Apprenticeships: How Earn-while-you-Learn Models can Address your Talent Shortage

Patrick J. Dempsey, president and CEO of Barnes Group, a global industrial and aerospace manufacturer and service company, knows the value of apprenticeships because he began his career with one. At age 16, he became an apprentice at a shipbuilding company in Ireland, learning welding techniques, among other skills. Although he did go back to school for both his BA and his MBA, it was the apprenticeship that set him on course for his future success.

“I realized very early on the power of learning from others and working as a team toward a common goal,” he says. “I believe apprenticeships instill those values from the very beginning of a person’s career, giving them a solid foundation upon which to build and enabling them to go on to do great things, both in the workplace and in society as a whole.”

When Dempsey took over Barnes Group, he ramped up the company’s apprenticeship program, which currently has 124 apprentices in place. “It’s something that is very near and dear to my heart,” he says.

But Barnes Group is in the minority of American companies offering such apprenticeships. Unlike European countries, such as Germany and Switzerland, that have made apprenticeships a preferred career path, the U.S. has maintained a focus on the four-year college degree. “Our educational system pushed everybody to go to college and forgot about the technical trade,” says Linda Wood, trainings program coordinator for Oberg Industries, a diversified manufacturer with more than 750 employees worldwide.

Wood, who once taught in the public school system, says the overemphasis on college diplomas is misguided. “We’ve created this conundrum here in the U.S. where we’re grading schools based on how many kids go to college and anyone outside of college is left holding the bag,” she says. As a result, the U.S. has been at a disadvantage in the war for talent, particularly as it relates to manufacturing. “We are coming up on a large deficit of people due to a perceived lack of attractiveness of manufacturing and people having the necessary STEM skills required for them to be successful,” says Dempsey.

The skills shortage continues to grow. Over the next decade, 3.4 million manufacturing jobs will become available as baby boomers retire and the economy expands, but 2 million of them will go unfilled due to the widening skills gap, according to a 2015 study by Deloitte and the Manufacturing Institute. This projection comes despite the fact that 80% of manufacturers say they are willing to pay above-market rates in areas where talent is hardest to find.

Apprenticeships provide a solution for companies willing to invest up front. They offer participants a debt-free “earn-while-you-learn” alternative to the traditional college route, as they typically begin receiving a salary from the moment they’re accepted and, at the same time, earn credits toward an associate’s degree at a local community college. “Our apprentices pay absolutely nothing for the 26 college credits we provide to each of them,” says Wood. “By the time they’re 21, they are making a good wage and can afford a home. We have many people with four-year college educations applying to come into our apprentice program because, quite frankly, they can’t find a job.”

A HEALTHY ROI
To be sure, there are significant upfront costs, including tuition, educational materials and labs, apprentice compensation and benefits, recruiting and marketing, and overhead. Apprentices are typically paired with mentors who oversee their progress, an additional time-suck. But the return is big, says Dr. James Weinstein, CEO of Dartmouth-Hitchcock Health System, which launched an apprentice program in 2014 to train medical assistants for its new primary care clinic in Lebanon, New Hampshire. “It’s a rural community and we didn’t have the workforce we needed there, so we needed a way to attract new talent, younger folks.”

In the first go-round, more than 2,500 people showed up to apply for 250 apprentice spots. The program cost of approximately $59,700 per medical assistant apprentice was offset by a $48,000 per-apprentice reduction in overtime costs and $7,000 per apprentice in increased revenue from medical appointment bookings, according to an independent study done by the U.S. Department of Commerce and Case Western University. “Whatever it’s costing us to train these people, we’re reducing overtime expenses, physician turnover and staff burnout; and we’re increasing our appointments book and improving preventive care completions with over 40% internal rate of return on our investment, which is amazing,” says Weinstein. “You don’t get that kind of return in the stock market.”

Weinstein doesn’t share the fear that some CEOs have about investing big bucks to train apprentices only to have them poached by a competitor. “That’s always a possibility,” he says, noting that so far, the program has a 90% retention rate. “But when you invest in people, when you train people and when you invest in their future, you get loyalty and you create a culture of caring.”

Dow Chemical isn’t worried about poaching, either. “I see why it would be a concern, but at the end of the day, people want to work for Dow because they see a safe, secure, profitable company,” says Carie LaFond, public affairs leader for Dow’s HR communications. In 2015, after a brief pilot period, Dow initiated an apprenticeship program in the U.S. (as it has done for many years in Europe) in an effort to address the shortage of qualified talent.

“We also have an aging workforce here at Dow, so for us, the apprenticeship program is not only filling that immediate gap, but it’s letting us use the knowledge we have in our current workforce and share that knowledge with the new resources we’re bringing in,” explains LaFond. Dow currently has more than 100 apprentices across Michigan, California, Texas and Louisiana, with a 95% retention rate, and has plans to expand.

“We want to target not only high school graduates but our country’s veterans,” she adds. “We’ve found that veterans already have a lot of the skills and knowledge we need.”

LaFond acknowledges that apprenticeships can be a harder sell to parents who may have had their hearts set on a college education for their kids. But she is quick to add that the apprenticeship program is a debt-free path to an associate’s degree. “And then you’re going to have an opportunity to work for a company where one of the benefits is tuition assistance” for those who want to go on to earn a bachelor’s. “It’s really a door-opening experience,” she says.

A MODEL FOR ALL INDUSTRIES
Today, more than three-quarters of apprenticeships in the U.S. are in manufacturing, but the model is rapidly expanding across industries, with programs springing up in healthcare, IT, advanced manufacturing, transportation and logistics and energy.

“Apprenticeship is really just a model for training that can apply to almost any industry or occupation,” says Sarah Steinberg, vice president of global philanthropy for JPMorgan Chase. In 2015, Houston Community College received a $4.2 million grant to develop apprenticeship programs with a host of companies, including JPMorgan. The bank will ultimately hire 43 apprentices from HCC; they will undergo a year-long information technology apprenticeship and then be transitioned into full-time roles with the company.

“This gives us the ability to fill a pipeline of skilled workers,” says Steinberg. “It’s also a good way of recruiting a more diverse population. If you’re just going to hire people out of the top bachelor’s degree programs, there are a lot of reasons why that doesn’t end up being the most diverse group.”

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Read more: 7 Steps to a Successful Apprenticeship Program