Human Resource Trends for Manufacturing and Distribution Companies

March 14, 2022

In this episode of ManuFacts & Perspectives, Travis Epp, Partner-in-Charge of the Manufacturing and Distribution Group speaks with Matthew Kerzner, Ph.D., Managing Director in the Center for Individual and Organizational Performance. They discuss the challenges and trends affecting recruitment and retaining talent in the Manufacturing & Distribution Industry.


Transcript

Travis Epp:Hello and welcome to ManuFacts & Perspectives, an EisnerAmper's podcast series. I'm your host, Travis Epp, Partner-in- Charge of our Manufacturing and Distribution group. And with me today is Matthew Kerzner, Managing Director of EisnerAmper's Center for Individual and Organization Performance.

For a number of years, and even predating COVID, manufacturing and distribution companies have had challenges attracting employees to maintain appropriate staffing levels. Many of the individuals entering the workforce appeared to be more focused on the technology industry. Manufacturing and distribution companies have to continue to create strategies to address their staffing needs, and human resources can play a significant role. And that's why we have Matt with us here today. So Matt, to start out with, what are some of the human resource trends you are seeing and hearing about?
Matthew Kerzner:Yeah. First of all, thank you, Travis, for having me today. I look forward to this conversation. So there are some trends that are happening right now in human resources, specifically in the manufacturing world. And the first one is we hear this great resignation, right? Everybody giving notice and leaving. So the big trend here is how do you retain the talent that you have? And this is a big challenge for manufacturers, right? Trying to find the right talent. So I always say what's happening? Why are people leaving or considering leaving work? And why are they staying? What are the top reasons?

So what I'm hearing out there and what I'm seeing is some of the challenges that manufacturers are having and why people are looking to leave is better compensation and benefits, right? We always hear this is a big thing. People want more money and better benefits. So that's one reason why people are looking to change jobs. Another one is work-life balance. With the world that we all experience in the last couple of years, people working from home or having to go in the office, work-life balance is very important, right? And feeling comfortable in our environment. So people are leaving their organizations if they haven't changed the environment from what they used to be to where they are today currently. And we've all gone through some change. And organizations that haven't changed in the last couple years are at risk of losing employees because they are looking.

Another major reason is lack of recognition, right? People just hearing, "Thank you. You did a great job. Are you safe at work?" Just recognizing people is another problem of why they feel they need to leave organizations.

And the last major reason is they're looking for a better culture. If the organization's culture hasn't changed or morphed, then employees are going to look for something that they feel more comfortable about.

So those are the major trends of why people are looking to leave work. But I want to say some of the top reasons why employees choose to stay. And I'm also hearing that when employees are leaving, they're also realizing that the grass isn't always green around the other side.

So here are some top reasons why employees are staying with organizations. Number one, organizations have really looked at work-life balance and what they can do in their scheduling of staff as well as giving some time off when time is needed to take care of some personal issues. So organizations that really wrap their arms around employees' work-life balance is starting to see some traction keeping their employees.

I already mentioned recognition is very important. So recognition is something that organizations that if they just recognize and honor their employees have a better chance of keeping them. People say, "People don't leave organizations. They leave supervisors." So having recognition in place at work is going to be really successful.

And the last one is having a great working relationship with their manager, someone that they can go to and speak to not just about work related issues, but just how having an open, honest dialogue of what's going on within their lives. And if supervisors and managers actually have this skillset of listening, they could actually retain their employees.

So those are some of the trends that we're seeing. The last trend that I want to mention too, Travis, that's really important is the level of HR professionals are increasing year over year. And we are starting to see a trend from 2020 from the time COVID started to the heat of COVID 2021. And now coming out of, I don't want to say coming out of COVID, but dealing with the aftermath of everything that happened with COVID, stress levels are keep going up, and there's not enough HR resources to actually help with the needs of retaining talent or looking for talent or developing their talent. And HR is being looked at to really help solve some of these problems. But no one is addressing the HR issues that the professionals are having and they're getting burnt out. So it's like this vicious cycle that organizations are trying to retain their talent, but they also have to address the stress level and provide the right resources to the HR professionals that are going to help them do that.

TE:Matt, what I often see in many of the mid-market or smaller manufacturing distribution companies is that they probably haven't had the proper resources allocated to the HR department over its oversight in many years, because what I've seen quite often, the CFO has responsibility and that's not really in his or her skillset. Do you have any comments on what you see and maybe the CFO were improper people having oversight over the HR department?
MK:Yeah. Great question, Travis. And I'm seeing the same thing out there when I'm working with clients is either HR, one or two HR folks or employees are reporting to the CFO or controller, or the CFO and controller are actually overseeing the HR responsibilities. And my response to this is that's okay as long as they have the skills, knowledge, and ability to take care of the needs of the organization, right? A solid HR department or an HR professional is both an advocate for the employer and the employee. So you have to be careful that if a CFO is playing HR, that they have to be an advocate for both and have to have a great listening skills besides good analytical skills, right, in order to do it, because it's not just about payroll. It's not just about making sure they have the fiduciary responsibility that the 401k money is being invested properly.

It's really about four major areas: talent management and getting the right people in the right positions, performance management, being able to perform, recognize and reward employees, talent management and being able to have succession planning solid in place in your organization to make sure that you have the right people in place to replace those who are retiring, who left the organization for one way or the another. So you have to make sure that you're really developing your pipeline of talent. And then the last piece is the policies and procedures, right? Protecting your employees and making sure that everybody understands the rules and regulations. And sometimes when HR either reports in to CFOs or controllers or those two titles are HR, they sometimes lose the sight because they think HR is just getting people paid, right, or making sure that they have the benefits. But it's also the working conditions that need to be taken care of as well, right? So it's those four major areas as well as making sure the work environment is intact where employees feel comfortable, safe, and productive.
TE:I think that touches on an important area where are you seeing leaders of companies of M & D companies giving the proper support to their HR departments?
MK:Yeah. It's a great question. And that's a hit and miss out there, right? Because I do think that leadership doesn't always know what they don't know. Again, they might have an understanding of what HR or what they think HR is. And again, that is, sometimes people think it's just payroll or compensation, right? They call it compensation or making sure that their employees get the right health benefits, but they don't always see that they have to develop their employees in a path of progression and et cetera.

So sometimes I say leaders just don't understand what they don't know, or they are not getting what they need from the HR person that's sitting in the seat, right? So they have to set that clear expectation to their HR department of what training tools and leadership do they need to be successful as HR professionals within the manufacturing environment.

Now in the leadership's defense, they are so busy. They are dealing with major challenges. I'll just call it the supply chain challenges, the trying to deal with business development, trying to grow their revenue, to try to maintain their competitive edge and sometimes thinking of human resources or human capital, just not in their forefront. And they realize that labor is the most fluid thing on their profit and loss statement. But sometimes they don't really truly understand that it's the employees that are going to give them the most highest return on their investment, if that makes sense.
TE:I think a lot of people or companies realize is that they maybe know what type of HR team, how strong it should be and how large it should be. But then there's the just the really competing conflicts of what they can and can't really do. So any suggestions where companies can maybe develop HR practices when they don't have a fully built out dedicated HR team?
MK:Yeah. It's a great question. Number one, they could always look into organizations that can support them, right? So they could always look for, they're called PEOs or ASOs where, for example, PEOs, you can hire outsourced HR folks that actually can come in. They're not your employees, but they can run your HR processes for you. Or you could have an ASO kind of environment where you are getting all of the services you need, but they are your employees, but you're outsourcing some of the administrative functions that might be needed for your organization. So there are organizations that could support your infrastructure if you just don't have the resources.

Another thing is that leaders of manufacturing organizations on the C-suite could join organizations like the society for human resource management. And there's a knowledge center that they could participate in and get some resources and job aids and some tools that could help them, right? So there's associations that could provide job aids and some techniques. There's also organizations that could provide some physical resources to run some of those functions. But I always say that they should also take a look at their payroll companies that they're using. Just understand how good or areas that they need to improve on to see if they need to bring in some additional talent in house to be hired, to help them. So I'm always saying there's people that could be brought in, organizations that could be brought in. There's associations, that they could join to get some knowledge, or they could just, again, seek out some additional help by bringing in some physical W2 employees in their HR department to help.
TE:One of the terms that I've heard when you're looking at human resources departments are what's the organizational health of the entity. So can you address how this impacts recruitment and retention?
MK:Yeah, it's a great question. So when I look at organizational health, it's really taking a look at your mission, your vision and your values of the organization. Are they very clear? Does all employees understand what is the mission? What are you all about? What are the values that you want in employees, right? Hardworking, dedicated customer service, sense of urgency, continuous improvement. These are values that you're looking for in employees. And then the vision, what do you want to be, right? What is it that you want to be? So having those clear, very clear for employees to understand or prospective employees are going to be able to match the talent to your organization, but it's also communicating your goals of the organization. What do you need to do to grow your business, your business development, or your offerings that you're currently offering, or what you need to offer? Operation efficiency. How do you do things better, faster with more quality and getting people involved in continuous improvement.

And then the last piece here, Travis, is the people is really creating a path of progression for employees to grow? Now, if you're in a small to medium size manufacturing organization, there might not be a lot of, I call it growth of a ladder right straight up. But that doesn't necessarily mean you can't have people learn different roles so they could be cross trained so when they're needed, they could be called up. So organizational health is when you have a solid mission, vision, and values for all employees to have a path forward. So everybody's rowing in the same direction and the organization is clearly communicating the goals that they want to accomplish, both macro and micro level. If you're doing those things, if manufacturers are communicating with their employees in those areas, you're going to see a solid organizational health, and that's going to relate to a healthy bottom line.
TE:One of the ideas you brought up earlier, Matt, was what leaders can do. And when I think about what leadership is, I think of it very simply. A leader is somebody who I would follow if they leave the company, somebody I want to be with. So from your perspective, what are some of the steps that leaders in manufacturing, distribution companies can do to improve the morale, the motivational and overall organizational health?
MK:Yeah. Great. That's a great question. And I say that leaders should have, there's a formula that I actually introduce to manufacturers, leaders specifically in manufacturing. It's leadership plus training plus tools equals success. So simply stated, if you follow those steps that you actually provide solid leadership where you're setting an expectation, you're monitoring the actions and you're giving feedback for improvement, or recognition is the leadership. That falls under leadership.

The second column is training. What is the training that employees need in order to be successful at the job? If you're going to set an expectation for those to execute on something, they need to be trained on either the equipment or the product or the R&D that you're doing. They need to be trained on what's expected of them. And the third one is the tools. It's the technology. It's the software. It's the actual tools that are needed to create whatever the widget that you're creating. So you need to have the tools to be successful.

If you're missing any one of those three, if you're missing leadership out of that calculation, you're not going to be successful. If you provide the tools and leadership, you set that expectation, but you don't provide the proper training, you're not going to be successful. Or you have the leadership, you set the expectation, you provide the training, but you have tools that you're not maintaining, things break down, you won't be successful. So each of those categories has steps, but if you're not having the foundation of those three areas, manufacturers are going to run into a problem.
TE:Thank you, Matt. As I was listening to you today, one of the things I was thinking that really an M & D company needs to do, and I think this would apply to other companies as well is sometimes we have this sort of mindset that HR is a cost center, but maybe a better way for leadership and the C-suite to think about it is let's make it a value center because a properly functioning HR department can bring so much to the company in both its current needs and down into the future. So that's maybe just one perspective that might be worth bringing forward.
MK:I agree one hundred percent with what you just mentioned, right? When leaders of manufacturing looks at their employees and looks at the HR department as a department that actually can bring the return on investment through HR policies, procedures, and provide the leadership with some direction, I think you're going to see a very successful department and organization.
TE:Matt, thank you so much for joining me today and covering this very hot topic. And thank you for listening to this episode of ManuFacts & Perspectives, an EisnerAmper's podcast series. Visit eisneramper.com for more information on this and a host of other topics and join us for our next EisnerAmper podcast when we get down to business.

Transcribed by Rev.com

About Matthew Kerzner

Matthew Kerzner is a Managing Director in the Center for Individual and Organizational Performance and the Center for Family Business Excellence. Matt has more than 25 years of experience in organizational development with a specialization in assisting family businesses and closely held businesses.

About Travis Epp

Travis Epp is EisnerAmper’s Partner-in-Charge of the Manufacturing and Distribution Group, with nearly 30 years of experience in public practice and private industry. Travis focuses on private companies in the middle market.

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