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September 20, 1998

4 Min Read
How to avoid a labor shortage

It seems that no matter where in the United States you have a molding plant, you're confronted by those two words that strike fear in the hearts of manufacturers: labor shortage. Obtaining--then retaining--employees in a strong economy with unemployment rates running, in many areas, well below the full employment level of 5 percent is a challenge. For many molders, the answer is paying higher wages. However, increasing the labor burden merely erodes profit margins. So what's a molder to do?

Dave Southworth, president of and a management consultant with Michigan Consulting in Royal Oak, MI believes that any company can overcome the labor shortage issues if owners and senior management become willing to build a different culture. "Culture change does not grow out of overnight reorganizations or policy and management style changes," says Southworth. "It does come out of a commitment to a common purpose."

A company's culture, management style, practices, and policies directly impact its ability to attract quality employees, retain current employees, and cultivate employee dedication and a stakeholder mentality, explains Southworth, author of Tomorrow's Organization, to be published this year.

Southworth describes the "stakeholder" mentality as a way of thinking, working, and interacting with customers, suppliers, and all employees. It's an organization where employees are more than just employees, and actually have a stake in the company's success and know what role they play in that success. This happens when employees are given "ownership" of their jobs, allowed to provide input, have control over the process and the output, then receive compensation in a manner that rewards their performance. (See related articles on gainsharing, May 1995 IMM and March 1996 IMM.)

Resistance to sharing a company's success with plant workers is deeply rooted in the traditional management style, one in which workers are managed from the top down, and are told what to do and how to do it. Southworth says that in the new corporate culture, incentive compensation and reward can provide strong desire to work both harder and smarter, thereby cultivating a stakeholder mentality. "Productivity, quality, and profitability need to be the objective--the focus--of all employees in the organization," says Southworth. "Then people want to come to work for you. Everyone wants to be a part of this organization. People want the satisfiers."

He borrows the term "satisfiers" from management guru Frederick Hertzberg. The satisfiers are achievement, recognition, work itself, responsibility, and advancement. One of the biggest mistakes management makes is believing that just paying higher wages will get and retain employees. In short, it's not about the money. Additionally, paying higher and higher wages to attract employees usually results in the revolving-door syndrome that molders detest. After all, someone is always willing to pay more than you do.

According to Southworth, the company that practices and delivers those satisfiers can avoid a labor shortage. Yet, changing the culture of the typical molding plant isn't easy. Southworth says that the long-standing preference in the United States is for an organization constructed by functions and managed from the top down.

Although we've heard much about participative management and employee empowerment, very few companies have implemented anything close to this. One crucial ingredient to this type of cultural change is pay for performance. Southworth says, "We can become the organization we envision by clearly understanding that the relationship between people, performance, and pay is inexorable."

How this is implemented is key to its success. Southworth says that the people who benefit most from pay for performance are those who've participated in the process of establishing the performance level and the reward structure. "Because they participated in its construction, they now own responsibility to make it work," he adds. Southworth admits that pay for performance is often difficult to define. First you have to define performance. In the injection molding industry, that can translate to productivity, with employees receiving stakeholder compensation based on the number of shippable parts.

Pay for performance can be team-based, in which a workcell, shift, or department receives stakeholder compensation for the performance or productivity of the team. The team concept is an excellent way to motivate people toward success. "Peer pressure is the greatest motivator for quality and productivity there is," says Southworth.

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