New Directions in Manufacturing: Report of a Workshop (2004)

Mark Troppe

National Center on Education and the Economy

During the last half of the 1990s, I worked with the Manufacturing Extension Partnership (MEP) of the National Institute of Standards and Technology (NIST). Here is where I really learned to understand the importance of manufacturing and how to work with manufacturing companies. Recently, I was reminded of an experience that occurred early in my tenure at NIST MEP. I was at a company with some MEP field engineers, and we were trying to get a better understanding of why the MEP technical field staff working with manufacturing companies seemed to be less cognizant of the human component of the manufacturing process. They’d go in and offer solutions involving new technologies, plants, and equipment but miss the fact that the plant suffered from terrible labor-management relations or had a hiring process that didn’t look for a prospective employee’s fit with the organizational culture. One of my hosts, an engineer, pulled me aside as I was expressing frustration with this and said, “Mark, it’s not that engineers don’t like people. It’s that engineers don’t like variation in the production process. An engineer’s whole focus is to minimize variation, and people are often the greatest source of variation in the process.” That was a good insight to learn early on, and I’d like to use it as a starting point for what I’ll discuss today.

No discussion on the human side of manufacturing would be complete without mentioning the skills shortages that many are predicting as early as 2010. These shortages could result from demographic changes, a slowdown in the growth of the labor force, increased diversity, and aging of today’s manufacturing workforce. It is impossible to overstate the importance of skills and credentials or certifications in improving productivity on the job. The link between education, earnings, and productivity is well documented. Obviously, if you don’t have the technical know-how to get the required work done, you’re not going to contribute much in a manufacturing setting.

I have some concerns about the public, not private, resources available to provide individuals already on the job with technical training. Most states have customized training funds that are rather flexible and can be used to support improving workforce skills. These funds are especially useful in dealing with the human element of introducing new technologies and production processes. Given today’s current budget limitations, however, I am concerned about the continued viability of some of these state programs. While I haven’t seen any hard data yet, I worry that these programs must be under tremendous pressure considering the tough choices that governors are faced with across the nation.

Many states are making more explicit links between the resources available for workforce development and economic development planning, strategies, and activities. Approximately 20 states have taken formal steps to reorganize and/or merge agencies with workforce and economic development responsibilities in order to capitalize on opportunities for alignment. Beyond these organizational realignments, there’s a lot of encouraging progress on this front, in terms of the creative thinking around sector strategies and reaching out to

employers. Almost everywhere I go manufacturing is cited as one of the key industries for support.

However, state and local government agencies aiming to support manufacturing can sometimes be far removed from the demands of the marketplace. For example, I was in a state a few months ago, and they were rightly proud of the resources their economic development agency had for expanding and improving their manufacturing base. But when I dug a little deeper, I learned that, if you as a manufacturer wanted funding support to pay for training, you had to apply through one office. If you wanted help with process improvement and quality control issues, you had to make a separate application through a different office. And if you wanted assistance or a subsidy in making an investment in a new production technology, it required a third application and a third office. If a progressive manufacturer wanted assistance in these three areas at once, a lot of time would be spent in filling out forms. But how can you separate these three functions in the manufacturing process? Making services accessible to employers is important.

One federal program that provides some funds for training is the Workforce Investment Act (WIA), administered by the U.S. Department of Labor. Originally passed in 1998, it is now up for reauthorization. Under current law, states have considerable flexibility to use a portion of the federal allocation to support training of workers in companies, many in manufacturing. The statute authorizes states to use some of these funds for layoff aversion. As a result, many states use the funds for training involving new technologies or processes that enhance the productivity of companies. In this way, they are in a stronger competitive position and can reduce the need for layoffs or plant closings.

One illustration is the way that the Oklahoma Employment Security Commission is providing $100,000 in WIA dislocated worker funds to the Oklahoma Alliance for Manufacturing Excellence (the Oklahoma MEP center). With these funds, the Oklahoma Alliance is providing lean manufacturing training and in-plant implementation assistance in 20 small manufacturing companies, teaching employees a transferable skill, and helping the companies reduce wasteful steps (and save money) in their production processes. The public funding is more than matched by private investment from the company, and some companies have reduced costs enough to justify keeping their manufacturing operations in the United States instead of pursuing offshore opportunities.

The good news is that the WIA reauthorization process is likely to provide even additional flexibility for use of these funds by manufacturers as the WIA system strives to become increasingly business- or demand-driven. The uncertainty here is what the appropriators will do to overall funding levels, given growing budget deficits and demands for the war effort.

Public policy and public funding in the workforce arena have concentrated primarily in three areas: providing income support to people out of work, matching people to jobs, and providing training to increase skills for better jobs. For the most part, this policy rightly assumes that the public has some responsibility for addressing skill deficiencies—and federal and state labor agencies have acted in this arena. But job placement and training are only two components of the range of people issues facing manufacturing companies in their efforts to keep pace.

It’s important that we not lose sight of the broader context in which those higher level skills are applied, i.e., the workplace, and the people practices that employers engage in, in order to make maximum advantage of the skills and knowledge of the workers:

• Culture—openness to new ideas, continuous improvement, collaboration, information sharing, and common mission/vision;

• Hiring process—recruitment and screening, orientation designed to help employees understand their role and where they fit in the bigger picture;

• Performance management—reviews, incentives such as rewards for contributing ideas to continuous improvement;

• Compensation and benefits—rewarding behaviors consistent with the same mission/vision; and

• Training and development practices—whether companies provide opportunities for workers to obtain the skills needed to be productive and to apply those skills effectively in the workplace.

These are all aspects of the human side of manufacturing. When a company’s people practices are aligned with its business strategies, you can see great results. If not aligned, they can derail even the most sophisticated technologies and engineering strategies. All these aspects must be considered as part of a larger context of the manufacturing entity.

No single entity such as a public workforce or economic development agency can effectively address all of the needs on the human side of manufacturing, especially as they relate to other concerns about new products, new technologies, financing, new markets, and the drive for “faster, better, cheaper.” Increasingly, however, I am seeing that communities pool expertise and resources from multiple organizations, public and private, to holistically address the needs of manufacturers. Participants at the local and regional levels include workforce and economic development agencies and organizations, local Chambers of Commerce, community colleges and private education providers, literacy councils, state and local chapters of business and industry associations, the local manufacturing extension centers, small business development centers, and organizations promoting entrepreneurship.

The communities that can figure out how to meld the unique mix of resources and expertise that they have into a mature service provider network at the local level—for the betterment of individual employers, particularly manufacturers—will have a comparative advantage over those communities that don’t. Moreover, they will result in benefits to participating employers, the employees, and the communities in which they reside.

I’m encouraged by the fact that employer attitudes have changed in recognition of the critical contribution of people to the success of recent organizational transformations. The following quote from Industry Week references its competition to identify America’s best plants: