City, Nev.-based firm that makes fasteners for the aerospace industry, says his company is not currently having a problem filling vacancies because "we're willing to train our people."

However, it is also partnering with local schools and community colleges in Nevada to get students interested in the manufacturing sector.

"We're looking ahead, to our company's future growth and to when more baby boomers will be retiring," he says. "We want to ensure we'll have access to a skilled workforce, not just as a company but because we're also very passionate about keeping manufacturing in this country."

However, Giffi says, even efforts such as these can be undermined by an overemphasis on specific skills.

"It's kind of a goofy mismatch," he says. "The leading companies are reaching out to high schools to build their talent pipelines, but when you look at their employment processes, if someone's not an exact match, they get rejected.

"I think there's a lot of reworking that could be done to make their hiring processes more effective," Giffi says.

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