Skills Gap Survey: Begin now to attract, train and develop manufacturing workers

The vast majority of American manufacturers are experiencing a serious shortage of qualified employees, which in turn is causing significant impact to business and the ability of the country as a whole to compete in a global economy. This is the key finding of the 2005 Skills Gap Survey. The problem for U.

By Staff January 1, 2006

The vast majority of American manufacturers are experiencing a serious shortage of qualified employees, which in turn is causing significant impact to business and the ability of the country as a whole to compete in a global economy. This is the key finding of the 2005 Skills Gap Survey.

The problem for U.S. manufacturers is that this challenge is not universal. Countries with rich educational heritages, e.g., India, China and Russia, are graduating millions more students each year from college than the United States. These highly educated individuals are actively participating in the development of innovative new products without regard for historical barriers, such as geography – thanks to technologies such as broadband, inexpensive Internet-ready laptops, and collaborative tools.

With such international talent readily available and significant shortages existing at home, it is clear that the future of American manufacturing may now be at stake.

A serious, persistent shortage

The details behind the talent shortage reveal a stark reality. More than 80% of respondents indicated that they are experiencing a shortage of qualified workers overall – with 13% reporting severe shortages and 68% indicating moderate shortages. Also worrisome is the finding that 90% of respondents indicated a moderate to severe shortage of qualified skilled production employees, including front-line workers, such as machinists, operators, craft workers, distributors, and technicians. As expected, the research showed that engineers and scientists are in short supply, with 65% of manufacturers reporting deficiencies – 18% severe and 47% moderate.

In addition to shortages of various types of employees, manufacturers surveyed reported they are also dissatisfied with the skills of their current employees. Among respondents to this national survey, nearly half indicated their current employees have inadequate basic employability skills, such as attendance, timeliness and work ethic, while 46% reported inadequate problem-solving skills, and 36% indicated insufficient reading, writing, and communication skills.

Significant business and economic impact

The talent shortage being reported is not a theoretical or distant problem. In fact, 83% of respondents indicated that these shortages are currently impacting their ability to serve customers. Specifically, the survey found that skill deficiencies are causing difficulties for manufacturers in terms of their ability to maintain production levels consistent with customer demand (56%), to achieve productivity targets (43%), and to achieve or maintain target levels of customer service and satisfaction (33%).

Clearly, this situation is untenable for America. Although our manufacturing sector has been able to remain vibrant and to compete successfully in a global economy, its ability to do so in the future is predicated on the availability of a highly skilled, innovative, “high-performance workforce.” Without a sufficient supply of these types of employees, the manufacturing sector will suffer – which in turn will have a detrimental impact to the nation’s overall economic health.

The key to business success

Notwithstanding the bleak picture of the workforce situation today, manufacturers surveyed believe that having a high-performance workforce is the most important driver of future business success. Nearly three out of every four respondents selected this as a key to future success.

The second most commonly selected driver of success was “new product innovation” – which is also inextricably linked to employee quality and performance. Surprisingly, “low-cost producer status” ranked only third on the list of most important drivers of future business success, but not far behind in terms of ages. In past studies, manufacturers have consistently ranked this as their number one response – but perhaps they have come to accept as a given that ongoing pursuit of lean operations and efficiency is essential to success in an incessantly competitive global manufacturing industry. To stay ahead of the pack, successful companies must constantly push the innovation envelope, which requires innovative and high-performing employees. As a result, the new manufacturing mantra may be: “high-performing and innovative, but lean.”

Getting there from here

While the situation is already posing significant challenges, the basic laws of supply and demand as they operate in the labor market suggest an even more difficult future. On the demand side, employers want more highly skilled employees that are exceptionally engaged and innovative. But basic demographic, social, and educational trends indicate a gloomy supply outlook:

The exodus of Baby Boomers from the workforce with substantial accumulated skills will reduce the available talent pool

Changing attitudes about careers and job satisfaction among Generation Y-ers

Changing job requirements, necessitating some level of technical skill in almost all jobs and making truly unskilled jobs a thing of the past

Significant dissatisfaction among manufacturers with the quality of K-12 education and the dearth of adequate career counseling

Declining percentage of students in U.S. universities studying science and engineering

In addition, research has shown a direct relationship between manufacturing’s negative image – which is tied to the old stereotype of the assembly line – and the decreasing number of young people pursuing careers in the industry.

The good news is that manufacturers are beginning to realize they need to improve this image. A growing number of companies are providing support for NAM’s Dream It. Do It. campaign that actively seeks to help young adults find careers they can be passionate about in one of manufacturing’s many exciting sectors.

Manufacturers also seem to understand what they need to do to remain competitive, with so many clearly viewing a high-performance workforce as the foundation of future competitive ability. The challenge for manufacturers is how to attract, retain, and motivate this high-performance workforce.

Thus, there is a focus on both reducing turnover among current employees and attracting new workers. Most manufacturers reported spending more on training programs today (as a percentage of payroll) than in 2001 – which is critical because training opportunities are an important component of a strategy to attract, retain, and develop employees.

On the other hand, it is unclear that manufacturers are engaging in the right type of activities and employing the right tactics to attract, develop and retain a high-performance workforce given the realities of the current environment. Much has been written about the changing nature of the employer/employee relationship and the changing picture of what employees want and value, especially among Generation Y employees. While many manufacturers are seeking to provide the right programs and trying out new strategies, often they rely on a rather traditional mix of compensation and benefit plan offerings for recruitment and retention purposes, which may not prove as effective with this new breed of employee.

Excerpts from the 2005 Skills Gap report, produced by the National Association of Manufacturers, the Center for Workforce Success, and Deloitte Consulting LLP. For the full report, go to and search for Research and Reports.