Manufacturing is caught in a talent squeeze and senior leadership teams that ignore this reality can pay a steep price. As the chief human resources officer of a Tier One automotive supplier ruefully told us, “We struggled to get talent issues on the senior management agenda, and every year our proposals would get cut from the investment plan. When the industry rebounded, we ended up paying twice the amount just to attract the basic talent we desperately needed.”

As supply chains and plant footprints have gone global, the rising demand for both blue-collar and white-collar employees has exacerbated long-standing talent challenges for manufacturers in the U.S. and Europe, and created new challenges for manufacturers in emerging economies, such as China and Brazil. To win in today’s talent-constrained environment, manufacturers must think beyond boundaries—both literally and figuratively—to leverage creative talent- sourcing practices, develop global talent competencies, and cultivate “glocal” (global plus local) organizational cultures, employer brands, and employee value propositions. This article offers manufacturers several solutions for managing the global talent challenge.

The challenge in developed economies…

In mature economies, manufacturers are grappling with aging workforces; talent shortages in science, technology, engineering, and math (STEM); and outdated employee value propositions. At the same time, they are trying to preserve and transfer knowledge, re-skill their workforces, and build new capabilities.

In the U.S., Japan, Germany, and the U.K., more than half the working population will be older than 40 by 2015, posing a significant loss of institutional knowledge as older workers retire, and a near-term affordability dilemma, since their seniority commands higher wages and benefits. Meanwhile, there is mounting concern over the lack of qualified young people entering the manufacturing sector; the decline in employment stability and outdated and misaligned value propositions in the sector have lowered its career appeal.

To add to this conundrum, more expertise is needed on the factory floor than ever before. Manufacturing itself is becoming more technologically complex with the adoption of ever more sophisticated machinery, robotics, and process-control software. These developments significantly raise the skills bar—inflicting a double whammy from both the talent demand and supply sides. In the U.S., for example, the National Center for Education Statistics found that manufacturers already face moderate to serious skills shortages across their operations.

…and in emerging economies

Emerging-economy manufacturers are confronting their own obstacles in developing high-end workforces. The talent pools in the BRIC nations (Brazil, Russia, India, and China) are becoming shallower, with companies in every industry reporting that the lack of skilled employees and rapidly rising salary expectations are crimping their ability to operate and expand. In high-growth manufacturing centers like Shanghai, the war for talent is further fueled by consistently high employee attrition rates, despite large pay increases and other perks.

The lack of managerial talent is particularly critical among manufacturers in many emerging economies. Leadership pipelines are underdeveloped, and there is a shortage of managerial candidates who know how to work in global teams and understand the norms of leadership in multinational corporations. As a result, manufacturers are being forced to bid up for the few qualified local candidates or import highly expensive expatriate managers. Emerging-economy manufacturers are further challenged by the knowledge management requirements of globally dispersed business models. Many companies do not as yet have the organizational structures or processes for managing knowledge-intensive work globally.

Like developed-economy manufacturers, manufacturers in emerging economies must raise their appeal among younger workers. By 2025, 60-75 percent of the workforce in the BRIC countries will be members of Generation Y, people born roughly between the late 1970s and the late 1990s who bring drastically different priorities and expectations to work than older population segments.

In short, manufacturers based in both developed and emerging economies are struggling to develop workforces capable of capturing global opportunities. To meet the challenge, they will have to identify and adopt best practices in attracting, motivating, and retaining talent from around the world.

Global talent best practices

In our work with senior leaders, operational executives, and heads of HR at leading global manufacturers, it has become clear that no single company has fully solved the global talent conundrum. Nevertheless, we are seeing leading companies implementing innovative practices that are helping them cope with the shortages in manufacturing talent. These practices fall into three categories.

1. Innovation in talent sourcing

As talent pools get shallower and shallower, manufacturers are resorting to alternative methods to recruit skilled employees.

Employ specialized headhunters: Specialized headhunters are playing an increasingly active role within corporate human resource organizations in manufacturing firms. For instance, the automotive supplier and building efficiency product manufacturing company, Johnson Controls (JCI), has a specialized global talent research team charged with proactively identifying candidates for essential jobs in advance of openings. This team continually scours all possible sources of talent, mines passive talent, and aggressively sells the employer brand to ensure that JCI has a ready supply of job candidates.

Partner with academia: University partnerships are an increasingly important means of filling the STEM talent pipeline. These partnerships extend well beyond on-campus recruiting days to developing custom curricula, integrating working experience with schooling, and identifying and developing promising candidates early in their academic careers.

In addition, some companies are working with universities to identify promising international students early on and helping these students meet residency and citizenship requirements. This is especially important in industries such as aerospace and defense where security clearances require citizenship, making the talent challenge more acute. (Manufacturing companies also have become active lobbyists for immigration policies that create an easier path to citizenship for highly skilled talent.)

Effective university partnerships require a long-term commitment. One Fortune 100 manufacturer requires all midlevel managers and above in their engineering organization to “own” university relationships and actively participate in campus activities. These managers are recognized for their campus engagement levels, and robust strategy discussions about university relationships are held each year as part of the annual planning process. In this manner, the company builds a close working relationship with educational institutions, engages with high-potential talent early on to sell a career in manufacturing, and proactively shapes its talent pipeline.

Pursue alternative sourcing: More and more manufacturers are recognizing that talent does not always need to be on the company payroll or in one of its buildings. Some are using services for sourcing and leveraging globally dispersed pockets of skilled talent. One such service is offered by InnoCentive, based in Waltham, Massachusetts. Founded in 2001, InnoCentive acts as an open innovation facilitator, providing a Web-based platform to engage a global network of creative problem solvers to work on critical projects, as needed, for monetary rewards. According to InnoCentive, since its inception, it has engaged more than 216,000 problem solvers from 200 countries on approximately 1,200 challenges, and has solved 50 percent of them.

Partner with outsourcing service providers: Although outsourcing has been traditionally used as a means of lowering labor costs, the rationale for outsourcing in the manufacturing industry has expanded to gaining access to STEM talent and accelerating execution. Toward these ends, companies are integrating outsourcing service providers into their value chains and collaborating with them more extensively in functions that have traditionally been kept in-house, such as new product development, design, and innovation.

GE Healthcare, for example, has partnered with Bangalore, India-based outsourcing services provider Wipro Technologies to develop ultrasound and imaging products. The scale of the partnership extends across the value chain, including research, product development, product testing, and even sales and service for select products. This innovative partnership has enabled GE to gain access to untapped sources of talent in emerging markets and get new products to market quickly.

2. Investment in global talent competencies

The only way that companies can balance their workforces and quickly shift them when capabilities are required in one region and there is slack in another is to manage competencies globally. This is easier said than done, but some manufacturers are pursuing this ideal.

Articulate a global career progression model: Developing a pool of employees who can and will work anywhere in the world requires international career paths not just for a few high-potential managers, but for middle managers and STEM employees, too. International experience must be hardwired into career paths and pursued earlier in career life cycles. Although such an investment in early-stage employees may seem counterintuitive, in practice it pays off by helping develop a strong skills base and increasing company loyalty among employees who appreciate the value of the investment made in them.

Recruit global boundary spanners: Not all employees may want or are suited for international assignments. That’s where “boundary spanners” can provide the catalyst to accelerate a global talent management strategy. Boundary spanners are people who are adept at working in far-flung local operations, as well as in corporate headquarters. For example, one global automotive supplier seeks out Chinese and Indian talent with international experience, and Europeans and Americans with deep local knowledge to run their operations in China and India. These boundary spanners execute well locally, and advance the broader cultural understanding necessary to support the company’s global operations.

Implement global HR and talent processes: HR processes and systems have historically been fragmented and often local, making it difficult to identify the next generation of talent.  In response, forward-thinking manufacturers are developing global reviews of the talent pipeline, identifying prospects for global development early on, and ensuring a balance of talent across regions. At Royal Philips Electronics, for example, regional talent reviews have been rolled up into global reviews, with explicit discussions about the global rotations required for the company’s developing management cadre. In addition, some leading organizations require employees and managers across the globe to record and update their skills and experience on internal networks, so the company can quickly identify and deploy its existing talent.

Adopting global HR and talent processes usually requires upgrading performance management processes. For example, one manufacturing and cement company monitors the global experience of employees and makes it a clear performance-evaluation metric. Managers are explicitly evaluated against how much and how well they rotate people into international assignments. And leaders of business units and functions are rewarded for sending management talent from headquarters to offshore operations, and bringing overseas talent to headquarters.

Globalize training and development: Training—including formal classes, informal mentoring, on-the-job experiences, rotational development, special assignments, and international project experiences—is a significant element in the employee value proposition. It can also help manufacturers to develop the global workforce skills without necessarily requiring relocation or having to spend large sums on expatriate packages.

Practical training is particularly important in emerging economies. While it’s true that China and India each produce more engineering and computer science graduates each year than the United States and Europe, it doesn’t follow that these graduates are immediately ready to enter manufacturing operations. As one Indian mechanical engineer stated in Fortune magazine, “There is still an abyss between the academy and the industry.”

Create a global knowledge management system: Knowledge management and sharing tools are fundamental to how work gets done and how innovations are leveraged and sustained in a global business environment. Cognizant, a technology solutions provider with global operations, has grown revenues 50-fold since it went public in 1998 by relentlessly perfecting its approach to knowledge management and sharing. Its internal knowledge networking application, Cognizant 2.0, supports collaboration, speeds the transfer of best practices, and saves the company and its clients money through the use of structured document repositories and participative tools, such as discussion boards, blogs, wikis, and social tagging. The company reports that Cognizant 2.0 has enabled it to deliver projects in 20 percent fewer hours, on average, and has improved productivity as much as 70 percent on specific project management activities.

3. The cultivation of ‘glocal’ organizational cultures, brands, and employee value propositions

Strong cultures, brands, and employee value propositions are essential to attracting and retaining manufacturing talent. They pay dividends in the form of more effective recruiting, happier and more engaged employees, lower attrition rates, and wage control.

Sell the career and the company: Strong employer brands are needed in an era when engineering and manufacturing companies and careers increasingly need to be sold to prospective employees. To address this challenge, one German electronics manufacturer promotes its employer brand and careers in manufacturing using a variety of tactics. For example, it starts sending a steady stream of company and career information to students in the engineering departments at target universities two years before they graduate. It also enhanced the value proposition for its STEM employees: implementing a program in which customers share feedback with the manufacturing and engineering employees about the importance of their work; establishing detailed career paths for engineers, allowing them to cycle through operational, design, and commercial roles to provide rich experiences without having to look outside the firm; and upgrading the ergonomics and colors in their engineering offices to enhance the appeal of the working environment. Over the last five years, practices like these have helped the company limit its attrition rate to a remarkable 3 percent and fill its open talent pipeline within four to six weeks.

Create a ‘glocal’ brand: Global manufacturers must go the extra mile to tailor their branding in a way that is locally relevant and compelling. Unilever, for example, not only maintains a strong global brand, but also tailors it to the local market in India, where it operates under the name Hindustan Lever. In this way, the company achieves positive recognition as a global giant with a strong local commitment.

Tailor the employee value proposition: A value proposition encompasses more than pay and benefits; it also includes the organization’s behaviors, mind-sets, norms, commitments, and informal networks. In a global company, many of these cultural elements vary with the prevalent local culture. Accordingly, successful global manufacturers tailor their employee value proposition to the local context, accommodating the culture and norms of the local labor markets in which they operate.

Holding fast to the values and traditions of the company and folding in local values can be a delicate balancing act. Nevertheless, employee value propositions should take into account certain societal dimensions, such as whether the local social mores value individualism or collectivism, what role the state plays versus private enterprise, religious beliefs, laws and conventions, and the gender roles that are considered acceptable in the workplace. This helps explain why one medical device manufacturer uses different job titles in China, provides escorted transportation for women employees in India, pays for three- course lunches in France, and offers additional days off in the United States. At the same time, this company strongly advocates one universal set of corporate values, evaluates all employees against a common set of competencies, and has a single global brand.

 

Plan now to win tomorrow

As the three sets of best practices make obvious, there is no silver-bullet solution to the talent squeeze in manufacturing—companies will need to pursue and develop talent in a variety of ways. Further, making these individual efforts work together will require a serious commitment to (and investment in) long-term, strategic workforce planning.  For this reason, talent planning and development must be added to the senior management agenda.

The winners in the race for talent will be those manufacturers that develop global pipelines characterized by innovative recruiting methods, global competencies, and glocal employer brands and employee value propositions. They will be the first to field the workforces needed to support the capabilities that give them the right to win in a global marketplace.