Build something – Manufacturing the cornerstone of a strong economy

We constantly hear about manufacturing jobs being shipped overseas and the cost benefit of outsourcing to Asia as well as labor exploitation in China that gives us cheap ipads, Nike sneakers and Walmart jeans.  The latest figures say that the US is now down to only 9 million manufacturing jobs (Compared for example to 30 million employed in government).   At the simplest level of Economic theory, markets are defined as “the process in which the prices of goods and services are established”.  Markets deal with product (such as apples, aluminum and mobile phones), or with services of a factor of production, (brick laying, book printing, food packaging).

Some countries may be rich in natural resources that help them grow for a period of time but unless they diversify they remain vulnerable to new technologies and fluctuating commodity prices.

It fascinated me back in 2000 when there was so much hype that the US was “moving to a service based economy”.  The low paying manufacturing work would be moved offshore and the highly skilled service components of innovation and value added services would remain as high paying jobs for US workers.

The dot com boom was riding high and every new startup was touted as an example of value and wealth creation by a service based economy regardless of what the company did.  At the time I was working for Microsoft, and resented being lumped in under the “IT service based economy” banner.   With some 30,000 engineers at that time, working night and day to build software, we were very clear that we were “building” products.  Although the finished product was not necessary tangible in the physical world it was a comprehensive product.  Somewhere along the way there was a tendency to group all things digital into the service based economy.

I am a firm believer that you cannot have a strong economy unless you actually build stuff.  The recent economic downturn has shown how the house of cards comes crumbling down if for example two Wall Street investment bankers celebrating their return on a questionable paper deal in the financial services sector, leave a $1000 tip for the “service” provided by the person waiting on their dinner table.  If the waiter/budding property investor then used the money towards a speculative option on an off plan condo purchase that a real estate pro had rolled over 3 times even before construction began, there was plenty of money changing hands but these are hollow services.  Everyone believed they got rich along the way, but if the original financial deal was proven bogus all downstream wealth created is questionable.

I was amused the other day listening to GarrisonKeillor joke about threeword job titles such as “media information processing” or “organizational resource imaging” compared to real jobs like machinist, engineer or lathe operator.  Despite all their other challenges, countries like Germany, Italy, France, South Korea and Japan have been committed to maintain their manufacturing prowess at the high end of markets even in the face of cheaper options from emerging countries like China. In many instances these efforts are government backed and have often been ridiculed by folk in the US, however as time transpires they are proving to be critical in economic sustainability.  The challenge in the US is compounded when the playing field is not level, so for example a government owned or supported company in China (built on the back of providing cheap outsourced goods) could (subject to some level of legal approval) purchase the engineering skills and technology of a US telco or auto manufacturer because the market conditions have made them vulnerable to a takeover.

Like it or not – this is why the auto industry bail out was so critical.  The US cannot afford to lose more manufacturing jobs if it wants to remain competitive in a global economy.  But the bigger question is do the skills even exist in the US?  According to a new survey from Deloitte and The Manufacturing Institute, American manufacturing companies cannot fill as many as 600,000 skilled positions – even as unemployment numbers hover at historic levels.

While this may be surprising given current unemployment rates it can be linked to a trend that started before the 2008 economic slowdown.   The manufacturing industry has spent heavily in the past five years on redesigning and streamlining their production lines while implementing more process automation.  The result being that the skills needed have changed as well.  As with other areas of the economy, employers are concerned that the education system is not producing workers with the basic skills they need.  The manufacturing survey mentioned cites the No. 1 skills deficiency among current employees is in the area of problem solving.

The United States has among the largest, strongest manufacturing industries in the world and has demonstrated its ability to innovate and adapt time and time again.  Change is inevitable but employers will need to get a lot more creative to close the skills gap.  The New World of 21^st Century work means flexibility in terms of access to the right skills at critical times, while simultaneously having the security and peace of mind to know that you can meet demand.  This goes both ways though as individual workers require their own balance of flexibility and security.

A More Flexible Work Environment

The expanding need for highly skilled workers and the commitments and cost model of FTE’s are driving changes in the Employer : Employee relationship.

Job shares, part time work, compressed work weeks, partial benefits, work from home and contract services are set to become the norm rather than the exception. 

To compete effectively for skilled knowledgeable workers, organizations need to embrace this new more fluid world of work and become more effective at recruiting talent on more flexible terms  and providing them with long term career “building blocks”.

Contracting on steroids

Gone are the days where you will have a single employer for life.  Estimates are that kids graduating today will on average, work for up to 28 companies during their careers.  In this type of employment environment, individuals will need to take even more responsibility for their own careers than ever before.  The analogy of a “gun for hire” will apply across the board even for permanent employees within large organizations.  Building your resume based on successful achievements will be the only guarantee to get the next gig, whether it is a two month project or a three year stint in a role.  While some companies may face internal culture challenges based on how they have previously viewed contract workers vs permanent employees, the line will continue to blur.  As companies continue to fight for the best talent and individuals come to terms with the reality that everyone really is replaceable, organizations will need to “modularize” their work to provide individuals with tighter results driven “success deliverables” that can be viewed as long term portable career “building blocks” acceptable both within the organization itself for the next role or outside at the next job.

Yes – reality check – It’s time for individuals to take control of their own destiny, but corporations will need to step up to the plate here too.  While leading organizations continue to focus on traditional benefits as a way to maintain a happy committed workforce, the recent recession has shown that even the best (and often most highly paid) employees are not exempt from downsizing.  In a world where individuals will continually be changing their positions employers will still have benefit contributions (such as healthcare, financial services and life insurance) as a lever to attract staff, but companies along with their group benefit providers will need to offer more flexible and transportable offerings along with the ability  to contribute directly to individuals existing plans.

In this “New World of Work” individuals will need to embrace the more flexible work environment for the upside that it provides – better work life balance, new challenges and more freedom.  For many it means “accepting” less security but in reality this is just accepting that previously they had an illusion of security since there employment was never guaranteed.  In this “New World of Work” there will be an increasing need for individual networking and community connections, both to foster the longer term, purpose and social components that many people receive from their work environment as well as identifying the next role or work opportunity, and forming the basis for large scale collective bargaining associations that in the past have come through employers or unions.

These changes will not occur overnight, they are long term trends which will continue to morph and evolve on a global scale.