The electronics manufacturing services (EMS) industry is only doing an average job of managing its human resources functions. This is one of the main findings of a report recently released by Charlie Barnhart & Associates (CBA).
HR managers in this industry do not consider themselves strategic partners with senior management within their organization. Their top three HR risk concerns are staffing, retention, and training. They have trouble finding and keeping good employees, especially in engineering. These hard-working HR folks are struggling with lack of support within their organizations and a lack of resources to conduct effective employee feedback, training, and HR development programs.
In our report, Beyond Outsourcing, we gave the HR function within the EMS industry an overall grade of C for its performance.
There is an even greater need for attention to people skills in the EMS industry, where the barriers to entry are low and many companies are started by engineers. The dysfunctional state of the industry, as evidenced by abysmal OEM customer satisfaction rates and cratering business performance metrics, has resulted in historic upheaval. The history of the industry demonstrates how chaotic and unstable things were and are — double-digit growth in one decade, companies getting acquired or evaporating the next.
In the electronics manufacturing industry, as in many other global businesses, there is a crisis in HR management. Managing a global workforce means balancing the requirements of local cultural considerations with cost reductions through lower labor rates. Historically, this has been especially true in the EMS industry. But when a business or industry considers its employees as merely an expense on the income statement, there is trouble ahead. The truth is, people really are the most important entry on a company's financial statement. They create the value by operating the equipment, maintaining customer relationships, and protecting the value of the assets.
In emerging markets such as China, the challenge is to nurture a growing middle class to encourage domestic demand. That means managing rising salary expectations while maintaining customers' demands for low labor costs. The traditional top-down military style is proving ineffective with tech-savvy Chinese young people, and some experts predict low workforce engagement will be a major impediment to China's rise to economic superpower status.
In the debt-ridden developed world, the trouble comes from lack of skilled workers. This may seem counterintuitive, considering unemployment rates, but the combined effects of misalignment in education, demographics, and the misallocation of resources in the wake of the finance crisis have resulted in a severe manufacturing skills gap.
With many electronics manufacturers considering a return to a regional approach — building in the region for the region — managers are realizing that things will have to change to help them find the skilled workers needed. Our study draws from the HR management industry's experts to bring objective analysis to the EMS industry.
What will be the overall impact of this lack of attention to the human element on this industry? We see major shifts in how global electronics companies design and execute hardware manufacturing. The players, geographies, business models, and distribution channels are morphing constantly. The key to success for these service providers will be how effectively they manage HR elements. Investment in people will be critical.
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