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Onshoring, COVID-19 and the battle for talent

How manufacturers can recruit and retain talent in 2021

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Metal worker using a grinder Even before the pandemic, 2020 was a challenging time to recruit manufacturing talent. In the US, the trend toward onshoring opened up a range of manufacturing positions that soon proved difficult to fill.

“The struggle to recruit is not just in the shop floor skillsets. It goes all the way up to the C-suite,” said Grant Thornton National Managing Principal Robert Hersh.

While compensation had remained steady since the last recession, the tight labor market and hot economy were prompting salary and bonus increases. Then, COVID-19 appeared. For manufacturers, the pandemic depressed demand, burdened supply chains, changed how people worked and even shut down entire sectors.

Robert Hersh
“The struggle to recruit is not just in the shop floor skillsets. It goes all the way up to the C-suite.”

– Robert Hersh
National Managing Principal,
Manufacturing
“To keep producing, companies had to ensure that their employees were physically safe, valued and prioritized,” said Grant Thornton Advisory Services Principal Jennifer Morelli. Beyond creating immediate challenges, the pandemic also had a profound effect on employee retention, compensation and bonus strategies.

The certain uncertainty As we head into 2021, employers are contemplating the uncertainty that still hovers over the economy. Morelli commented, “I think it’s actually very similar to what we faced in 2020. COVID-19 is going to cause uncertainty about what’s to come, especially if you think about any continued supply chain disruptions.”

COVID-19 promises to have both short-term and long-term effects on modes of work. For some, it is unclear whether working from home will continue or how widespread it will be. When employees do continue working from home, that may have unexpected effects on work culture and ancillary effects on employee retention. For example, if some workers are allowed to work from home and others are not, this may cause friction and exacerbate divisions within companies. On the other hand, the persistence of work from home may create opportunities for recruiting. Working from home could be positioned as a perk for hard-to-retain employees, and companies could cast their recruiting nets wider to attract candidates outside of their geographies.

Ken Cameron
“We assume that the labor market is going to come back hotter than ever as soon as a vaccine is distributed.”

– Ken Cameron
Director, Human Capital Services
The uncertainty will extend to the timing and extent of the recovery as well, with a robust recovery posing its own challenges. “A lot of organizations are hedging their bets, but we assume that the labor market is going to come back hotter than ever as soon as a vaccine is distributed,” said Grant Thornton Human Capital Services Director Ken Cameron. “That is going to create an even bigger challenge for manufacturing organizations trying to address attraction and retention issues.”

But simply betting on a broad recovery might be misguided. As in 2020, COVID-19 is likely to affect different verticals in different ways, with some thriving, some floundering and some remaining flat. Recruiting and retention strategies will need to be finely tuned to each company’s situation.

Five promising strategies These five strategies can help manufacturers address the complexities of recruiting and retention in 2021:

  1. Holistic compensation, with benefits for wage workers
    A mix of components, including base salary, annual incentives and long-term incentives, will be crucial for competitive compensation. Morelli believes that “benefits are going to be incredibly important when you think about hourly workers. They sometimes fall in the not-so-sweet spot of making enough money to get by, but the benefits aren’t necessarily provided. So, a portion of their income goes to benefits, which can be challenging. How can you start to weave these aspects into your compensation package for some of these employees?”
  2. Deferred incentives
    The economic shocks of 2020, especially coming after a decade of growth, are causing manufacturers to consider recalibrating bonus payments to avoid disruption. That includes reconfiguring packages by adding performance indicators and increasing long-term payouts. Such strategies can help shore up retention as labor becomes more difficult to recruit. Cameron pointed out that “you may measure outcomes over a long period of time and end up paying out over two, three, four or five-year periods to increase that retention hook.”
  3. Jennifer Morelli
    “Giving everybody everything is not realistic, but it’s critical to identify motivational factors for key or high performing individuals and show them attention through relevant rewards and recognition programs.”

    – Jennifer Morelli
    Principal, Advisory Services
  4. Segmentation
    In the face of uncertainty and limited resources, a one-size-fits-all strategy often doesn’t work. Morelli advised, “giving everybody everything is not realistic, but it’s critical to identify motivational factors for key or high performing individuals and show them attention through relevant rewards and recognition programs.”
  5. Career path development
    The shortage of skilled manufacturing employees at all levels continues, exacerbated by an increase of onshoring. One key to retention in this environment is to create career paths and provide the training required for those paths. According to Hersh, “manufacturers of all sizes, but mostly in the middle market and above, are creating their own training plans and focusing more on career paths.”
  6. Automation
    Automation isn’t a typical retention strategy, but it can ease both recruitment and retention concerns. Automation can enable high-value workers to accomplish more, employ a higher level of skills and improve job satisfaction. Automation solutions can include back office or shop floor robotics, advanced analytics and artificial intelligence.

Recruiting and retention strategies were already changing when COVID-19 transformed the economy and introduced profound change and uncertainty. As the economy stabilizes and recovers, manufacturers must creatively structure their compensation plans and find ways to win the battle for increasingly valuable workers who can drive success.

Contacts:

Robert HershRobert Hersh
National Managing Principal,
Manufacturing
T +1 617 848 5060

Jennifer MorelliJennifer Morelli
Principal, Advisory Services
T +1 215 701 8899


Ken CameronKen Cameron
Director, Human Capital Services
T +1 404 704 0136