Labor Costs Expected to Increase, So Will Challenges 
to Developing Workers
by Dean Prigelmeier, President of Proactive Technologies, Inc.
In an article by David McCann of CFO.comentitled, “Labor Costs Will Skyrocket Over the Next Decade”, the author cited new research from consulting firm Korn Ferry projecting new challenges for employers in the coming years. “Organizations around the world could add more than $2.5 trillion to their annual labor costs within 12 years as a result of the global shortage of highly skilled workers. The report follows up on the recruiting and workforce management firm’s forecast in May that the talent shortage could cost companies $8.5 trillion in unrealized annual revenue by 2030.
This is a rolling crisis that started several decades ago – the repercussions are just now being articulated in terms employers can relate. Employer’s awareness of the approaching crisis appeared for retiring baby-boomers and the anticipated loss of expertise and critically unique task-based skills mastered over decades of performance. Add to that the rise of millenials, the continual introduction and evolution of technology and the disruptive effects of the Crash of 2008. Now employers are finding themselves rebuilding their workforce, in many cases with tools and techniques that haven’t evolved all that much and still without really understanding the seriousness of the challenge, let alone the labor and opportunity costs to their operation.
click here to expandThe report continues, “The crisis is not something that’s far off in the future. Even in 2020, the U.S. wage premium is expected to reach $296 billion. By 2025, the gap will total $400 billion, according to the report.” What can companies do to mitigate the trend and minimize the effect? “Employers will need to concentrate on reskilling lower-level workers,” Thompson (author of the report) notes. “That involves identifying those who are adaptable and flexible enough to be successful in the new world of work and putting in place robust training and workforce plans.”
Since 1986, Proactive Technologies, Inc. has repeatedly sounded the alarm in presentations, conferences and employer visits. For some, the urgency and magnitude of the challenge seemed not to register even though they were confronted by symptoms daily. Worker development is not everyone’s forte, and many had several “other fish to fry.” Developing workers and maintaining high performance slipped to the back burner. Numerous pieces appeared in this newsletter, attempting to draw attention to the challenge and things that needed to be done, and could be (should be) done, such as: Read More
More Employers Finding Ways To Strategically Ensure Fair Pay
by Stacey Lett, Director of Operations – Eastern U.S. – Proactive Technologies, Inc.
In an article appearing in IndustryWeek entitled “Trying to Ensure Fair Pay, Employers Are Changing Policies,” it noted that according to a recent employer survey “2018 Getting Compensation Right,” “60% of U.S. employers are planning to take some action this year to prevent bias in hiring and pay decisions.” Further, 53% “are planning on or considering adding a recognition program.”
The report went on, “37% percent are planning on or considering changing criteria for salary increases. Among employers not redesigning their programs, most are making changes to the importance of factors used to set base pay increases.”
click here to expandIn short, the report led one to believe that employers overall wanted to make pay fairer, but one got the impression that there was no clear path. It is difficult in this environment to talk about raising workers wages without shareholders mounting a revolt. But with the reported shorted of skilled labor, the difficulty in training workers with a lean staff and no structure, strategy or record keeping, etc. an area of compromise has to be reached. If not, skilled workers will not apply, or stay, and the shareholder profits will definitely be affected. It is the “bullet that needs to be bit” to get the economy working like it did so well post World War II when everyone felt they had a chance at doing well for themselves and their family.
One easy-to-set-up, easy-to-implement, low investment/high return strategy for paying workers for the documented value the employee has accumulated has been discussed in previous Proactive Technologies Report articles, most recently “A Pay-for-Value Worker Development Program – Fair to Management and Workers, and Effective Too!” and previously in “Pay-For-Value Employee Programs” Read More
Pre-Employment Physical Ability Tests Can be a Legal Liability
If Not Done Right
by Jim Poole, President of Lifetime Learning, LLC
David Sparkman of EHS Today wrote in a July 20, 2018 article entitled “EEOC Cracks Down on Pre-Employment Physical Testing” that “If your company uses pre-employment physical stress tests for job applicants that result in the rejection of female applicants, you could be in a world of hurt if the Equal Employment Opportunity Commission (EEOC) finds out.” He described the story of Hirschbach Motor Lines, “which used a pre-employment back assessment to screen and reject applicants it believed would be unable to work as truck drivers. Applicants were tested for their ability to balance and stand on one leg, touch their toes while standing on one leg, and to crawl… The company eventually agreed to pay $3.2 million to a class of female applicants after the EEOC filed a lawsuit alleging the strength and fitness tests they took impacted women disparately. Earlier this year another case involving physical ability testing required by a police department resulted in a nearly $2.5 million settlement for female applicants.”
EEOC’s aggressive pursuit of cases demonstrates why it is important that employers understand the legal issues surrounding physical ability tests (PATs). Extreme care should be exercised when selecting and validating such tests. Sparkman quotes experienced lawyers representing clients in these types of cases, “’If a PAT has a disparate impact-for example, if women fail the PAT at a statistically significantly higher rate than men-an employer has the burden of demonstrating that use of the PAT is job-related and consistent with business necessity,’ explain attorneys Mallory Stumpf and Sarah Smith Kuehnel of the Ogletree Deakins law firm.”
click here to expandThe EEOC announced last year in its Strategic Enforcement Plan (SEP) that for the next several years, it will continue to focus on class-based recruitment and hiring practices that discriminate.
PATs can be useful in pre-employment assessments, but employers need to make sure they are constructed and utilized correctly. A credible approach is:
- Have an independent expert perform a thorough job/task analysis – Read More
Keeping Employers Engaged in Regional Workforce Development Projects
by Dean Prigelmeier, President of Proactive Technologies, Inc.
Billions of dollars have been spent on workforce development projects funded by the state and federal governments in the last 20-30 years. However, from the tone of the discussions surrounding workforce development projects and participants today, it seems that the same things that were troubling employers in 1980 are still troubling them today.
Getting an employer to sign up for a grant-funded workforce development project should not be that difficult, if the brands and reputations of the institutions promoting the project are sound, and the project concept appears logical, achievable and will in all likelihood contribute to the employer’s business model. But once the pitch has been made to the employers and the bold outcomes projected, keeping the employers engaged for the duration of the project and beyond can be difficult.
click here to expandOne thing that I have found in setting up and maintaining long-term projects is making sure the person, or people, at the initial meeting are the right ones. “Worker development” seems to fall within the domain of the employer’s human resources department. But not all human resources managers are the same. Some are fresh from college and may not yet have experience with concepts such as meaningful on-the-job training, integration of worker training with ISO/TS/AS compliance, etc. Some tend to be generalists and may enthusiastically agree with a project concept but are out-of-sync with their production and quality manager’s view of the world. While you may be able to get the human resources manager on-board, the human resources manager may not reflect the interest or concerns of the more influential production or operations management and staff.
Unfortunately, this may not be discovered until months into a project. If the operation’s management and staff were briefed on the project (sometimes they are not), out of deference to the human resources manager the other key stakeholders may not voice concerns or ask pertinent questions that may influence the nature of the project. This may later start to percolate up and bring the organization’s participation in the project to a halt.
If there is a requirement for employer contributions (in-kind and/or cash) to the project, lack of support from the operational management and staff may allow concerned accountants to cause the organization to withdraw. Read More
Read the full August, 2018 Proactive Technologies Report newsletter, including linked industry articles and online presentation schedules.
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