Putting Talent at the Centre in Manufacturing By World Economic Forum & McKinsey – Key Insights

The report, also a collaboration between the World Economic Forum and McKinsey & Company highlights the importance of placing people at the core of the manufacturing industry. Despite significant technological advancements in intelligent operations, human talent remains indispensable. The research argues that a strategic shift from viewing frontline workers as a cost to seeing them as a vital investment is essential for companies to fight challenges and seize opportunities in the industrial landscape. It also proposes a new playbook for talent strategy taking insights from a pilot program involving 10 companies across 13 global sites, demonstrating how investing in talent innovation can significantly boost business outcomes while strengthening the employee-work relationship.

Key Data Points

1. By 2030, 54% of the workforce in the advanced manufacturing sector will require training to meet evolving skill demands.
2. 40% of frontline workers in manufacturing face financial insecurity, driving high turnover.
3. Companies with effective people strategies are 2.2 times more likely to outperform their peers.
4. Pilot participants in the Frontline Talent of the Future Initiative achieved, on average, a 52% improvement in stability metrics.
5. Productivity growth in advanced economies declined to just 1% from 2016-2022. This is down from 2.2% between 1997 and 2002, a period driven by the “dotcom” era boom.
6. The last 15 years have seen productivity growth decline, largely driven by the global financial crisis and other systemic issues.
7. 71% of US manufacturers struggle with workforce stability.
8. Between 2011 and 2019, the decline in productivity growth was even stronger in manufacturing than in the broader economy, with only 0.7% growth.
9. 41% of respondents to a recent survey of manufacturing employees are planning to leave their jobs in the next 3 to 6 months. Attrition, especially among those in the first 90 days of employment, remains stubbornly high, reaching three digits in many sectors.
10. The US Bureau of Labor Statistics reported 622,000 unfilled manufacturing job openings nationwide.
11. The overall labor force participation rate fell from 67% in the 1990s to below 63% in 2023.
12. 39% of workers’ existing skill sets are predicted to be transformed by 2030.
13. By 2030, skill gaps in the labor market are expected to be the primary barrier to business transformation, cited by 63% of surveyed employers.
14. 37% of manufacturing employees cited not feeling valued by their organizations as one of their top three reasons for quitting.
15. 36% of manufacturing employees cited not feeling valued by their managers as one of their top three reasons for quitting.
16. 36% of manufacturing employees cited not seeing potential for advancement as one of their top three reasons for quitting.
17. Supervisors are able to dedicate less than a third of their time to people leadership and approximately 40% of middle managers report burnout, the highest rate among all job levels.
18. In 2022 and 2023, wage growth peaked at roughly 8% annualized and in 2024, wage growth has remained around 4%.
19. McKinsey analysis from October 2024 indicates that 41% of employees feel their compensation is insufficient.
20. Companies typically spend about three times as much on talent as they do on capital equipment annually.
21. The average EBITDA impact observed from improving productivity and stability was in the range of $17,000-$34,000 per active employee.
22. The investment required to implement talent initiatives typically generates a return of three to five times the initial investment within one to two years.
23. 56% of the innovations viewed in the pilot were developed at the site level.
24. Western Digital (Prachinburi, Thailand) shifted 37% of its workforce to jobs at higher technical levels, yielding 14% improvement in engagement.
25. Schneider Electric’s Chennai site achieved 100% dual coverage for digital competencies.
26. Unilever (Kilbourn, Chicago, USA) implemented transparent and flexible scheduling, leading to a 48% improvement in absenteeism and a 16% increase in OEE.
27. Unilever (Kilbourn, USA) achieved an attrition reduction of 68% by creating development opportunities with a flexible organizational structure.
28. Western Digital (Thailand) used a digital control room, boosting labor productivity by 21% and reducing equipment failure diagnostic times from two hours to 10 seconds with over 90% accuracy.
29. Haier COSMOPlat (China) developed a dynamic line balancing system that improved the overall line balance rate from 65% to 85%.
30. Flex (Austria) increased the participation of women in its apprenticeship program to 25%.

Conclusion

The “Putting Talent at the Centre” report  establishes that the future success of manufacturing depends on a renewed commitment to its people. This make it important to have a fundamental shift in mindset, transitioning from viewing talent solely as a cost to recognizing it as a critical investment. While the Frontline Talent of the Future Initiative’s pilot program has yielded promising initial results, highlighting the positive impact of talent innovations on productivity and stability, the journey is still in its initial stages. There is significant potential to further formalize talent investment processes within organizations and aligning them with the rigorous approaches typically applied to capital expenditures. Companies that prioritize this mindset and proactively invest in attracting, engaging and developing their frontline workforce will be best positioned in the market.

You can read the full report here.