The following is a transcription of a webinar we hosted with Purple Squirrel Advisors.
We want to cover what we’re seeing here in Michigan from a trends and challenges standpoint. I’m sure if we have participants attending from other parts of the Midwest we have similar challenges with our Manufacturing base here. Governor Rick Synder has talked a lot about the gap between what companies need and what our system is producing. We’ve heard one speaker recently refer to the new currency in today’s economy as talent. What we’re seeing in many of our clients is their growth is being constrained by people, and also not having the right people in the right seats.
As an example, we had a client recently that basically could not take on any additional orders because they were constrained with talent throughout their operations area. They didn’t have talent to do estimating, engineering, project management, and internal production. This was a constraint for them and they were not able to grow their company because the constraints were woven through the entire process.
There is also a great need on a technical level for CNC Operators, tool and die, and other technical backgrounds that have become somewhat of a dying art in many ways. One of the things that is happening here in Michigan is the creation of a program called MAT2. This has been created to address the widening skills gap in an aging workforce. Programs in MAT2 currently include IT Technician, Technical Product Design, and CNC Manufacturing Technician. We’ve heard from many of our clients that these programs are of interest and a good way to develop a talent pipeline early on. Another interesting development we’re seeing is a focus on STEM education, even at the high school and middle school levels.
For example, a high school in Detroit launched a 16 Million dollar STEM program in 2015. It’s exciting to see our community leaders and educators are responding to this talent crisis and implementing programs designed to intervene at a younger age and develop talent. Additionally, we’re seeing pretty stiff competition for jobs from people across the world so our students need to have a much stronger foundation in those STEM subject areas. Finally, the legislative efforts are focused on coordinating industry needs with educational foundation. We’re on the right track, but unfortunately we’re behind the 8 ball and many of our clients and manufacturers here in the area are feeling that.
In terms of other trends that we’re seeing in small to mid-size businesses, following the deep recession, many companies were hesitant to pull the trigger and make those key hires in concern of the future and what we had gone through as a country and that deep recession.
Starting in 2013 we saw a great demand for talent where finally companies felt like they were in a position to add those key people. In many cases, what we’ve seen is business owners are sitting in multiple key seats, especially for privately held businesses. For example, a President, second generation family business, we’ve seen Presidents that are also sitting in the CFO spot, the VP of Sales, the Chief Operating Officer; so they’re wearing many of those key hats. In order to continue to grow their business, they need to take themselves out of one of those key functions and actually hire a specialist in one of those areas. As an example, we just completed a CFO search for a 45 Million dollar family health business where the President was in exactly that situation. In order to take the business to the next level we need to turn over the finance responsibilities to an outside person. It can be a scary endeavor to a small business owner to make those key hires, but obviously it does help quite a bit.
Many baby boomers are choosing to work longer because they were hit so hard during the recession, so this also makes succession planning a more difficult topic because their retirement age is more difficult to predict. One of the things we have seen really help from a succession planning standpoint is having that open dialogue with the management team. The succession is creating a lot of opportunity for middle-manager level individuals, mid-career and of course we’re seeing quite a bit of that. Another trend happening right now is business owners selling their private equity to strategic buyers, because valuations are unprecedented levels.
There seems to be a little bit of a slowdown with mergers and acquisitions in the last 3 to 4 months, but overall the demand has been so high that the level of valuations has just been astronomical. This has created a lot of opportunity for Michigan; we’ve seen private equity investments from businesses across the country. This is industry wide, too, so we’re seeing it in healthcare, manufacturing, service, because really there is demand across the board.
Over 90% of the positions we, as a company, have filled in the past 18 months have been newly created roles. We are seeing tremendous opportunity for companies to build out their organizational structures. In terms of signs you need to make a hire, this is something we’ve talked to our clients about, and again, they know their business is constrained, or they’re working long hours, but it is hard to pinpoint when exactly is the right time.
Some things you should look for:
- Heavy workload
- People working in excess of 50 or 60 hours a week
- Capacity issues
- You’re worried about taking on more sales
- Leadership team wearing too many hats
- Business complexity is changing
For example, when talking about business complexity changing - some of our clients have sold their business to private equity firms and all of a sudden the private equity leadership has a very different expectation for the CFO than the privately held business does. Or let’s say the business is expanding and opening up a new facility that requires some debt; the banks will have a very different requirement from a financial standpoint than a privately held business with no debt would. There are just a few things to think about.
Sometimes the skill set of key employees have not grown with the complexity of the business. I’m sure some of you have heard that you’ve outgrown your employees and we do see that. Certainly, this is a level of training and development you can do with existing employees, but sometimes they’re not going to be the right employees that will help you get your company to the next level. A couple of other things to think about in terms of complexity or reasons to hire are:
- Launching new products
- Entering a new market
- More or different skills needed for future business
- Strengthening the workforce
- Ensuring the appropriate mix of skills and cost
I love this quote and it really does represent what we’re seeing:
“Companies that do not have the right people in critical jobs, forfeit revenue growth, innovate more slowly, and/or lose competitive advantage because they are unable to adapt to market dynamics.” - Building Critical Talent Pipelines, Oracle
This goes to the point of being caught flat-footed and not having those proactive strategies in place to make those hires.
A critical aspect that we think some of our clients have fallen short on is that there is a lot of internal preparation that needs to happen before you go to market for a particular position. This is where a role analysis can be a very helpful step. Meeting with your leadership team and thinking to yourself: what is the vision for the company, what are the gaps, what are the bottlenecks, how is this hire going to contribute the most value, what do we need from this hire, and what are the key initiatives that need to be tackled in the 3,6,9, and 12 months? Going through all of these questions can really help you to be proactive and avoid the crisis mode in terms of the hiring process. Soliciting feedback from your key members early on is very important. Don’t underestimate the power of giving your team a voice in the process. If you don’t have an aligned leadership team when you go to market and start interviewing candidates and the leadership team is not on the same page, the candidates can see that and feel that, which can disrupt the process and cause a loss of momentum. We had a client that was hiring for two new positions and unfortunately, some members of the leadership team were not on the same page going into those hires, which we were not aware of. When they started interviewing they were communicating different jobs to the candidates, which was very disruptive. Avoiding those situations is very helpful to maintain the momentum in the interview process.
Some factors to consider before going live in the hiring process:
- Who is going to be involved in the interview process and in what stage?
- Is there an internal candidate and what are the implications?
- What should the organizational chart look like to accommodate growth to support the company vision?
In some cases, there may be an internal candidate and you can maintain that candidate and their career path, as long as you have that communicated and opened a door for them to be apart of the process.
One thing that we are really passionate about is that the hiring process offers a window into how an organization runs from a candidate perspective. You have to keep in mind how you conduct an interview, the feedback, and the follow up; all of those are giving the candidates cues to how you make decisions and treat people. This can really affect someone’s desire to join your company. Finding a way to offer creativity, innovation, and autonomy shows the candidate what their career path would be and not just that they can meet a certain need today, but that they will be with you long term.
Keep in mind, the hiring process is a reflection of your brand, so you want to make sure the experience is fantastic for everyone, regardless of the outcome with each individual candidate. Closing the loop with each candidate and making sure they know where they stand with you is important. Even if they’re not a fit, delivering that feedback can go very well in terms of how they feel about the experience.
One of the topics we’ve heard many of our clients struggle with is actually attracting millennials and keeping millennials engaged in the workforce. We’ve been to conferences and studied millennial communication and what is important to them and what we’ve found is they really want open dialogue, they want to understand what their roles and responsibilities are today, but also what do you have planned for them for the future? They want those clear opportunities for advancement and they want an open and friendly environment with consistent and clear feedback. They also value work-life balance and some of those intangible benefits; it’s not always about cash compensation, but also what about what you can offer in terms of flexibility, working from home, and again, some of those career path discussions. Additionally, community outreach and philanthropy are some things that millennials tend to be very interested in, so understanding the company’s role is what they can do to contribute to those causes is important. Again, supervisors that act as mentors, not bosses, is very important for millennials. One other thing I think is important to mention is millennials view their career in chapters of 3-5 years. They want to be with an industry leader and industry leaders are going to change, so in many cases we see millennials stay 3, 4, or 5 years with a company and then move on to gain new experiences.
Come back on Friday for part 2.