Industry:

The years ahead look promising for American manufacturing. New facilities are being built nationwide and jobs are returning to the domestic manufacturing sector at levels not seen in decades. According to government estimates, construction spending related to new manufacturing facilities in the U.S. has reached a record annualized pace of more than $200 billion, with more than $700 billion worth of so-called manufacturing megaprojects – or construction projects valued at $1 billion or more – breaking ground since 2021.

However, just as the industry is picking up, the tightening labor market for manufacturing executives is creating a growing gap between the number of available positions and the number of qualified candidates to fill them. As a result, it has become increasingly difficult for manufacturing companies to recruit and retain high-level leadership, leading to increased competition for talent, higher salaries, and more attractive benefits packages to entice potential candidates.

More than that, however, the tightening labor market for manufacturing executives is also starting to impact the bottom line, as difficulty in hiring and retaining top executives can hinder growth, innovation, and operational efficiency within manufacturing companies. It is also creating a skills gap, as demand is growing for executives with specialized skills like digital transformation, data analytics, and sustainability expertise, while the supply of qualified candidates is limited.

“There is a significant generational gap in executive talent,” says John Hambley, Senior Director, Executive Recruiting & Strategic Engagement, at RTX. “There’s a surge of younger executives aspiring to join Fortune 500 companies, but a gap exists as the older generation needs to retire. We are experiencing an influx of talent not yet at C-suite level but poised to be there in about seven years.”

A Changing Market

This is happening due to a combination of factors, all contributing to the tight labor market for manufacturing executives.

First, and perhaps most importantly, is the aging workforce. Many senior executives in the manufacturing industry have been in the roles for decades and are nearing retirement. This is simultaneously creating new demand for talent, as well as further reducing the pool of experienced candidates. At the same time, the younger generations are bringing different priorities and career expectations to the workforce compared to their more senior peers – such as increased interest in hybrid and remote work arrangements, mission-oriented work, and work-life balance – impacting recruitment strategies.

But the industry is fundamentally changing as well, leading to new needs from leadership. The increasing adoption of automation and Industry 4.0 technologies across manufacturing requires executives with at least digital fluency if not advanced technical knowledge to fully leverage. What’s more, the ongoing march of globalization is placing manufacturers in direct competition for a global talent pool, making it more difficult than ever to attract and retain qualified domestic executive talent.

“The demand for executive level talent at Eaton is at an all-time high due to demographic trends, company growth, and digital transformation,” says Jackie Morgan, Vice President of Global Talent Acquisition at Eaton Corporation. “There’s a focus on hyper-growth in the market, prompting companies to reassess their talent needs. Executive talent has more options than ever before.”

Widening the Net

To address this shortfall, the industry is going to need to adapt to the new recruitment world in manufacturing right now, with an eye toward creating an industry where talent wants to, and can, build or continue a career. To do that, leadership today needs to:

Embrace the potential of hybrid work: Hybrid work arrangements, which combine some remote work with limited on-site time, have proven popular in other industries as a way to attract talent that does not necessarily live near enough to commute in every day. Hybrid work may not appear to be an obvious fit for manufacturing, given that so much needs to be done in person on the factory floor, but more roles at these companies can be hybridized than most think. In fact, at the executive level I would estimate that as many as 70% of roles could be filled on a hybrid basis, up to and including the CEO, CFO, CIO, legal department, commercial operations, and more. The key to making it work, according to a recent report from the Drucker Institute, is balancing in-office time for meetings and brainstorming with enough flexibility to reach a greater pool of talent.

“Location flexibility is crucial in attracting executive talent,” says John Hambley of RTX, “as being open to relocation or remote work significantly expands the talent pool. But it is always important to set clear expectations for face-to-face interactions, especially during the initial period of employment.”

Invest for the future: It is shocking the number of mid-cap and small-cap manufacturing companies that overlook the importance of building their own bench for hiring needs down the road. Internships, co-ops, and mid-career training programs are inexpensive and easy ways to plan for future talent needs, but they need to be implemented now to fill tomorrow’s leadership pipeline. Eaton Corporation, for instance, combines external hiring with internal development. About 30-40% of the company’s mid-professional level hires come from outside, but it also has a robust early career development program that hires about 500 people globally each year for rotational programs. Eaton also emphasizes cross-functional and cross-sector movement within the company to diversify employees’ experiences, and offers robust learning and development programs, focusing on both hard and soft skills, to make its relationships with employees stickier.

Thoughtfully consider location: By establishing a home office somewhat near their manufacturing operations, but in a more populous area, manufacturing companies can access greater opportunities to recruit without sacrificing proximity for on-site work. For instance, a company based in the southeast with plants in Alabama, South Carolina, and Tennessee might choose to center their corporate office in Atlanta, which is near enough to reach each plant within a day’s drive but with a much larger executive hiring pool to choose from.

Think strategically about the mission: Eaton’s approach to handling these challenges includes emphasizing the company’s mission to make the world a better place through their power management solutions. Its executive recruitment efforts focus on attracting candidates who connect with this mission and align with their values. Says Jackie Morgan of Eaton: “We want to create a culture that aligns with our shared values and provides opportunities for growth and development. We use assessments for both hiring decisions and onboarding, partnering with a third-party firm to align assessments with their competency model and external market benchmarks.”

Look beyond manufacturing: Finally, it is important to remember that not every hire for every role needs to come out of manufacturing. Many roles, particularly at the executive level, are very fungible across industries, including HR, legal, IT, and more. There are some specialized requirements in some areas, but companies that are more willing to bring someone on from outside of the industry and train them will have more candidates to choose from when hiring.

Unfortunately, for many who are recruiting talent in manufacturing this is a problem that needs to be solved today, not 10 years down the road. Developing internal talent will help the industry improve its domestic pipeline over time, but more immediate action is needed to keep pace with the growing demand for U.S. manufacturing. This is where widening-the-net thinking can pay dividends.

To stay up to date on trends shaping the executive hiring landscape, subscribe to our blog for more insights.

 

 

Insights in your inbox

Stay up to date on the latest trends and insights shaping the executive search landscape from JM Search’s Blog.