May 25, 2021   SOURCE: BusinessWire

Pandemic-Fueled Labor Shortages Intensify Talent Crisis in Manufacturing

The resilience of manufacturing is unwavering — but not without struggle. A study commissioned by The Workforce Institute at UKG finds that, although many manufacturers are emerging from the COVID-19 pandemic on solid footing — with more than half (54%) achieving year-over-year growth — a mounting skilled-labor shortage threatens to delay the sector’s full recovery.

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“The Resilience of Manufacturing: Strengthening people operations and bridging the talent gap amid crisis” is based on a survey of more than 300 hiring decision-makers representing a mix of U.S.-only manufacturers (65%) and multinational manufacturers with a strong U.S. presence (35%).1 Featuring year-over-year comparisons with a similar study completed by The Workforce Institute before the pandemic took hold, the 2021 research explores linkages between understaffing, overtime, employee burnout, absence, and turnover, as well as strategies bolstered by people-centric technology and used by manufacturers throughout the COVID-19 pandemic to overcome these barriers to business success.2

“People have been and always will be the backbone of the manufacturing industry,” said Kylene Zenk, director of the manufacturing practice at UKG. “Investing in technology that will create a better experience for all employees — that will make them feel protected, connected, and effective in their roles — is a modern necessity when cultivating the kind of highly sought-after workplace culture that is key to attracting and retaining today’s skilled and savvy workforce. Make no mistake, enhancing the employee experience must be among manufacturers’ highest priorities.”

Despite modest growth amid a turbulent year, the industry’s talent gap grew wider.

Before the pandemic — a period when many manufacturers were already grossly understaffed — 38% of manufacturers had trouble finding candidates with the right skills. Today, that number has jumped to more than half (54%).

While the sector has shown steady recovery since losing 30% of U.S. manufacturing shifts between late March and mid-April 2020 — when the U.S. economy hit its lowest point, as reported by the UKG Workforce Activity Report — manufacturing frontline shift-work volume is still hovering at just 88.5% of pre-pandemic levels as of April 2021.3

Today, nearly two in three manufacturers (63%) are “struggling” to fill critical labor gaps despite high unemployment caused by the pandemic. And the research shows that multinationals are facing greater struggles than their U.S.-only counterparts: In addition to experiencing “severe” demand fluctuation at a greater rate (77% vs. 56%), almost three in five multinational manufacturers (58%) cited difficulty acquiring skilled talent compared with just half of U.S.-only manufacturers (49%), while 49% vs. 38% reported difficulty retaining skilled employees.

In March 2021, manufacturing production lines were understaffed a quarter of the time.

Attendance and attrition have been persistent challenges in the manufacturing world, and COVID-19 intensified these issues for employers as people were forced to fundamentally reimagine their home-life reality, all while unprecedented demand volatility pushed global supply chains to a breaking point.

  • Employees aren’t just calling out of scheduled shifts on short notice — many are actually “ghosting” their employer by skipping a scheduled shift with zero notice.
  • Between January and March 2021, more than two in three manufacturers (68%) let employees go due to poor attendance, and 13% said managers had to adjust labor schedules every day to account for unplanned absences.
  • Turnover is up 15% over the prior year: Nearly three in five manufacturers (59%) experienced “higher-than-average” turnover from March 2020 to March 2021, compared with 44% from March 2019 to March 2020. Among multinationals, 71% said turnover was up during the first year of the pandemic vs. 52% of U.S.-only manufacturers.

All together, these obstacles are hitting manufacturers’ bottom lines in the form of productivity losses (37%) and overtime pay (34%), as well as costs related to employee burnout (28%), employee turnover (27%), and recruiting (23%).

To close the talent gap, manufacturers are prioritizing investment in their workforces.

Accounting for these pronounced impacts to staffing — and preparing for a rise in retiring Baby Boomers — employee cross-training has become a greater focus for nearly three in four manufacturers (73%), and one in three now offer mentorship programs as a way to encourage knowledge-sharing between seasoned workers and newer employees (up 7% over the prior year).

Four in five manufacturers (81%) say investing in the workforce is a key component of their digital-transformation strategy, and just as many say their frontline managers already have the right tools and resources to help employees advance along their career paths. But there is room for growth:

  • While employee pulse surveys help managers understand and better respond to employee sentiment, only 27% of manufacturers today provide employees with a means to anonymously communicate feedback upstream.
  • All employees value flexibility, though frontline team members rarely get it: Only 28% of manufacturers say their employees have autonomy to adjust their work schedules or set their own availability or work preferences.
  • Schedule predictability for full- and part-time employees in manufacturing decreased year over year.

Manufacturers reveal promising outlook for flexibility, safety, and diverse talent pipelines.

Nearly three in four manufacturers (73%) have advanced their digital strategies by accelerating adoption of new technologies within the first year of the pandemic. Adoption of automated employee scheduling solutions is on the rise — up 16% over the prior year — as is adoption of mobile at-work technology that enables flexible employee practices, like using a mobile device to clock in/out of a shift (up 23% over the prior year) or request schedule changes (up 19% over the prior year).

Similarly, health and safety practices introduced in 2020 — from new testing and screening protocols to enhanced personal protective equipment requirements and “contactless” time tracking — are predicted to remain steady fixtures on the factory floor through the remainder of the year, bringing peace of mind to manufacturing’s essential workforce population.

Showing the industry’s resilience, many manufacturers are recruiting from “alternative” talent pools: Within the past year, about three in four (76%) have hired or considered hiring people with non-traditional skills or work histories, while others are recruiting individual contractors (71%), people with disabilities or special needs (62%), and second-chance workers (52%). Overall, 71% call workplace diversity a “top recruitment priority” for their HR department.

“As shockwaves continue to reverberate through the supply chain, employees are being asked to be more agile than ever,” said John Frehse, senior managing director at Ankura Consulting Group and advisory board member of The Workforce Institute at UKG. “As exhausted as we all are right now, there is no better time to assess what has happened, develop the right labor strategies to protect the emotional wellbeing of employees, and make our companies more resilient for the next big disruption. It is not a question of if it will happen again, but when.”

Supporting Resources

About The Workforce Institute at UKG

The Workforce Institute at UKG provides research and education on critical workplace issues facing organizations worldwide. By bringing together a global consortium of HR and workforce management thought leaders, the think tank is uniquely positioned to empower organizations with practical ideas for optimizing the 21st century workplace while also providing an important voice for employees, including frontline and hourly workers. Founded in 2007, a hallmark of The Workforce Institute's research and education — including books, podcasts, surveys, blogs, and its annual list of workplace predictions — is balancing the needs and desires of diverse employee populations with the interests of organizations in order to manage absenteeism, fight burnout, develop equitable work schedules, and build strong leaders, all to drive inspired performance. For additional information, visit workforceinstitute.org and join the conversation at @WF_Institute.

Footnote 1: Survey Methodology: Research findings are largely based on a survey conducted by Qualtrics on behalf of The Workforce Institute at UKG between March 24 and April 2, 2021. In this survey, 314 hiring decision-makers — i.e., those who make or influence hiring decisions — representing a mix of U.S.-only manufacturers (65%) and multinational manufacturers with a strong U.S. presence (35%) responded to questions pertaining to their organizations’ talent management challenges during the first full year of the COVID-19 pandemic, as well as their organizations’ current HR and technology practices. All year-over-year data comparisons cited in this report are based on prior-year research conducted between March 11–17, 2020, among 313 hiring decision-makers working in the U.S. manufacturing sector. View the full 2020 report.
Footnote 2: Respondents surveyed between March 24 and April 2, 2021, were asked to reflect on “the prior 12 months,” i.e., March 2020 through March 2021.
Footnote 3: When compared with a 100% pre-pandemic baseline.

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