The road to the 2030 manufacturing workplace: What Industry 4.0 means for talent strategies

Manufacturers face multiple business challenges right now. There are indicators of contracting global production activity.1 Rising trade tensions and the threat of tariffs loom as disruptors of manufacturers’ supply chains, with potentially damaging effects on the global economy. Signs of slower global economic growth and weakening demand will concern manufacturers in all industries.

But, in the decade ahead, probably the greatest challenge will involve the transition towards a new talent paradigm in the digital age. Industry 4.0 has revolutionized all aspects of production, and change will accelerate – and deepen its social and economic impact – as machine learning and autonomous robots gain traction in manufacturing environments and supply chains. Talent strategies will be vital to synergize the workforce of tomorrow with extrapolating technologies which are only on the cusp of being harnessed.

 

Three major global talent challenges

1. Talent shortfalls or misalignments may already be nearing crisis mode. Skills shortages in the U.S. manufacturing sector alone could inhibit economic output by $2.5 trillion in the decade ahead,2 as the current gap between workforce skill sets and the requirements of the Industry 4.0 manufacturing environment is projected to widen by 2030.

For decades, STEM (Science, Technology, Engineering, and Mathematics) subjects have under-delivered in the educational systems of many major economies. Some evidence points to 4.0 production workers not necessarily needing STEM qualifications, but rather the capability to operate complex machines, to interact with robotic instruments, and to use automation tools in order to activate quick decision-making. Either way, new technology skills and critical thinking abilities are not keeping pace with their requirement on factory floors.

2. Employee engagement has never been so low. Gallup’s 2018 State of the Global Workplace report states that 85% of employees are either unengaged or actively disengaged at work. The issue is particularly problematic in the established industrial economies. And manufacturing workers are less engaged than the overall workforce: in the U.S., for instance, just 33% of all workers are engaged, but the manufacturing sector reflects weaker engagement, at 25%. There’s a disconnect between what companies are offering, and what employees – notably Millennials – wish for, or expect. And it is costing an estimated $7 trillion in lost productivity.

3. The other challenge is implicit in the megatrend of shifting age demographics. Soon, 50% of the global labor force will comprise Millennials. They’re not a homogenous group, but attitudinal commonalities cut across cultures and geographies: they value communication, autonomy, flexibility, and mobility. They want to earn a pay cheque balanced with purpose, watching corporate responsibility, whilst not expecting to stay in the same job, or career, for many years.

But move over, Millennials. Around the corner is an oncoming stream of the new cohort of employee, Generation Z. Born in the mid-1990s, they value independence more than Millennials’ orientation to teamwork. Millennials may be “always-on”, but Generation Z are true digital natives; they are more entrepreneurial, wanting to work hard and smart – but with the expectation of suitable rewards.

Simultaneously, and despite the world’s population rising by some 800 million to 8.5 billion by 2030,3 the profile is ageing. This is further pressurizing workforce availability, especially in developed economies, and is driving both automation as well as radical talent plan revisions. Paradoxically, people will need to adapt to longer working lives, and near continuous retraining, as the presence of interlinked machines, robots, and artificial intelligence (AI) extrapolates in the workplace.

These ambiguities in demographic composition have seeded a changing psychology within the modern workplace, an evolution in parallel to the Industry 4.0 revolution.

Towards a solution: strategies to adopt

Leaders should understand the dynamic between technology and talent to shape strategies, synergized for both, to progress the organization’s goals.

There are three strategy pillars to integrate manufacturing workers into the Industry 4.0 transformation, to unlock further human potential, and to leverage their combined competitive advantage

1. Lead an automation strategy across the entire organization. The changing talent paradigm is too important to be delegated to Human Resources. Technology’s disruption – and its potential – is too fundamental to be isolated within IT. Only an integrated approach, spanning the organization’s vision through to its operations and all aspects of the next-generation value network, can succeed.

The human-machine interface should synch with the organization’s business model. In turn, this will clarify priority skill sets. A manufacturer accentuating agility and innovation may calibrate its talent strategy towards STEM-qualified recruitment, specialized digital design skills, and risk-tolerant, entrepreneurial managers.

In contrast, a company emphasizing sustainability and green and progressive values should manufacture in lean methods which tightly control resources, with a sharpened ambition toward nurturing its employees. Technology should be infused differently, its talent strategy balanced to skills development, retention programs, and hiring for soft skills.

Largely, this is an issue of culture. Often, culture is a barrier to change, so a transformative commitment requires a leader to drive digitization and foster talent adjustment.

2. Blueprint an Industry 4.0 talent ecosystem. The crux is to think ‘boundaryless’. Digitization removes, or completely alters, traditional concepts of hierarchical, geographical and functional structures, and how information is shared. Simultaneously, evolving attitudes among today’s workforce prioritize autonomy, flexibility, and empowerment. Onboarding these changes in a new talent structure – one which synchronizes with new and emerging technology frontiers – can leverage the potential of employees.

Talent sourcing is increasingly global. Urbanization is gathering pace. By 2030, 4.9 billion people, 58% of the global population, will live in cities. Some megacities, already, have GDPs matching or exceeding medium-sized nations. Not only are cities the locus of economic expansion, they are also the locales for talent pools, and forces of globalization and the Internet of Things (IoT) mean that manufacturing centers can be based in a diverse geographical spread.

There are also implications for team architecture. Next-level value networks imply revisiting the structure of any and all collaborative entities. Teams can be designed to mix full-time and part-time, remote and onsite, contract and temporary workers. And the standard, functional production unit within most manufacturing processes should be reassessed for its fluidity, breaking with flat hierarchies if improvement gains are feasible. Consider cross-functional networked teams to pool differentiated expertise and push continuous learning, or parallel teams to broaden perspectives to solve a specific problem, or zero infrastructure-cost virtual teams to drive new product development (NPD) projects. Flexible team designs may facilitate greater agility or problem-solving capability, in tune with Industry 4.0 – even in traditional manufacturing workplaces.

3. Invest, monitor, reiterate. Then reinvest. Manufacturers need to invest, now, for the decade ahead. The appropriate channels and mix will vary within industry and by company, but should include inhouse upskilling programs, partnering with academic institutions and industry bodies, apprenticeship initiatives, and recruitment and retention programs.

Automation will also contribute to the equalization of operating costs between mature and developing manufacturing nations, as will labor wage increases in emerging markets. This has longer-term implications for the location of manufacturing plants: talent or workforce metrics, based on cost alone, will be a lesser differential.

Crucially, objectives must be set for the talent transformation. Remember, it’s not only about the factory floor. Leaders should address the question of augmenting or replacing peoples’ roles towards enhanced value-generation throughout Industry 4.0 supply networks. Indeed, one of the most widely anticipated benefits of AI advances is that these will free workers for more creative tasks.4 Economic historian, Deirdre McCloskey, summarizes the future of work like this: “The work we do will be more and more about decisions and persuading others to agree, changing minds, and less and less about implementation by hand.”

Conclusion

Manufacturers are in the midst of the collision of pervasive connectivity, the explosion of data, the march towards cognitive automation and self-learning systems, and operational and process management refinements gearing ever-constant performance mandates and improvement. It is the people in these environments who experience the impacts of these momentous changes in their daily lives, including at work

Smart manufacturing will always have a role for smart people. Organizations will be poised to achieve competitive advantage if they strategize a holistic path for talent transformation to the Industry 4.0 workplace.