In their new roles as "solutions providers", identifying and maintaining a steady supply of talented workers will become increasingly important for manufacturers. Many were forced to lay off hundreds of workers during the worst of the downturn, but retaining and hiring skilled workers remains a high priority.
The issue becomes more important as recovery starts to materialise. In our survey, more than one-fifth of respondents cite skills shortages as a risk to their business over the next 12 months. Almost the same number have hired skilled workers over the past year, even though the downturn forced many companies to reduce their headcount.
It is not hard to see why. An overwhelming majority (91%) of respondents say R&D investments have been spent in-house over the past year, and almost the same number do not expect this to change in the next 12 months.
Meanwhile, many in the sector are concerned that the talent pool is shrinking. Such fears seem particularly prevalent in the UK, where prominent industry figures such as Sir James Dyson—inventor of the eponymous vacuum cleaner—have repeatedly warned of a coming shortage of engineers. One theory behind fears of a skills shortage may be that older workers are retiring faster than they can be replaced. "Keeping hold of those skills has been more and more important," says Adam Buckley, head of programmes at the Manufacturing Institute, a UK-based industry group.
In the institute's regular survey of manufacturers' priorities, the issue of talent and skills has moved sharply up the list of concerns, from seventh in the fourth quarter of 2009 to second, after production costs, in the first quarter of 2010. According to Engineering UK, an independent industry group, almost 600,000 new workers must be added to the manufacturing workforce. It believes that demographic shifts will lead to an 8% drop in the number of 15-24-year-olds—the target group for new engineering graduates—over the next decade.
Aware that demographic trends are not in their favour, companies have been less ready to lay off workers than in previous recessions. "While historically, in a recession, manufacturers have got rid of people, this time they have looked at other ways to keep hold of those scarce skills resources," says Mr Buckley.
Similar issues apply in the US, according to the Boston Consulting Group (BCG). However, striking a balance between being overstaffed and retaining talented employees can be tricky for companies, acknowledges Mike Zinser, a Chicago-based partner leading the manufacturing sector practice at BCG. Our survey backs up that assumption. Some respondents say they will have to outsource more of their R&D in the year ahead, perhaps indicating that they are worried about attracting enough skilled engineers in-house.
"Talent management is a critical area that a lot of organisations are starting to focus on," says Mr Zinser. "But with the downturn you can only cut so far without hitting the bone, so keeping the key folks busy while not shooting yourself in the foot economically is critical—that's a hard balance to strike."
