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Managing Talent in the Age of the Dragon

Supply chain executives can add another item to their list of things to worry about in the next few years: Recruiting qualified talent. In spite of near-record levels of unemployment in the US and other industrialized nations, finding the right people for the right job will be a growing problem, according to market researchers.

China, of course, is a leading player in this dynamic. China's low-cost labor has lured manufacturing jobs — and by extension, supply chain jobs — overseas, leaving many US tech workers unemployed. Yet, academics and trade associations insist US tech companies have a hard time finding workers (See: Is America Losing the Battle for Tech Talent?.) What gives?

TV news magazine 60 Minutes recently did an enlightening segment on this topic. US manufacturing companies, including well-known names such as Alcoa, are indeed having problems finding workers. In a nutshell, the skills of unemployed US workers don't match employers' needs.

Competition has forced many US manufacturers to turn to automation for their manufacturing lines, and this automation isn't turnkey. Among the qualifications to run this equipment: trigonometry. Manufacturers aren't looking for EEs; they're looking for mechanical engineers. The labor pool is chock full of over-qualified workers or entry level employees who need to be trained.

Many of the manufacturers still operating in the US are small, niche businesses that produce high-quality precision parts for mission-critical systems. Faced with a dearth of skilled talent, these companies are training their entry-level employees. The average commitment per employee, according to 60 Minutes , is about 18 months, at a cost of $60,000. (For the record, $60K is about what an experienced manufacturing employee can expect to make in a year.)

The report went on to talk about employer responsibility vs. the public education system when it comes to this skills gap. That's a discussion that won't be resolved in a single, or even a series of, blog posts. Supply chain executives have to manage for the present as well as the future.

So what are smart companies doing? Managing risk.

It's interesting to note that supply chain companies are tackling this problem from the risk management perspective. The question posed to supply chain executives in a recent SCM World survey (paraphrased) was: “What's your level of concern that an employee you train will jump ship for a better job?” Not surprisingly, that concern is much higher in China. According to “The Chief Supply Chain Officers Report 2012”:

The dynamic of the market for talent in China appears to be heavily influenced by poaching. Our data does not so much point to a limited talent pool (ranked joint third overall as a concern) as to a talent pool made up of people willing to be lured away from rivals for more money. As we'll see, this may translate into substantial risk for businesses which suffer high short-term costs of transition. In other words, betting on building a great, long-term supply chain team in China may not be so smart.

In sales-driven organizations, such as electronics distribution, poaching is a common occurrence. During the channel's heyday of merger and acquisition, several high-profile lawsuits were launched when a competitor recruited employees from an acquired operation.

Given the current level of consolidation — market leaders {complink 453|Arrow Electronics Inc.} and {complink 577|Avnet Inc.} have acquired most of their biggest competitors in North America — there are fewer secrets left in electronics distribution to protect. Instead, the concern has moved to a global stage, where the strategies, knowledge, and relationships developed in the channel are at risk because of differing attitudes on intellectual property.

Distribution companies have proceeded with caution in regard to China. Avnet's first foray into the region was through an arm's length partnership with a Chinese trading organization. Avnet has since acquired several distributors in China, and is one of the largest resellers in the region.

Leading competitor Arrow has made acquisitions in China as well. Both companies have held on to the “think global, act local” philosophy in regard to Asia. Rather than impose the Americas distribution model on their Asian partners, both companies use a best-practices model that leverages global assets (warehousing, inventory) where it makes sense, but maintains local practices (sales and support) as well. The CSCO study indicates that it's a sound approach to talent management in the supply chain:

As we saw earlier in this section, supply chain leaders consider the issue of relocating talent internationally, to countries such as China or Mexico, to be a relatively low-level concern. Anecdotal evidence, for instance from PC maker Lenovo, suggests that global leadership of a supply chain organisation can be assembled from all over the world, even on a Chinese foundation. China may be essential to most global supply chain strategic designs, but it need not, and probably should not, be strictly Chinese.

For the supply chain, at least, it appears that employee training is a safe investment.

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15 comments on “Managing Talent in the Age of the Dragon

  1. _hm
    November 26, 2012

    There is no need to worry. One should make most out of available situation. It is art and science of finding and cultivating suitable person required for organization. But they are always available. Perhaps they may be able to contribute much more as compare to your expectation.

     

  2. Taimoor Zubar
    November 27, 2012

    @Barbara: What do you think are some of the skills and qualifications students can acquire if they want to enter the supply chain industry and fill in the gap? Do you think prior experience plays a role when it comes to landing into good supply chain jobs?

  3. Taimoor Zubar
    November 27, 2012

    @Rich: I think people are very dynamic when it comes to filling gaps in the job market and there can't be surplus or shortages in terms of human resources in an industry for a very long time. If there's an industry that pays well and there's a shortage of skilled labor, people will acquire skills and enter the market. Similarly, when there's an excess supply, the wages will go down forcing people to switch away to other jobs.

  4. prabhakar_deosthali
    November 27, 2012

    What we need is to have the private and public training institutes to orient their courses or design new courses to match the newly created job opportunities or the modified job profiles of the existing jobs because of the changed work scenario- more automation, new communication channels -email, chat,sms , new logistics methodologies and so on.

     

    Unless the education sector quickly reinvents itself with the new job scenario there will be always a contrast between what manpower is available and what kind of manpower industry wants

  5. Nemos
    November 27, 2012

    “The average commitment per employee, according to  60 Minutes , is about 18 months, at a cost of $60,000.”  It always will be a gap between the knowledge gained from the universities, and the knowledge is needed by the market. So a good practice instead of looking for the “talents” to invest in training  employees with strong will. Of course, the cost is too much, but it can be regulated if we choose alternatives solutions (there are plenty of educational tools without cost) 

  6. Houngbo_Hospice
    November 27, 2012

    @Rich,

    Which one do you think will likely happen? Is the best yet to come or the golden yeears of prosperity are way behind us?

  7. Houngbo_Hospice
    November 27, 2012

    @Nemos,

    there are plenty of educational tools without cost”

    There are free alternatives to spending thousands of dollars to gain the required skills. But do you think that certificates obtained from open course universities are valued by companies?

  8. Houngbo_Hospice
    November 27, 2012

    @prabhakar_deosthali

    “What we need is to have the private and public training institutes to orient their courses or design new courses to match the newly created job opportunities”

    This debate about the lack of concordance between what is taught in schools and the skills needed in the enterprise is nothing new. I think the education sector is different from the industry  and we cannot expect that to change overnight.

  9. Nemos
    November 28, 2012

    Some of those programs are really very good and in some cases much better than the courses or the programs  that you have to pay. ( for example www.coursera.org) But when I am saying that the companies should invest to training I mean that they should build their own educational structure (like coursera  ).

  10. Ravenwood
    November 28, 2012

    “Among the qualifications to run this equipment: trigonometry. Manufacturers aren't looking for EEs; they're looking for mechanical engineers. The labor pool is chock full of over-qualified workers or entry level employees who need to be trained. …” I'm not aware of the “over-qualified workers” circumstance, unless it's the IT or Business offices. At the Manufacturing level I see a shortage of Technicians: You don't need Mechanical Engineers to run assembly apparatus. I've two daughters who graduated from UGA, with MBAs. They spent almost as many years looking for work as they did earning their degrees. My son, however, recently graduated from HS at age 16, entered a 2-year trade school (Athens Technical College) for an Associate Degree in CNC programming and had 3 offers by the end of his first year. These were living wage positions with benefits, two in the private sector and one with the Army Corps of Engineers. So, to the point of  “…private and public training institutes…”   I suggest Public High Schools reinvent themselves by offering Trades as part of the curriculum, and introducing HS students to Junior/Community/Tech schools as part of the weekly schedule, to develop real-world job skills for today's market. Maybe — just maybe — if they see the reward of employment at the end of High School, they'll begin to work harder, grade higher, and manufacturing businesses both large and small will have a better labor pool from which to draw talent. []

  11. bolaji ojo
    November 28, 2012

    Sparky, Thank you. You said what many need to say but instead avoid. Recently, I visited a company in Germany started by a family patriach who has since retired. The son who succeeded him is now in his 60s and will possibly retire in a few years. The business is doing fine but there's nobody in the family following in his footsteps. His children all have MBAs and are working in the banking industry. He considers them less productive than many of his technicians and engineers but they also remind him they make a lot more money than his workers — when they finally got hired, that is.

  12. Mr. Roques
    November 29, 2012

    By creating jobs that don't require the use of intellectual, but mainly manual labor, even though specialized, they make people less happy and more probable to jump to another company that offers a slightly better salary.

    They are forcing their way into robots. 

  13. dalexander
    November 29, 2012

    @Nemos…I agree. Head knowledge vs. hands on training. The hands on training can help produce a product so the business can recoup some of the cost of the new employee. With head knowledge available via multiple sources including self guided training, the final evaluation of the candidates chances will be determined by the interviewing team that may use a qualifying or screening written test as well. When I was looking to hire a Component Engineer, I had prepared a written test with various answer formats including A B C or D and some circuit drawing challenges. If a prospect could not pass the basic test, I did not interview. If they did, the first question I might ask is how much hands on experience do you have? The resume can be pretty doctored including false claims to advanced degrees so the interview remains the best tell of all. Not withstanding, if the person showed a strong potential but had little experience, I still might hire them because most of what a CE knows, he has to learn on the job. Every company does things differently and it may be that difference that gives them their competitive edge. The last thing you want to do is hire a “know it all.”

  14. Taimoor Zubar
    November 30, 2012

    @Rich: These events that you mentioned are exception events which are not part of the regular course of the economy. In these cases the market forces may not be able to bring an equilibrium in the job market and some external intervention may be required.

  15. Taimoor Zubar
    November 30, 2012

    @Mr Roques: I agree. An ideal job has to be a mix of intellectual component and physical skills. While the weight of each of these components may vary from job to job, you should at least have both these components present in the job description. For instance, even a simple factory worker should have some tasks that require him to use his intellectual skills besides the physical skills.

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