EBOOK | PSIONLINE.COM/TALENT | ©2019 PSI SERVICES LLC

A GUIDE FOR MANUFACTURER HIRING IN A TIGHT LABOR MARKET

EBOOK | PSIONLINE.COM/TALENT | ©2019 PSI SERVICES LLC

A Guide for Manufacturer Hiring in a Tight Labor Market

Part 1: Record Low Unemployment and the Current Tight Labor MarketGood Employees Have Never Been Harder to Find

The Operations Manager just informed you that he needs ten new hires next week to meet the growing customer demand. In addition, you’ve had four people turn over this week who will need to be back filled immediately. However, your candidate pipeline is running dry and you cannot get people through the hiring process fast enough. How are you possibly going to fill these 14 new positions? For many Talent Management professionals, and particularly those in the manufacturing industry, this is the new norm – an unending list of open positions and a dearth of qualified and available talent. There is a confluence of events leading to some of the most difficult hiring conditions that we have seen in decades.

The unemployment rate in the United States has hit its lowest rate (3.9%) since December of 2000. Rural Mid-west counties (areas considered to be hot beds for manufacturing) are seeing an unemployment number closer to 2%. Experts indicate that these figures are representative of “full employment” (meaning that workers who want a job have a job with the hours they need, and since the percentage is so low, the people who do not have a job represent workers who are incapable of finding gainful employment). These low unemployment rates combined with the growth in the oil/gas and manufacturing industries (among others) have led to stiff competition in the labor market. This has forced companies to entice potential new employees with additional benefits or compensation or risk being unable to fill open jobs with quality employees. In addition to creating difficulties filling open positions due to growth, this stiff competition has led to higher turnover in these industries because candidates understand that if they are unhappy, there are multiple other companies that are seeking the skills that they bring. The war for talent is real and is being waged across the country.

This problem is not only felt by the companies trying to fill the jobs, but by cities and counties in which these organizations reside, as well. Cities and counties fear that if organizations cannot fill their hiring needs in their current locations, they will move their plants elsewhere.

For example, counties in Indiana will provide a $5,000 home purchase benefit from the county for candidates who accept a job and move into their county. That’s right, cities and counties are paying people to move there and fill their jobs!

As with anything, there is a complex set of factors that has led to this labor shortage in the manufacturing industry. Here are some of the critical factors impacting the labor market:

• During the last recession, individuals flocked to larger cities and urban living to increase their job-seeking opportunities.

• The current political climate has encouraged American manufacturing and has attempted to make the benefits of foreign-made goods less appealing.

• There is a growing negative perception of manufacturing jobs among new individuals entering the workforce.

• Those perceptions of manufacturing jobs may not be unfounded. Specifically, many manufacturers who previously offered pensions and other differentiating benefits have moved to more variable workforce models that allow them to be more flexible to the changes in the economic landscape.

• Finally, manufacturing is in a state of transition from manual processes to automated processes with more robotics, so hiring individuals with the right skill sets can be difficult as organizations need individuals who will fit in both worlds during the transition.

All of these factors create a difficult landscape to fill open positions with quality people. Organizations fear that if they maintain high selection criteria they will be unable to fill jobs and meet company goals. Even if they can fill open positions with quality candidates, they are still seeing turnover increase month after month as quality employees are in high demand and employment options are plentiful. As such, the hiring turnstile continues to spin. How do organizations attract more quality candidates? How do they attract younger talent and keep them within the organization? How do they do so while still maintaining profitability?

EBOOK | PSIONLINE.COM/TALENT | ©2019 PSI SERVICES LLC

Employment trends tend to change and are cyclical in nature, but that does not help the talent management team who needs to fill their customer demand now. Thus, what are the best practices for organizations to hire, place, and retain talent in this difficult market? In this guide, we will cover hiring system issues, solutions to consider, sourcing alternatives, assessments, and ideal recruitment and selection strategies.

Part 2: Perceived Issues and Potential Solutions with Hiring SystemsIn this section, we’ll cover common perceived issues, like:

A. We have too many steps in our hiring process

B. We cannot screen anyone out because we don’t have enough candidates in the first place

C. Our selection system isn’t working

A) Are There Too Many Steps in your Manufacturing Hiring Process?

In an ideal job market, we would have a lot of interested job candidates. Competition from other companies wouldn’t exist. We would have the upper hand in choosing the best of the best for the job. I think most employers would agree that from their perspective, we are not currently living in an ideal job market. As mentioned in Part 1 of this guide, the current landscape is putting a lot of pressure on recruiters, Human Resources, and Talent Acquisition. When conditions get tighter, processes that worked well in better conditions are put under the microscope and may be seen as barriers to getting (qualified) candidates to apply to jobs and accept job offers. When conditions change like this, it’s important to reflect on how the recruitment and hiring processes need to adapt to combat some of these challenges. One of the biggest concerns is: It’s tough to get candidates through the full process.

Recruiting in a tight labor market is a challenge. Candidates have a lot of options around them. When you find interested candidates, you want to make sure to get them through the process as quickly as possible before you lose them to another opportunity. As such, time to fill is a critical metric and something that recruiters, HR, and TA are feeling pressure to constantly improve. If you are noticing a lot of drop out from candidates, it’s important to consider a few things.

First, is the drop-out healthy?

Are candidates withdrawing or dropping out of the process because they would not be a good fit or are not qualified for the position? This is the type of candidate withdrawal that we want. If we are doing our jobs well, we would expect this type of drop-out because we are providing candidates with a realistic idea of the job and company, and they are self-selecting out of the process based on fit.

While this can account for some drop-out, not all dropout is healthy.

There are cases in which candidates are exiting the process who are potentially qualified and a good fit for the job. Why might this happen? This could stem from a couple of reasons. One reason is because they do not feel fully engaged in the process. Lack of communication and failure to explain the process on the part of HR or TA is the fastest way to create negative reactions from candidates. If candidates are not feeling engaged, they will not want to continue with the process. The current market is very candidate centric – candidate communication is especially important now. This requires us to engage with the candidates and provide them with frequent touch points or updates on the process.

Take a close look at the steps in your hiring process.

Another reason candidates may drop off is that the hiring process is overly lengthy or requires too many steps. It’s important to take a close look at all the steps in the process and consider the following:

1. Do all steps add value? After analyzing your process, it may become apparent that there are steps in your process that are not adding value. For example, if you are hiring for an entry-level material handler position, is a resume screen providing additional value outside of the basic qualification questions being asked in the application? Further, that third interview may not be providing much more information over the other two.

What are the best practices

for organizations to hire, place,

and retain talent in this difficult

market?

EBOOK | PSIONLINE.COM/TALENT | ©2019 PSI SERVICES LLC

2. Is the time between steps too long? What is the average time in between steps? What steps are automated versus the steps that require human intervention? What steps are providing you incremental information over others?

3. Do the steps require too much coordination? Analyzing your process may also reveal that the steps requiring more resources are lengthening the process due to sheer coordination. For example, a series of panel interviews requires aligning schedules of the interviewers along with the candidate. As a result, the time to complete this step will take longer because of the coordination. Panel interviews are not always the best route because of these reasons. This more manual and time-intensive step may not be adding a lot of value.

In sum, there may be opportunities to reduce steps that don’t add value or that require a lot of manual work, thereby streamlining an otherwise lengthy process overall. However, it’s important to not go to the extreme – in order to make a good decision, we need objective and valuable information. Eliminating the most objective step in the process (i.e., an assessment or a structured behavior-based interview) will increase your chances of making a poor decision.

Additionally, candidates want the ability to “show their stuff.” This investment is something they value and makes achieving the end goal of getting a job more rewarding. It also makes not receiving a job offer seem more fair.

Ultimately, the company, location, and job should be considered when you are making changes to your hiring process. While there are some strategies that can be executed across companies and locations, there are others that require a close analysis of the company, location, and job to make an appropriate change.

Going back to the original concern that it’s tough to get candidates through the full process – this is a very real matter today. As with anything, we need to take a deep dive into where these concerns are coming from and implement some strategies to combat the root cause of the concern. Better candidate communication along with the removal of steps that are manual or don’t add value may be good ways to keep candidates engaged in the selection process and reduce the time to fill positions.

B) Low Applicant Volume? Selection System Strategies to Consider

Every organization, no matter how long they’ve been in business, knows the importance of maintaining a long-

term vision and strategy. That’s why we’re always so surprised by clients who want to remove their screening process during times of low applicant volume. It’s akin to dating: even if there are not a lot of interested candidates, you should still value yourself enough to maintain some standards.

All too often, when it’s difficult to fill hiring quotas, the selection system is viewed as the enemy. You may have heard your hiring managers half-jokingly say that it’s better to have anybody than nobody. But that sentiment is actually dangerous because it implies that a poor fit is ultimately the less costly option. That couldn’t be further from the truth! For example, OSHA estimates that safety incidents on the job cost U.S. organizations almost $1 billion per week. And those “warm bodies” who seemed like a good idea at the time aren’t likely to have other opportunities lining up, so they’re going to drag down your bottom line for many years to come.

For our clients who understand that screening tools are a non-negotiable part of the application process, here are some strategies we’ve devised to deal with low applicant volume:

Understand the truth about low employment

We keep reaching new lows of unemployment, but many industries – manufacturing in particular – continue to add new jobs at equally accelerated rates. This imbalance is creating an employee’s market in which it’s possible for workers to quit their job in the morning and have a new one by the afternoon. Job hopping is becoming increasingly common, and a selection system is your best way to preemptively weed such people out. A recent article by Forbes reported that the average millennial stays in their job for just two years before leaving, but they are more likely to stay if the company culture overlaps with their personal values. If you don’t assess motivational fit or value alignment, then you shouldn’t be surprised when your new workforce turns over in record time, putting you back at square one.

If you don’t assess

motivational fit or value alignment,

then don’t be surprised when your

new workforce turns over in record time

EBOOK | PSIONLINE.COM/TALENT | ©2019 PSI SERVICES LLC

Profiling strategies to meet required yield

Even though more jobs are being added across the country, wage growth has remained largely stagnant. This reflects a larger trend of how, despite the changing market, organizations are reluctant to change their traditional structure and approach to hiring. Your selection system will always be a key piece in hiring, but don’t be afraid to make adjustments to your tried and true tools during a tight labor market. Streamlining your steps, adjusting your knockout questions, or shortening your assessment are all viable options to get more applicants through the selection process. It may not be what has worked in the past, but it’s far better than no system at all.

Appropriate assessment placement

The fastest route to hiring may be to gut your selection system, but it’s not the most effective. The second fastest route, and the far more effective option, is to ensure that your system is as efficient as possible. Use a basic, quick screen at first and save the intensive steps for after buy-in has already been established. If people are opting out of your hiring process during the early stages, reassess your lineup and determine why you’re losing candidates, eliminate any irrelevant or redundant questions, and listen to the feedback of recently hired employees. That said, remember your standards. If you try to compete with the lowest common denominator, you’ll likely end up with no process at all, so keep your long-term vision and strategy in mind when you decide where to be flexible.

Selection systems aren’t an obstacle, they make your organization better for the long-term even if they require more effort up front. You may feel that investing in quality applicants may have been easier in the past. But even though the applicant landscape is changing, do not hire people without assessing their basic fit or aptitude for the job. Removing your screening tools is the fastest way to put your organization’s long-term vision and strategy at serious risk.

C) Evaluate Your Selection Process to Combat Tight Labor Market Challenges

Talent Acquisition professionals who are faced with high-volume hiring at the entry level are getting hammered by operations on a weekly basis to fill openings. If they keep relying on recruiting methods that worked well just a few years ago, the beatings will continue. Record low unemployment coupled with a growing economy is great for the country but also comes with many challenges. The two biggest challenges are the constant churn of workers and the overall lack of quality candidates. When faced with

the pressure to hire and retain quality talent, the easy thing to do is point the finger to the part of the selection system where you feel the least control: the assessment. Is it a fair attack? Well, yes and no…

Every step of the selection process should be under scrutiny when faced with such a tight labor market. The key word in that sentence is “process.” It is fair to challenge the assessment along with the application, phone screen, interview, and any other component, but challenge the “how” just as much as the “what” is being used to select candidates. Assuming you have implemented a well-validated assessment, some examples of how to challenge its use include:

• Are recruiters and hiring managers using the assessment and its interpretation consistently? Knee jerk reactions to make the selection process easy or eliminate steps inconsistently can lead to fairness claims.

• Is your assessment being used correctly in the funnel? Short assessments work best when screening out low success probability candidates early in the hiring process. Longer, more comprehensive assessments are often used further down the hiring funnel when candidates are more invested and engaged.

• Are you making good business decisions or are you accepting anybody who walks through the door? Consider relaxing scoring profiles, even temporarily, to accommodate current market demands.

• What are you doing with the assessment results? Some markets dictate the need to use data from assessments not to “cut” candidates, but rather to inform later stages of the hiring process. Look for areas to probe and help to determine fit.

So, yes, it is fair to challenge how the assessment is being used in the selection process, but you cannot “blame” it for your turnover and quality problems. Sometimes companies also need to look inward and ask themselves some tough questions:

Are we using corporate social networking to help find and retain top talent?

Those who do:

• Brand their profiles and fill them out completely

• Include photos and videos of their culture

• Get your employees to help build their brand

• Post their job openings on social media

• Take advantage of live video streaming

EBOOK | PSIONLINE.COM/TALENT | ©2019 PSI SERVICES LLC

Are we an employer of choice that attracts and retains the best talent?

Those who are:

• Make it clear to potential candidates that social responsibility is a core value

• Provide and communicate a visible career ladder

• Set goals that motivate, engage, and recognize their employees

• Compensate well for the talent they deserve

Do we really know why turnover is increasing or just hope the assessment will find candidates who will not quit?

Those who understand the problem realize that:

• An assessment can only help with one piece of the puzzle (about 20%) by helping to predict individual traits that candidates possess – traits that are a fit for the organization like personal responsibility, adaptability, and teamwork.

• Internal drivers of turnover within the organization must be evaluated. Those may include pay, benefits, opportunities for growth, leadership, coworkers, job design, and culture. This aligns closely with being an employer of choice. With so many job options available, higher quality employees will simply move on for a better and often easier alternative.

• External drivers of turnover like the unemployment rate and competition for talent in various markets are much harder to combat but cannot be ignored.

Are we overlooking or exhausting all avenues of talent pools?

A recent blog on Glassdoor suggests the following:

• Reevaluate runner up candidates and see if they could be a good fit for other roles. Maintain active and passive engagement.

• Check in on the gig workforce. Freelancers comprise 35% of the United States workforce and can be looking for the right “fit” company.

• Reach out to the long-term unemployed – unemployment gaps can happen for a myriad of reasons.

• Bring veterans on board! Soft skills like leadership, work ethic, loyalty, and motivation are easily transferrable.

• Ex-offenders can bring loyalty and commitment. Many employers have removed “no felony” requirements from the application process expecting an increase in loyalty and decrease in turnover.

Do we understand what millennials want and are we willing or able to provide it?

According to a Forbes contributor it may not be so daunting. Citing a recent Capital Group study, companies that attract and retain millennials tend to:

• Provide benefits that match their values. With more of a focus on parenthood, they value a 529 plan for their children’s education. Sixty-seven percent state that being loyal to an employer is important to them if the employer can align with their values.

• Offer retirement investment options giving them the ability to prioritize family.

• Provide benefits such as volunteer time off and charitable gift matching that have risen in popularity due to desire for social impact.

At the end of the day, hiring and retaining quality talent is complex issue with growing difficulty in a tight labor market. It requires an examination not just of individual tools in the selection process and how they are used but also a candid and honest evaluation of the company’s ability to source and/or attract the sorely needed talent. The employee experience is gaining greater importance and those companies that do not recognize it will fall behind their talent goals.

Part 3: An Ideal Recruitment and Selection StrategyDesign an Ideal Selection Process for the Current Tight Labor Market

In a tight labor market, it’s tempting to make rash decisions about your selection process. We often hear variations of different arguments that essentially boil down to:

• We don’t have many people applying, we can’t afford to turn anyone away.

• We need more candidates – and quickly; remove some steps in the hiring process.

• Candidates can go anywhere and be hired; we’re putting them through a test that is too long.

The employee

experience is gaining

greater importance

EBOOK | PSIONLINE.COM/TALENT | ©2019 PSI SERVICES LLC

Here are a few considerations that we talk through with our clients during this tough market:

The Value of Assessments to your Selection Process

As the labor market becomes more competitive, people start asking if assessments should even be used. It’s a candidate’s market - shouldn’t we be happy to get anyone at all? Maybe we should cut testing out completely or choose a shorter test so that there are little to no barriers between application and hire. This is often a knee jerk reaction to a few common pain points (e.g., low applicant volume, high fail rates, real or perceived long time-to-fill metrics, and concerns over completion rates).

If you’re in this situation, please consider the following points before making your decision:

• You still want to hire good employees – removing an assessment reduces the amount of objective information you have to make informed decisions.

• Candidates do not react negatively to assessments, regardless of test length.

• Once they start, candidates are highly likely to complete assessments regardless of length.

Temp to Perm Strategies

Particularly in times of high demand, our clients tend to turn toward temporary workforce solutions. Their next question is usually, should we use employee assessments for temporary employees?

My answer is yes, for the following reasons:

• If the job duties, expectations, and work environment are the same, you shouldn’t lower the benchmark. Selecting employees who meet your expectations is still important in the short (and long) term.

• Some organizations want to test temps but want to use something less rigorous (for example, only using half of the process). Be careful here, however, as you may be creating a situation where your temporary employees have to pass another step before you can hire them down the road. What will you do if they fail?

• Is it worth it to test short term help? Absolutely! These temps are often the face of your organization – they are on the front line building your products and interacting with your clients. It makes economic sense to screen out risky candidates.

Communication Between HR and Operations

Often low candidate volume can cause operation managers to think, “What’s the hold up?” This also causes them to question the utility and legitimacy of

the assessment and to put pressure on HR to provide more and more candidates for consideration. In this environment it is critical to have ongoing communication with operations so that they can understand the challenges of a tight labor market.

Here are a few things they (and you) need to talk about:

How is the process going?

This is an important question to ask all the time, but even more so in a competitive labor market. Which new employees are performing well and which are struggling? Which candidates did well in the interview and which ones struggled? Also, be sure to touch base on what criteria are being using in resume reviews, interviews, and in assessing training success.

How are you working to bring in candidates and move them through the entire hiring process efficiently?

It may seem obvious, but make sure to advertise to operations what you’re doing from an attraction, selection, and retention standpoint. Highlight the processes that are working, what you know needs to be improved, and how hiring managers can help make the process better. If they don’t know what you’re doing, they’ll assume the current hiring struggles are specific to their department, your organization, or their industry. While this may be true in some cases, there truly is a labor shortage that you’re struggling against, too.

What are the upcoming hiring needs?

Often operations managers have vital information about hiring needs. They’ve scheduled work months in advance and they know when there’s going to be an uptick (or downtick) in staffing needs.

Finally, it’s vitally important in the current market to remain flexible. Perhaps a temporary change to your selection process is the right answer, either in terms of a shorter assessment or removing a step in the process. Be mindful of what you’re losing, however, and also remain vigilant to other parts of your selection process that could be streamlined (e.g., the application).

If your organization is not feeling the effects of a tight labor market now, there is a good possibility that you will in the near future. The changing nature of the labor market will affect the way that you and your company approach your recruitment and selection strategies. It’s important to stay in front of these changes, and with a well thought out approach you can be ahead of the curve. Taking into account tips from this guide, you can work with your consulting team to define your goals, realistically identify your recruitment strategies and anticipated applicant volume, and design/redesign a process that’s going to help you hire the types of candidates you need with the resources you have available.