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New manufacturing report shows how worker turnover costs the industry

Data reflects manufacturing's mounting skills gap as companies fall behind in workforce investment

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There have been plenty of discussions lately around the mounting skills gap dilemma facing manufacturing and fabricating industries. It’s quite a different conversation compared to a decade ago, though.

Between late 2007 and 2010, the U.S. economy was suffering through a financial crisis-led recession that saw nearly 9 million jobs cut and an unemployment rate top out at 10 percent. Manufacturers and fabricators took a brunt of that jobless hit.

Fast-forward to today (where unemployment is at a low 4 percent), and you find those industries desperate to find enough skilled workers or willing trainees to fill positions. And even if a manufacturer can manage a successful recruit through the shop door, retaining that worker is a struggle. Multiple reports and studies estimate that nearly 2.5 million manufacturing jobs will go unfilled through 2028.

A new report released this week from Tooling U-SME, The True Cost of Turnover: Hidden Cost Go Beyond Financial to Impact Productivity and Culture, finds that monetary drain of employee turnover costs manufacturers hundreds of thousands if not millions of dollars annually.

The study finds that two of five manufacturing companies (43 percent) report an average of at least 20 percent annual turnover. But it goes beyond the bottom line. The report highlights problems meeting customer demands and an overworked staff confronting low morale. It can create an environment where high-performers rotate out the door at a high rate.

During FABTECH in Atlanta this past fall, I sat down with Tooling U-SME Vice President Jeannine Kunz to speak with her about the organization’s 2018 Manufacturing Workforce Report, and much of what she had to say directly relates to the recent turnover report.

“Manufacturers are good at making things, looking into new technologies, investing in new equipment and materials, looking at their processes and optimizing those processes. But they're not always as strong at developing the workforce,” Kunz told me. “So, what you end up with is a lack of structure and sustainable programs to build the people to the competencies of the job.”

The 2018 workforce report revealed a pretty staggering (but not all that shocking) number. Of all the study respondents, 99 percent cited that finding new skilled hires was a first and foremost challenge. And it’s a multi-pronged problem: from the rapid rate of retiring knowledgeable/skilled Baby Boomers to the lack of training programs for smart manufacturing, robotic/automation engineering, big data/analytic proficiency, and even additive manufacturing (AM).

“A lot of times the challenge is connecting that worker investments to ROI,” Kunz said. “And then connecting the fact that not developing people is truly causing your quality issues, your lack of productivity, your broken-down machines, and your rising tooling costs.”

But it’s a Catch-22. Or what Kunz calls an “execution gap.” In order to properly train workers to meet Industry 4.0 standards or even legacy processes, you need to pull them off the production line. But then the workflow drastically slows causing all sorts of quality and quantity problems.

According to the turnover report, most manufacturing and fabricating companies are not upskilling or investing in continued education to ensure higher retention numbers. More than three-quarters of companies responded saying they do not have in place a talent development strategy for manufacturing employees. Less than half of the industry respondents strongly agree their company trains to develop the right knowledge and skills. Other data from the report shows:

  • 36 percent budget for employee development
  • 44 percent incorporate training for on-the-job trainers
  • 56 percent evaluate critical job tasks with structured evaluations
  • 12 percent use training/development programs and skills assessments
  • 15 percent tie worker compensation to skills development

But there are those making a living in the metal fabricating industry that says it’s less about a skills gap and more about a financial gap. One of those industry experts is Josh Welton, owner of Brown Dog Welding in Detroit and a regular contributor to The FABRICATOR and The WELDER.

“If there was a legitimate skills gap and the industry and the government were serious about closing it, it could be done in less than five years,” Welton said in a December editorial for The WELDER. “U.S. manufacturers just have to be willing to offer more money and better benefits to invest in the American workforce. More students would go through two-year vocational programs, and more people would enter four-year apprenticeships. Fewer experienced tradespeople would want to leave for greener pastures. This has to be a concerted investment in people, not a quick $1,000 signing bonus or a dollar more an hour in wages.”

Then there’s Titan Gilroy, CEO at TITAN’s CNC, who has bluntly expressed that the skills gap is a lie. “We have a training gap. We have an awareness gap,” he said in a September 2018 video on his popular YouTube channel, TITANS of CNC: Academy. “We have jobs that aren’t sustainable to actually allow you to put your kids through college, buy a house, or purchase a car. We’ve lost sight of the fact that manufacturing is what built the middle class.”

So, when you look at the data and talk to the experts, the skills gap might not be a problem due to a lack of people capable of doing the work, it might come down to paying to make it worthwhile for a potential manufacturing employee and legitimately investing into a maintainable workforce. But even that is easier said than done.