Manufacturers commonly claim that “our employees are our greatest asset,” but when it comes to corporate strategy, they treat recruiting and retention as tactical issues. Recent data, however, suggest that a long-term staffing strategy and supporting investment are absolutely critical to future success.
Last week’s headline of 4.1% U.S. unemployment obscured a number that many precision manufacturers are only vaguely aware of — manufacturing unemployment is at 2.6%[1]. According to classic economic theory, 5% unemployment is considered full employment. Full employment spurs growth, but it also leads to labor shortages, particularly in skilled fields. Labor shortages, of course, drive up wages. Today, the average American manufacturing job pays $21.60 per hour[2].
The first method looks back in time. Firms are reviving, expanding, or initiating apprenticeship programs. With the image of American factory jobs shifting from unskilled work in dirty plants to highly skilled positions in NASA-like cleanrooms, it is becoming easier to recruit talented younger workers for training programs. Additionally, some firms have looked at programs aimed not only at training new hires, but at retraining their entire workforce to improve productivity. While the results of these programs are often impressive, they can be slow to flower and costly.
An alternative increasingly under consideration is to acquire smaller competitors for their skilled staff. While it can be a challenge to find the right fit of location, market focus, and expertise, this M&A strategy is percolating to the top of boardroom discussion.
Do you have comments or questions on this topic, or on merger and acquisition strategies in precision manufacturing fields? Please contact Tony Freeman at tfreeman@asfreeman.com.
For more information on A. S. Freeman Advisors, LLC please visit www.asfreeman.com.
[1] Federal Reserve Economic Data (FRED) November, 2017 report.
[2] Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.t24.htm
