Manufacturing and better "people management"

I'm just catching up with a study released in September by Deloitte Consulting LLP, The Manufacturing Institute, and Oracle -- People and Profitability: A Time for Change. As the title suggests, the report focuses on how companies manage their workforce. It finds that "Even during this period of significant economic challenge and among this hard-hit industry group [manufacturing], the importance of careful talent management to business success is resounding." For example, skill shortages remain even in the downturn for skilled production workers and for scientists and engineers.

What I found especially troublesome was how companies are responding:

Manufacturers, especially the most profitable, say they place high priority on having a high-skilled, flexible workforce, but they continue to rely on traditional approaches to managing and developing their employees. Layoffs are prevalent, and progressive management tactics seem to have gained little traction. Many manufacturing organizations are still guilty of "New Aspirations, Old Tactics" as originally diagnosed and described in the 2005 Skills Gap Report.

That 2005 report highlighted a growing disconnect between employers and employees:

There is a growing disconnect between what today's workforce wants and what employers traditionally offer. The phrases used to describe this disconnect are familiar - lack of employee engagement, loss of company loyalty, and the need for a new employer/employee "deal."
The dramatic changes in the employer/employee relationship became acute in the past decade. Trends such as downsizing, merger mania, and globalization created an ever-shifting work environment that has resulted in negative and cynical views about the workplace. In recent years, organizations that regularly survey the U.S. workforce, such as The Conference Board and The Gallup Organization, have warned that employee opinions about the workplace are at an all-time low.

It also described the failure of companies to address the disconnect:

Despite an emerging desire for building a high-performance workforce and attracting highly engaged employees, the majority of respondents to the survey continue to use mostly traditional recruiting strategies. Manufacturers cited competitive wages, and health care and retirement benefits as their top methods for attracting employees - which for most employees are considered a given rather than differentiators.

Implicit in the 2009 study is that the traditional economic-centered approaches to human capital are still inadequate, despite the recession. Simply because there is heightened economic insecurity does not mean that economic incentives alone are sufficient.

This latest report does see some bright spots:

More fundamentally, the survey data may suggest that participating companies are beginning to adopt a new approach to the employment relationship and are endeavoring to promote employee engagement through emphasis on communications, information sharing, company culture and values.

However, the report concludes with this warning:

We believe a quantum leap is needed regarding People Management Practices with companies taking proactive steps toward preparing their workers for the challenges that lie ahead.

One part of the way forward is increased worker training. As readers of this blog know, I have long promoted the idea of a knowledge tax credit. According to the 2005 report, 61% of companies surveyed thought a tax credit for worker training would be an effective policy. A knowledge tax credit would have the dual effect of improving our human capital and increasing consumer demand as companies would use the funds to pay workers to take classes (thereby creating more employments slots for others to fill the working hours of those in the classes). As I have said over and over again, rather than pay workers to stand in unemployment lines, let's pay them to sit in a classroom.

But a knowledge tax credit is only one item. We need to be more creative in ways in which pubic policy can promote the high performance work organizations (see previous posting). It is not as straightforward as other policy areas - as it goes to the heart of the internal management of companies. But it is an area we need to address if we are to revive the economy, as the Deloitte study notes.