At a glance
- Sector struggling to find key staff because of skills shortages and an ageing workforce
- Managing the risks strategically around demographics is essential to addressing the key issue for manufacturers of retaining and attracting skilled workers
- Almost one million replacement workers will be needed in the manufacturing sector by 2020 and problem only likely to get worse
Manufacturers need to make plans now to avert future skills shortages, as well as engage more with their workforce, if they want to keep up with the challenges of demographic change.
While the manufacturing sector is far from being alone in facing the issues associated with an ageing workforce, it has a particularly high proportion of workers in the 35-55 age range. Indeed, the threat of losing skilled workers due to retirement already ranks as one of the biggest concerns for manufacturing companies, many of which have been struggling to attract younger workers for some years.
Top tips for brokers
- Ask your clients if they’ve at least identified the key roles in the organisation
- Which roles carry the most risk for the organisation in terms of the potential challenge to find a replacement?
- Has your client identified the talent that is at most risk?
- Is your client having conversations with key talent in their organisation around career aspirations?
- Which individuals have the potential to move into other roles and what kind of support do they need to make that transition?
According to the manufacturers’ organisation EEF, almost 80% of UK firms are currently struggling to find appropriate staff because of skills shortages while almost one million replacement workers will be needed by 2020 to fill gaps left by retired workers. Meanwhile, the latest survey from the UK Commission for Employment and Skills found that some 30% of vacancies in the manufacturing sector are deemed as hard to fill.
Alan Ross, Senior Strategic Risk Management Consultant at Zurich, believes manufacturers are under intense pressure to retain and attract skilled workers, a problem that will only get worse if businesses fail to address the issues now.
“There are two aspects to this risk that we commonly see across our manufacturing customers,” he said. “One is the slow burn, skill shortage type risk where manufacturers are finding it difficult to fill vacancies because of the lack of suitable skills. The other aspect is the risk of losing a key individual tomorrow – due to illness, moving to a competitor etc – because of their technical knowhow or because they’ve built up a wealth of knowledge and understanding over many years.”
The issue has created something of a dilemma. While no one wants to be carrying excess capacity with a duplication of staff, there’s also the worry that investing in existing staff with qualifications and training could somehow backfire.
“A lot companies tend to worry that this kind of investment will be wasted because their employees will just take their improved skillset to better paid jobs with competitors, “explained Alan. “On top of that, just because someone views himself or herself as being able to move up to a more senior role it doesn’t necessarily mean they have the skills and potential to get there.”
However, workforce engagement can often go a long way in managing these difficult issues. Managers need to get more involved with such things as annual appraisals and regular catch-ups with their staff, which can also drive revenue and productivity – as well as reduce staff turnover in the future. Thus, investing more time in their most valuable assets – their employees – can provide ample benefits both in the long and short term.
“While many managers still shy away from these sorts of conversations, there needs to be more talks with top talent about their career aspirations,” added Alan.
Getting it right
Manufacturing firms should begin by laying some basic foundations for their succession planning strategy. As a starting point, companies need to identify the key roles within their organisation and where any potential gaps could develop. This should then enable them to focus on the areas of highest risk.
The areas of highest risk can be anywhere: from director of finance, to engineering and technical roles, sales and marketing or the payroll administrator who is the only person that understands how the system works.
Identifying key roles
Once manufacturing companies have identified what the key roles are in their organisation and the associated risks if these roles go unfilled, the next step is to ascertain whether there are already individuals within the organisation who can in fact fill those roles.
People generally need some sort of development to be able to step up, so there might not be ready-made replacements. While you might have promising individuals, they may not actually be ready to fill these roles for another two to five years
Alan Ross, Strategic Risk Management Consultant at Zurich
“People generally need some sort of development to be able to step up, so there might not be ready-made replacements,” said Alan. “While you might have promising individuals, they may not actually be ready to fill these roles for another two to five years.”
He added that the potential disruption from gaps emerging in an organisation should not be underestimated, with manufacturers even at risk of losing important customers as a result. Brokers, meanwhile, should be asking their manufacturing customers whether they have at least identified the key roles and associated risks.
To help manufacturers, Zurich provides excellent risk management services, aimed at minimising the total cost of risk around the whole issue of succession planning. The insurer also offers both key person dependency cover and essential personnel cover extension. While key person dependency cover helps minimise the impact of losing important employees, essential personnel cover extension can provide additional benefits for key personnel.