Ted Toth is the third generation of his family to run a small precision-manufacturing company in Pennsauken, N.J., located in a working class suburb east of Philadelphia. The Toth company was recently purchased by a larger company called Rosenberger and is now called Rosenberger-Toth, but Ted Toth is still vice president and managing director, which means that the problems of running a plant fall to him. The company makes antennae parts for global-positioning-system satellites and sells them to Lockheed Martin. With 35 employees, Rosenberger-Toth does about $6 million a year in sales.
It’s highly precise work because the satellites are positioned 200 miles above the earth’s surface and can never be repaired. Their antennae either work perfectly or they don’t work at all. Forget about tolerances measured in millimeters. These devices have tolerances within a nanometer.
“That’s the trouble with the skills gap. The technology is growing at [such] a [fast] pace that the training can’t keep up with it.”
The problem is that it takes more computerized machines and related software to make the antennae parts; and therefore, it takes more sophisticated operators to run the machines—who are increasingly difficult to find. “That’s the trouble with the skills gap,” says Toth. “The technology is growing at [such] a [fast] pace that the training can’t keep up with it. Instead of blue collar workers, who work with their hands and backs on a production line, we now need ‘blue-tech’ workers who use their heads and use technology like computerized machines and robots.”
Toth will need to hire several new workers in coming months, but schools in the area are not developing enough candidates for him. The company hosts a “Manufacturing Day” each October for students from the Pennsauken High School that does attract job seekers—but they are not yet ready to operate the machines immediately after graduating. Toth, who made one entry-level hire recently from Camden County Community College, says he finds that community colleges in his area don’t have high enough graduation rates and don’t train on the latest equipment. “It’s going to be difficult to find the people,” he says. “We currently have to steal them from other shops.”
Toth knows whereof he speaks partly because he is the new chairman of the board of the National Tooling and Machining Association, which has 1,400 members with an average of 30 workers. They are thus one of the backbones of the industrial economy and all of them have the same problem of finding workers. “The image of industry is one of the biggest problems we have,” he adds. “Most people think of manufacturers as having smokestacks and dark, dirty and dangerous environments. We’re very clean, modern and computerized. But kids see the images in movies and don’t want to get their hands dirty.”
The problem of attracting younger, skilled workers to replace Baby Boomers, who are retiring, is serious enough that it may threaten the ability of small and medium-sized manufacturers to continue to eke out productivity and quality gains, says ThomasNet.com, a New York-based company that connects buyers and sellers of industrial and commercial products. In late 2013, it surveyed 1,209 executives from companies with fewer than 100 employees and less than $10 million in revenue and concluded that the “manufacturing sector’s ‘biological clock’ is ticking away.”
Among companies surveyed, ThomasNet.com’s president Eileen Markowitz says there is a “lack of urgency when it comes to filling their pipeline of talent.” Overall, manufacturers now face 600,000 to 1 million job openings, according to various estimates.
“To attract millennials, manufacturers have to recognize that they are looking for “knowledge workers” and cater to their needs.”
Perhaps only 10 to 20 percent of major manufacturers have adequately addressed the challenge of securing new flows of young, skilled labor, estimates George Bouri, global board member and managing principal for the Americas Region at consulting firm Trascent in New York. “We Americans are laggards in this area compared with Japan, the Southeast Asians, Germany and Switzerland. Smaller manufacturers face even greater odds because they may not be able to afford to have large human resource departments and can’t afford programs in high schools and community colleges that big companies such as Boeing, IBM and Intel can.”
A Brave New Work Force?
The enormity of the challenge is captured in the contrast between what consultants describe as the ideal environment for young workers and the realities of managing a factory. “The entire manufacturing apparatus—from recruitment to retention—is still built to the industrial era,” says Bouri.
To attract millennials, manufacturers have to recognize that they are looking for “knowledge workers” and cater to their needs, he argues. That means workers should have flextime and be able to dial in to work during a family or life event. Training, benefit and retention programs have to be oriented toward them. “They have different expectations of the work experience,” Bouri adds. “They want rotation and growth.”
He cites what Google did in taking an ugly high-tech building and turning it into the highly vaunted Googleplex. “We now have to cater to a workforce that will work longer, more flexible hours but are looking for an experience at work that their parents and grandparents didn’t expect,” he adds. They want better dining options, places to exercise and to read and transportation incentives.
However, tell that to a hard-core manufacturing guy like Toth. “Some students came through here and asked, ‘Where’s your game room?’” he recalls with an air of obvious disbelief. The notions of flextime and onsite day care are equally beyond the pale in his view. “We have $500,000 machines,” he explains. “If somebody doesn’t come in, you still have to produce a certain number of parts to make payroll. We have to have structure. We can’t have kids running around. It’s a lot more rigid a system” than young people may think.
“We now have to cater to a workforce that will work longer, more flexible hours but are looking for an experience at work that their parents and grandparents didn’t expect.”
To fill the vacuum, manufacturers are relying on a potpourri of devices. Many encourage visits from high schoolers and even middle schoolers to try to capture their imagination about making things that help others. Teachers also are targets because they need to be reminded of the value of STEM (Science, Technology, Engineering and Math) educations. Getting through to high school counselors about the choices that students face—whether to incur the debt of going to a four-year university or to take more practical work-oriented routes—is also key.
Many manufacturers reach out to community colleges and work with them to shape their curricula so that students obtain skills that are immediately valuable. In some cases, companies donate equipment to community colleges and send executives or employees to teach classes or to mentor promising students.
CEOs say it’s increasingly important that students at community colleges learn certain skills sets and then take a test to prove their mastery of that subject. They are issued a credential for a course of, say, eight to 10 weeks. That way, even if they don’t graduate, they can demonstrate that they have specific credentials. Many companies also offer summer internships and apprentice programs for new employees that mimic Germany’s famous apprenticeship programs.
In fact, German companies with extensive operations in the U.S., such as Siemens, are replicating some of their apprenticeship programs here. Siemens opened what it calls the world’s most advanced gas-turbine plant in Charlotte, North Carolina, in 2011 but had difficulty in finding people to operate it. In particular, the company needed people trained in mechatronics, a new interdisciplinary profession that includes mechanical, computer and electronic engineering with software control and system design.
The company developed a skills-assessment method and trained or retrained 500 people during the ramp up of the plant, says Eric A. Spiegel, Siemens USA president and chief executive.
“Mechatronics is a new interdisciplinary profession that includes mechanical, computer and electronic engineering with software control and system design.”
In addition, it created an apprenticeship program with Central Piedmont Community College. “Currently, there are a couple dozen recent high school graduates and veterans who are sitting in a classroom in Charlotte learning about advanced mechatronics,” Spiegel says. “These students are in the second year of a 3½ year apprenticeship program. They attend classes on advanced mechatronics half of the time.” The other half of the time, they work in the plant.
Siemens pays the students throughout this period and they will receive a certificate from the state of North Carolina that says they are trained in mechatronics. “They are guaranteed a job in our plant when they graduate,” Spiegel explains. The starting salary is $55,000 a year.
At least some CEOs of small and mid-sized companies appear to be imitating aspects of the German system—but on a highly localized basis rather than on a national one. One is Michael Araten, CEO of the Rodon Group, a privately held, mid-sized company that makes an impressive 5 billion to 6 billion customized, plastic products each year for the medical, pharmaceutical, consumer-products, construction, food and toy industries.
Rodon has about 200 workers in its vast factory in Hatfield, Pennsylvania, which is equipped with highly specialized equipment that runs 24 hours a day. The company has two specialists on staff who help develop the software that controls the company’s advanced robots. “We’ve tried to address the pipeline of talent through apprenticeship programs, summer internships and partnerships with local trade schools and community colleges to help them understand what our needs are,” Araten says.
One particularly innovative action his company has taken is to help create a consortium of 100 manufacturers in Montgomery and Bucks counties called the Bucks-Mont Manufacturing Consortium. It is a nonprofit organization led by Rodon’s head of human relations. HR representatives from other companies volunteer their efforts, as well.
“CEOs looking to expand and improve their manufacturing must pay keen attention to where workers will come from.”
The consortium works with the state government and with federally funded workforce-development boards to tap whatever government funds are available to pay for training at community colleges and other institutions. In this geographic area, at least, community colleges seem to be cooperating in the push to train new workers.
Araten’s workforce has grown from 140 to 200 people in recent years and he anticipates that number will increase to 250 people over the next four years—assuming the company achieves its growth targets. “I think we’re going to be in good shape,” he says. “We will make sure we’re first in line at community colleges and trade schools.”
But more fundamentally, he says he perceives a shift in how average Americans are beginning to calculate their life choices. “Look at North Dakota,” he says. “People [there] never considered that they would work in energy, but now people are clamoring for those jobs.”
Parents and their children also are beginning to recognize that four years of university education could leave them with six-figure debt levels and that manufacturing jobs pay 30 to 40 percent more than retail jobs, he says. “People go where the opportunities are,” Araten concludes. “Manufacturing is becoming a more viable option than it has been in a long time.”
Bottom Line: Manufacturing jobs are no longer old-fashioned positions on the assembly line. CEOs looking to expand and improve their manufacturing must pay keen attention to where workers will come from.