The Great Skills Mismatch

The Great Skills Mismatch Sidebars

PENNSYLVANIA: Finding Hope in High Schools
OHIO: Urgently Pursuing Upskilling
NEW JERSEY: Where Are The New Chemical Workers?
Nine Tips to Work With Community Colleges on the Great Jobs Mismatch


Brian Pelke, 38, owner and president of family-held Kay Manufacturing on the gritty southeast side of Chicago, near the faded steel town of Gary, Indiana, takes the nation’s shortage of skilled workers very seriously and quite personally. As head of a $25 million-a-year maker of components for the U.S. auto industry, he watched as Detroit’s Big Three and their top suppliers became bloated and uncompetitive, only then to suffer through crippling bankruptcies and restructurings. While that painful process dragged out over decades, hundreds of thousands of jobs were lost, either to Asia or to Mexico. High schools and community colleges in Pelke’s area stopped teaching kids how to work in manufacturing—because there were no jobs.

Now that Detroit has stripped down its cost structure and car sales are showing surprising strength, automakers are demanding more parts from Kay Manufacturing. Pelke’s employment stands at 125 people, and he is trying to hire 10 workers a month to meet demand for his highly machined products. “We need people in all areas, but it’s tough to find them,” he explains. As someone who started working at his father’s plant at age 14 and was by no means a star in high school, he’s now reaching out to high schools and community colleges to find workers. “I was one of those kids who wasn’t the best kid in high school and was discarded by my guidance counselor,” says Pelke. “I want to tell the young people out there today that there is a great opportunity for them. I tell them they can make $50,000 to $100,000 a year taking care of these machines.”

Pelke’s challenge is a microcosm of a national skills mismatch. Employers report that they have three million job openings and cannot find applicants with the right skills at the right cost—even though 23 million Americans are unemployed or underemployed. CEOs face shortages of engineers and skilled laborers, such as welders, operators of computer-controlled machines and chemical process operators as the American manufacturing model continues to shift away from the traditional assembly line to a leaner model that requires more team-orientation, cross-training and higher reasoning skills. Thus, the skills mismatch is a triple-headed monster. Not only does the nation face the challenge of creating new pools of qualified, young labor entering the work force, it must retrain workers in their 40s and 50s who have been displaced from other jobs but lack necessary skills. At the same time, millions of existing workers have to obtain new skills to keep their companies competitive, a process known as upskilling.

Large companies, such as Ford Motor, IBM and Intel, have the scale and human resource staffs to address the skills crunch and have been doing so for years, but small and medium-sized enterprises (SME) across the country also are increasingly finding that they must engage with community colleges to address the gap. Although there is no central clearinghouse of information about business tie-ups with schools, it appears that there has been a burst of such activity in the past year to 18 months. It’s still too early to tell whether the collaborations between SME CEOs and community colleges will make a significant dent in the skills mismatch, but the early signs are promising.

CEOs interviewed in four industrial states are finding that community colleges are more flexible than four-year universities because they allow business leaders to review their curricula each semester and suggest changes to make the coursework more relevant. Community colleges will provide on-site training, as well as training in a company’s own facilities on evenings and weekends. They usually offer coursework that leads to certificates within six to nine months—in sharp contrast with private, for-profit universities and technical centers that often require two full years of instruction. For-profit colleges also have come under fire for not networking with employers to adequately understand their needs and produce students with the right qualifications. Furthermore, community college certificates cost a fraction of a for-profit college education. An added plus: because there are so many of these schools (some 1,200 belong to the American Association of Community Colleges), they tend to be located nearby, so it is easy to hire from their ranks and not face the expense of relocating workers from elsewhere.

American CEOs have been complaining for at least a decade that they cannot find workers with the right skills, so it is surprising in many ways that relatively obscure community colleges are emerging as part of the solution. “I call it the silent crisis,” says Cheryl L. Hyman, chancellor of the City Colleges of Chicago, which is working with CEO Pelke. “Typically over the past decade, in discussions about the role of education in economic recovery, there has been a big focus on kindergarten-through-12th grade and the role that four-year colleges play. But there was little, if any, conversation about this very valuable asset in the middle known as community colleges.”

Kay Manufacturing’s Pelke is working with Daley College, one of seven community colleges that are part of the 120,000-student City Colleges of Chicago system. It launched a College to Careers program about a year ago to address all three pieces of the skills mismatch. The program is targeting six industrial sectors that need workers—health care, manufacturing, hospitality, distribution and logistics, business services and information technology. Two Kay employees are currently enrolled in the manufacturing program at Daley College, focusing on computer numerically controlled machining. Pelke is paying their tuition, and he also sits on an advisory council to improve the college’s curricula. He’s even sending his maintenance people to Daley for training because the college has a building dedicated to showing them how to service systems that the company uses. “It’s a two-way partnership,” he explains. “I can take their graduates and I can send my people for training.” He says he prefers hiring people out of Daley College—as opposed to four-year engineering graduates—because “their students are out there getting dirty making parts and that’s what we need.”

It may seem unlikely that SME CEOs are taking the time to get involved in education, but it seems essential that they become the architects of relationships with community colleges because only they can articulate their range of needs and move their full organizations to embrace the community college relationship. “The higher the level of the collaboration, the better the outcome,” says Eileen Cardile, CEO of Underwood Memorial Hospital, which has an extensive training and retraining relationship with Gloucester County College in Sewell, New Jersey.

Undeniably, there can be some red tape in working with a community college, but the payoff can be great in terms of getting state funding to defray the cost of training and retraining, says Susan Muha, executive vice president of Cuyahoga Community College (Tri-C) in Cleveland, Ohio, which has won national recognition for its training and retraining efforts. “Large companies, like a Ford, have more resources and more clout to be able to get money from the state to be able to put their agenda together for training,” she said. Ford expects to win $1 million in state grants to train 750 people over three years. “Medium and smaller size companies don’t have a specialist to keep up with where the training dollars are and how to access those dollars,” Muha says. “That’s more of a challenge for them.” Smaller companies also are more focused on the here-and-now as opposed to giants that can develop three-year plans.

Some community colleges will work with an SME CEO to tap into state or local workforce development grants, which spares the company from having to do that work. In other cases, companies proceed without any state funding, still finding it cheaper than on-the-job training done in house.

In general, there is broad experimentation taking place across the country between smaller companies and community colleges. In some cases, as with Gloucester County College and its new program for the petrochemical industry, multiple employers that are not directly competitive with each other can work with a single community college to create a stream of graduates that the companies then compete to hire. In other cases, a community college partners with other educational local institutions and chambers of commerce to service the needs of a specific company or industry.

Will these efforts prove to be enough to eliminate the great American skills mismatch? Not yet. Community colleges are constrained because they are attempting to address multiple challenges of their own—teaching students who want to go to four-year institutions and providing instruction to large numbers of immigrants trying to learn English and other remedial subjects. State and federal funding is flowing to community colleges but at nowhere near the level that would be necessary for a quick fix. Clearly, it will take years for small and medium sized companies’ CEOs to address their looming skills mismatch, assuming good will and cooperation from all involved. However, they seem to be headed in the right direction. The bottom line? It makes sense to strike up training and retraining partnerships with community colleges.

PENNSYLVANIA: Finding Hope in High Schools

Carlos Cardoso, CEO of Kennametal, a $3 billion industrial metals company based in Latrobe, Pennsylvania, argues that education is at the heart of helping the U.S. expand its manufacturing sector and save what is left of the middle class. The future of American manufacturing will consist of highly innovative, highly skilled, high margin jobs, he says. But the problem is Cardoso says young people, parents and high school teachers are not interested in engineering or the types of education that lead to jobs in manufacturing. “The United States is No. 1 in manufacturing, but we rank No. 23 among the world’s 30 advanced economies in terms of graduating engineers from college,” says Cardoso. “The kids graduating from high schools have a terrible aptitude for math, science and reading.”

The same is true of the people who could operate Kennametal’s highly computerized equipment. “We are running out of skilled labor,” Cardoso says. “About 30 percent of our manufacturing employees will be retiring in the next 10 years.” Kennametal already has 150 job openings in the U.S. it has not yet been able to fill.

All familiar complaints, but Cardoso does more to address the problems than the vast majority of CEOs. His company offers student internships and apprenticeship programs, it partners with community colleges and technical schools, and it offers tuition assistance to employees. About 50 employees are receiving reimbursement this year, costing the company $73,000. The company also reaches out to high schools near its headquarters in Pennsylvania and near a major manufacturing facility in Solon, Ohio, through its “Young Engineers Program.” Juniors and seniors take part in classroom discussions about manufacturing and develop hands-on projects with help from Kennametal engineers and scientists. About 70 have “graduated” from the two programs since they started in September 2011.

Most talent-hungry CEOs limit their outreach efforts to community colleges, reckoning that it does not make financial sense to target high schools because the students are so young. But Cardoso, who is chairman of the Manufacturing Alliance for Productivity and Innovation, consisting of 400 companies, argues that the war for talent starts there. “I want to create a bigger pool of people in high schools who want to come into manufacturing and engineering,” he says.

“The parents are a challenge because a lot of them don’t want their kids to go into manufacturing,” Cardoso explains. “Teachers also don’t understand manufacturing or engineering. We bring the parents in to an open house when we launch the program and then bring them in at graduation. The whole point is to send the message out to teachers, neighbors and parents that this is a smart thing to do.”

What if the students don’t eventually go to work at Kennametal? “If we get 10 percent of them to come [to] work for Kennametal, that’s okay with us,” Cardoso says, adding that the other 90 percent could work for other manufacturers—reviving the nation’s industrial base and thereby benefitting his company in the long term.

OHIO: Urgently Pursuing Upskilling

Michael Canty runs a classic, niche-manufacturing company in Highland Heights, Ohio, on the eastern outskirts of Cleveland. His $10-million-a-year privately held Alloy Bellows & Precision Welding makes industrial bellows that resemble metal accordions that expand and contract. They are used in jet engines and gas turbine engines for power generation, both high temperature, high stress environments.

The way Alloy Bellows survives in a brutally competitive, demanding business is by insisting on ever higher levels of training for its 63-person work force, which includes recent immigrants from Russia, Lithuania and Croatia, as manufacturing techniques become more automated and more sophisticated. “We do a lot of internal training—it’s almost constant,” Canty says. “We also have a lot of cross training. No one knows just how to do just one thing. Once someone learns more than one job, their perspective of whatever they’re doing grows. If they are a machinist and go downstream into where those machine parts go, they have a better understanding of the whole process.”

But Canty also turns to local community colleges, primarily Cuyahoga Community College (Tri-C), for help in upskilling his workforce. “If we want several people to learn something like blueprint reading or dimensional inspecting, it makes sense to bring Tri-C in because it’s an objective source,” Canty says. “Often their information is better. They may be more current in their knowledge of new equipment and new techniques. And it provides an outside voice. Someone on the floor hears an outside voice and it gets recognized and is heard a little more clearly.”

Plus, the price is right. Canty estimates that it costs half as much to have Tri-C experts come to his plant than for him to conduct the training himself. The reason it costs so much less is that Tri-C can obtain state funding to help defray costs.

Does the training pay off? Canty does not seek to attach a single return on investment (ROI) number to his training efforts but instead looks at other metrics. “Quality goes up, errors go down, people move from job to job more easily without error, and on-time shipping goes up,” he explains. “We bar-code every single function, every single person. It helps with scheduling, but it also helps us analyze efficiency and productivity ratings. It allows us to set standards to see where the variances are. I’m convinced that training has a very positive effect.” All that may explain why his profit margins are up almost 50 percent over the past few years.

Soft skills also are important and need to be upgraded constantly. “I don’t know of any operation that doesn’t require communication from one function to another,” Canty says. “Without cooperation and communication, you end up with a far more dysfunctional plant [than] would otherwise be the case.”

He has adopted a liberal educational-reimbursement policy, and that encourages some of his workers to take classes at Tri-C in the evenings. “If you’re making 15 to 18 bucks an hour and you have a family of four, it’s pretty hard to be thinking about paying thousands of dollars for a course,” Canty says. “Another effect is that it provides self-esteem to individuals who go to those classes and prepare for promotions. It gives them status.”

Susan Muha, executive vice president at Tri-C, says that about 40 percent of what Tri-C does is upskilling of existing workers at companies like Alloy Bellows. “We take a core program and change 20 or 30 percent of it, then package it and go out and train,” she says. Tri-C staff may take a welding simulator to a company for training, or the company may choose to send workers to Tri-C to be in a more neutral, non-work environment. “We’re open to anything,” Muha says. “That’s one of the beauties of most community colleges—we’re trying to figure out what will work best for that particular company.”

NEW JERSEY: Where Are The New Chemical Workers?

Lucio Siano has a problem. As CEO of the U.S. subsidiary of COIM, a $1 billion privately owned Italian maker of specialty chemicals, Siano knows that 40 to 50 percent of his 100 workers, including highly skilled chemical process operators, will hit retirement age in the next five to 10 years. These operators, working at the company’s two plants in New Jersey, south of Philadelphia, make polyester polyols in 12,000- to 100,000-pound batches for the automotive and construction industries. The work is automated but the operators still must adjust for pressure, temperature, humidity and quality of materials—all while maintaining high safety standards. “We consider it quite an art,” Siano says. “Our operators have to have a very intimate sense of what they are doing.”

To solve his problem he turned to a petrochemical industry consultant, who told him there were many other small- to medium-sized companies in the heavy industrial region that faced the same problem. So Siano created a partnership with other non-competitive companies—Johnson Matthey, Nustar Asphalt and Solvay Specialty Polymers among them—to create an educational program at nearby Gloucester County College (GCC) starting in April 2013. The companies negotiated with the college to establish the curriculum. The program requires 96 hours of evening instruction and costs a modest $2,299. The companies help subsidize the class and grants from the New Jersey Department of Labor and Workforce Development also are expected to kick in. Students who complete the class are almost guaranteed jobs starting at $35,000 because of the shortage of workers in the area.

Why turn to a community college? “It was a natural choice for us,” Siano explains. “It can offer a high-level education at a modest price.” It also is better and cheaper than trying to hire people and then train them. “On-the-job training is difficult and expensive,” he adds. “From a cost point of view, this is better. From a cultural and educational point of view, we cannot do better than to put them in classes with professors who are experts in the subject.”

GCC was receptive to Siano’s efforts because it offers customized training for an estimated 10,000 students a year, but it still required the active involvement of a local CEO to make the program become a reality. “He’s the poster child for this kind of process,” says Patricia Claghorn, dean of business studies and continuing education at the college.

Why don’t more CEOs do this sort of thing? “You have to take the courage to talk to others,” Siano says. “CEOs may be reluctant to talk together because of antitrust rules. They’d rather wait to see if someone else will take the initiative. CEOs are usually very, very busy and it takes time and skills to convince other people.” But if they want the skilled workforces to sustain their businesses into the future, more CEOs may have to follow Siano’s lead.

Nine Tips to Work With Community Colleges on the Great Jobs Mismatch

  1. The first step is recognizing that you have a problem, whether it manifests itself through too many job openings or through poor productivity, high turnover and poor safety among existing workers.
  2. Create an internal process, perhaps with a human resources chief, to determine what skills need to be obtained or improved.
  3. Select a nearby community college that has a track record of successful training and retraining. Get involved with its board or advisory committees that shape its curriculum. Your personal involvement is essential because it opens up full channels of communication.
  4. After observation, ask the community college if your workers could benefit from its existing courses or if the college will create specialized courses. To find new workers, contribute old equipment to classes and dispatch key specialists to co-teach classes. Think of it as a three- to five-year relationship.
  5. If retraining, decide whether the courses should be offered at the college, which provides psychological distance from the workplace, or whether professors should come to a company setting to offer instruction.
  6. Adopt a liberal employment reimbursement policy, which will encourage all streams of workers constantly to seek new skills. Some companies even pay for community college for workers who are not yet on staff.
  7. In some cases, the community college will secure funding from state workforce-development agencies. In other cases, the burden of doing that falls to the company. But the net effect is that the cost to the company is reduced.
  8. Constantly re-evaluate the success of retraining classes. It may be reflected in productivity numbers or some other statistical indicator, but chances are that informal assessments will be more meaningful than a formal return on investment number.
  9. Think of it as an ongoing process. A single worker could take multiple courses over a period of time and obtain progressively more advanced, “stackable” credentials that make him or her feel that the company is investing in its talent, thereby building loyalty.
William J. Holstein :William J. Holstein is a journalist, consultant and speaker. He is the author of, "The Next American Economy: Blueprint For A Sustainable Recovery." For more of his work, visit www.williamjholstein.com.