Category All, Best Practices How to Solve Hiring Problems in Manufacturing with Employee Recognition The state of the manufacturing workforce is changing faster than ever. HR professionals working in the manufacturing sector are facing the greatest challenge of their generation – how to attract younger workers and solve the hiring crisis. March 9, 2023 By Ivo Jurcic Unfortunately, the current shortage of skilled laborers in manufacturing is only a continuation of long-term industry-specific problems. If manufacturing companies want to win the war for talent, they have to fundamentally change how they approach Employee Experience. In this blog post, we’re going to talk about the impact of employee recognition on retention and talent attraction. Before we get into that, let’s first set the stage for the state of hiring in the manufacturing sector. The Hiring Crisis in Manufacturing Historically, blue-collar workers used to be the most extensive employee group in the labor market. In 1970, blue-collar jobs in the US were 31.2 percent of total nonfarm employment, according to the Centre for Economic Policy Research. However, the labor market has been through tectonic changes since the early 2000s. After the 2008 recession, the trade deficit skyrocketed and the number of blue-collar workers fell from 24.6 million (in 2000) to 17.8 million in 2010. Currently, there are about 19.6 million blue-collar employees in the US, according to the most recent data from CEPR. These dynamics have a profound impact since most of the blue-collar workers, in fact, work in manufacturing. As more workers migrated to white-collar jobs, and seasoned professionals move closer to retirement, the entire manufacturing sector faces an unprecedented number of missing laborers. According to the National Association of Manufacturers, by 2025, U.S. companies will have two million empty job vacancies in manufacturing positions, which will have economic consequences for manufacturers and limit their capacity for growth. The Manufacturing Institute and Deloitte published a skills gap study and found that there may be an estimated 2.4 million unfilled manufacturing positions in the U.S. between 2018 and 2028, with a potential economic fallout of $2.5 trillion. The situation will only worsen because of older professionals’ retirement rates. The Multigenerational Teams in Manufacturing report found that 5% of the existing workforce is already beyond retirement age, and an additional 20% will reach retirement age within the next 10 years. A change has to happen. The manufacturing sector has to attract young professionals, make up for the skills gap, and keep its talented workers from leaving. There’s no time to waste. Above all, manufacturers have to solve a deep cultural problem and project an image of an appreciative, people-centered employer to win over skeptics and maintain a growing and productive workforce. The challenges seem colossal, but they can be solved. We’ve seen it firsthand. Employee recognition turns even the biggest skeptics into firm believers in change. After the next paragraphs, you’ll become a believer as well. How Employee Recognition Makes a Difference Recognition has a profound impact on the workspace. Feeling valued and recognized for one’s achievements is a universal human need; everybody wants to feel appreciated. Positive experiences in the workspace reinforce employees’ belief in the organization and their work. This feeling sustains the relationship between manufacturing employees and their company. When employees are not recognized for going the extra mile, their experience of being an employee doesn’t feel remarkable in any regard. Then, employees stop believing in their work and their organization. Employee recognition is here to turn the tide. Attract Employees with Recognition The inability to attract new hires is a fundamental problem that will only get bigger as more seasoned manufacturing professionals will retire in the next 5 to 10 years. When employees are recognized frequently and feel valued, they’re more likely to become net promoters of their company. Net promoters are employees so satisfied with their employer that they’re willing to recommend them to their peers, friends, and other would-be hires that would benefit the company. Net promoter employees are HR’s stuff of dreams. In terms of attracting employees through recognition, there are three ways in which satisfied employees actively contribute to workforce growth: Recognized employees often refer their company to their friends and acquaintances, creating a new source of potential employees. According to research from Jobvite, 78% of recruiters agree employee referrals are the best method of attracting new hires. In addition, the research found that employee referrals have the highest conversion-to-hire rate, more than career sites and online job boards. Satisfied employees leave positive reviews on hiring websites, such as Glassdoor, which are critically important for job companies researching manufacturing companies. A positive reputation is instrumental in attracting new candidates. Glassdoor surveyed jobseekers to investigate the impact of poor reputation on hiring. They found that a whopping 86% of job seekers wouldn’t accept a job offer if the potential company has a bad reputation on their site. Manufacturing professionals network; recognized employees provide social proof that their company values them, which makes the company attractive to other professionals in their circle. LinkedIn found that 85% of all jobs are filed through networking. By sustaining a good relationship with onsite manufacturing employees, companies are effectively creating more hiring opportunities for them online. Transform the Manufacturing Company Image In the past, manufacturing jobs were often perceived as low-pay work with few opportunities for career progression. According to Deloitte’s report A look ahead: How modern manufacturers can create positive perceptions with the US public, 43% of surveyed respondents agree strongly that the US manufacturing industry provides careers that are rewarding and interesting. When respondents were asked if they would encourage their children to pursue a manufacturing career, 33% strongly disagreed. Among their disapproving reasons, 64% of respondents said a manufacturing career doesn’t pay enough. This is an example of an inaccurate public perception of manufacturing. source: Trading Economics In fact, according to the U.S. Bureau of Labor Statistics, the wages in manufacturing in the United States have been rising steadily and are currently $25.93/hour, which equates to approximately $51,860/year. However, salaries differ per region. In 2022, the average tenure for U.S. manufacturing workers is 5.2 years, according to stats from Statista, which is almost 1 year above the national average. Employees working in manufacturing stay longer in their companies and earn strong salaries. The most successful manufacturing companies have challenged the public perception of manufacturers by putting more attention on the importance of recognition in the workspace. By using reward and recognition solutions, employees can receive rewards and send recognition to each other, and demonstrate a high-reward culture surrounding their line of work. More importantly, would-be hires and possible candidates can embrace the image of manufacturing work as tech-powered and focused on rewarding and promoting employees. This is a game-changer for hiring. Introduce Skill Validation In November, Deloitte had its yearly Future of Work event and discussed the latest global workforce trends. We covered the most critical insights in this post. One of the most profound insights was the gradual shift from a job-based work organization to a skill-based, as a response to the hiring crisis ravaging most sectors, including manufacturing. Work is becoming more cross-functional. According to stats from Deloitte, 63% of current work being performed falls outside of the job description and 81% of employees claim work is increasingly performed across functional boundaries. In other words, robust, traditionally defined jobs are lagging behind. What organizations need for progress isn’t to fill positions, but rather, to acquire the right skills necessary for achieving operational goals. This is a huge paradigm shift because the prevalent hiring practice is still the traditional perfect-fit candidate model. The change of tide presents manufacturers with a unique opportunity to attract the skills they need and solve their hiring problems from a new angle. Manufacturers have to build a talent pipeline that would allow them to track their internal talent inventory, i.e. the skills their workforce currently possesses, and identify which skills the organization is missing to facilitate growth. This paves the way for an internal labor market that will make the company more resilient to workforce challenges and turnover. In practice, this allows HR to move seasoned professionals to positions where they can transfer their knowledge to younger workers while keeping them employed. Modern HR departments of manufacturing companies need to be equipped with tools that allow them to validate skills. HCM tech is already used for recruiting, onboarding, training, and managing aspects of employee experience. By taking a step further and introducing skill validation, organizations can recognize employees for their hard and soft skills and, by doing so, proliferate the skills necessary to grow the company. Current employees can master new skills from their seasoned peers and be recognized for their efforts and HR can embrace a novel hiring model based on skills, to ultimately grow the workforce and solve hiring problems. Raise Engagement in the Workspace Raising engagement in the workspace is a never-ending HR struggle. Disengaged employees achieve subpar productivity, fail to connect to the culture of their organization, and hurt the chances for company growth. There’s not a successful company out there that doesn’t actively pursue ways of engaging the workforce so that they become more passionate about their work. With that in mind, employee recognition and reward practices stand as a proven method of raising engagement in the workspace. The Harvard Business Review surveyed over 550 C-suite execs from organizations with more than 10 000 employees, to find out which initiatives are most effective at raising engagement in the workspace. A whopping 72% of responders said giving recognition is the most impactful driver of employee engagement. Additionally, in 2021, Deloitte studied the engagement practices of top-performing manufacturing companies and found that manufacturers that achieved strong employee experience had 1.6 times higher levels of employee engagement than companies that didn’t pay attention to EX. Sometimes it’s not a question of engagement; it’s a question of recognition. It’s not reasonable to assume employees can stay motivated to deliver top performance if they’re not recognized for their efforts. It takes a supportive, appreciative environment to help employees stay engaged. By creating an engaging environment using employee-centered recognition programs, manufacturing companies can reach new productivity levels and reduce the need for excessive staffing. Bear in mind, recognition supports several workforce goals simultaneously, which all complement each other and yield terrific results. Reduce Employee Turnover When employees are not recognized in time, they eventually become disengaged and the seeds of turnover are already being planted. Disengagement has various phases, but ultimately, workers seek employment somewhere else. And then, all the skills and knowledge they’ve mastered at the workspace will serve some other company. The deterioration of engagement happens in several stages: Dissatisfaction with the job; at this stage employees begin to feel their role is not aligned with their personal skills, interests, or goals. Their engagement starts to crack. Disengagement from colleagues and the company employees become less interested in team interaction, and they go through their planned activities. The personal investment in the team’s success is already sinking. Loss of confidence; employees lose confidence in their manager’s ability to change things and re-engage them. Actively disengaged; at this stage, employees do the bare minimum (or even less) and work with zero enthusiasm and effort than necessary. Actively-disengaged employees are already looking for other job opportunities and their departure is imminent. Remember, seasoned manufacturers are in huge demand in the labor market. Despite the Covid-caused recession and soaring inflation, the manufacturing sector is still struggling to fill vacancies. If employees are unsatisfied, they will eventually go elsewhere. To reduce employee turnover and act while employees still haven’t reached the stage of quiet quitting, manufacturers have to practice frequent recognition in the workspace. When employees are recognized by their peers and line managers, they are reminded of the value they bring to the company. They feel purposeful. More importantly, they understand that their role, which might seem repetitive to some, serves a higher goal. Believing in the organization and being connected with its culture sustains employees and keeps them from disengaging. Recognition creates an amazing workplace where people want to contribute and feel valued. How JobPts Changed the Game JobPts is an employee Recognition and Reward solution built for companies with large workforces consisting of deskless, on-site, or office-bound employees. The solution is designed to deliver tailor-made R&R programs that connect with employees and positively impact company culture, ultimately translating into excellent workforce results. By leveraging monetary and non-monetary R&R programs, employers can recognize their workers for their effort and promote behaviors, attitudes, and values they want to proliferate in the workspace. Employees feel seen by their leaders; they feel valued and understand how their work connects to the big picture. Other employees are encouraged to do their best because they trust others will reward and recognize them. It’s a win-win. First, JobPts drives deep cultural transformation through a change in employee behavior, meaning that employees are encouraged to send peer-to-peer recognitions and nominate each other for positive behaviors displayed in the workspace. This has a direct impact on how employees engage with one another and the attitude they bring to work. When JobPts rolled out for JTI, an international manufacturer of tobacco products, 13 000 of its employees nominated their colleagues in their first nomination period, with 3 nominations on average per person. In return, employee engagement on JTI’s internal communication platform has skyrocketed, with employees celebrating each other’s success. The change began only 2 months after implementation. You can read about the full case study here. Another real-life reference of a successful R&R platform implementation comes from OMV, an international integrated oil, gas, and chemicals company, headquartered in Vienna, Austria, with over 15 000 active users on JobPts. Thanks to the platform, OMV became an employer of choice and managed to attract more skilled labor. OMW’s fantastic workforce recognition results were powered by a flexible point-based reward system on a custom OMV-branded platform that went live in less than 90 days. Additional recognition features included peer-to-peer recognition, nominations, excellence awards, the celebration of special occasions, and a rich catalog of redeemable rewards. The practice of consistently recognizing employees builds a desirable environment where people want to work. It effectively projects the image of an employee-centered manufacturing company, ripe with opportunities for skilled workers. For deeper insight into the transformative power of Recognition and Rewards, feel free to pick up our whitepaper on the link below: Conclusion Despite economic hardships and disruptions in the labor market, it’s certain that the demand for skilled laborers will only increase in the coming years. Source: KKR Manufacturing companies can stay ahead of hiring problems and welcome new employees, but they have to embrace fundamental cultural change. This means putting recognition first, so workers can connect to their company, become engaged and help bring fresh talent so that everybody can benefit together. According to Gartner, by 2025, 50% of large organizations will have an R&R system in place but will achieve mixed long-term results. The report identified Semos Cloud as a point solution provider, along with all the greats. R&R solutions offer a viable solution for solving critical problems of talent attraction and retention. Explore what JobPts can do for your talented workforce.