Why U.S. companies pay headhunters $15,000 to…

Why U.S. companies pay headhunters $15,000 to…

Sep 22, 2016

“Why U.S. companies pay headhunters $15,000 to fill manufacturing jobs”

By Silvia Ascarelli, MarketWatch

LAFAYETTE, Ind. (MarketWatch) — When Kevin Nading needed to hire nine skilled craftsmen with at least five years of experience for Caterpillar Inc.’s factory here in the Midwest, it took him six months to find them. He has paid recruiters finder’s fees of as much as $15,000 for experienced workers with the right mix of skills. He’s even had to pay relocation costs.

Using a headhunter to find blue-collar workers may seem unusual, particularly as politicians, including presidential candidates Hillary Clinton and Donald Trump, bemoan the loss of American manufacturing jobs. But in places like Lafayette, companies are discovering they can’t rely on posting job openings on employment websites like Monster Worldwide MWW, +0.56% Those who do the hiring in this area an hour northwest of Indianapolis complain about how difficult it is to find workers. That’s true for entry-level workers but even more so for senior electricians, mechanics and other higher-skilled employees who keep factories humming.

Companies say they are being hit by the looming retirement of longtime employees with specialized skills, a tight labor market and a poor image of manufacturing jobs that has resulted in parents and high school guidance counselors steering teens toward four-year colleges. And when they do hire younger, unskilled employees, they find many fall short on so-called soft skills, such as communicating effectively and working in teams. Too many miss days of work and appear unmotivated.

The squeeze is painful for Indiana, where almost 30% of the economy is tied to manufacturing, more than any other state and more than double the national average. More than 520,000 people work in factories scattered across the state, including 17,000 in Tippecanoe County, where Lafayette is located. The jobs pay well: an average of $72,000 last year, including overtime, according to the Indiana Manufacturers Association, compared with $48,000 across all other sectors.

To be sure, Indiana hasn’t won back all the manufacturing jobs lost during the Great Recession. And even now, some companies are laying off workers.

Statewide, unemployment was only 4.5% in August, below the national average of 4.9% and less than half the 10.9% peak hit during the Great Recession, in early 2010. In Tippecanoe County, unemployment during the first six months of this year averaged 4.4%.

“In Indiana, we’ve seen nothing but growth” in manufacturing jobs in recent years, says Brad Rhorer, a senior executive in human resources at Subaru of Indiana Automotive’s factory, located a few miles from Caterpillar in Lafayette. He, too, has had to use recruiters in some cases.

The company, owned by Fuji Heavy Industries Ltd. 7270, +3.70%  in Japan, is in the midst of another expansion that will bring employment to more than 5,000 people. The challenge to find assembly-line workers is noticeable, despite being one of the top-paying manufacturers in Lafayette. In 2006, when the company added 1,000 jobs, it received 23,000 applications. This year, as it has added 1,200 jobs, a little over 4,000 people applied. But many quickly fall out of contention as the company reviews their work skills and those soft skills. It recently tried recruiting those discharged from the military at Fort Campbell, Ky., more than 300 miles away, figuring veterans have a strong work ethic.

At Caterpillar CAT, +0.48% 395 applications yielded only two hirings as skilled electricians.

“Teamwork is our biggest hurdle,” Rhorer says.

In southern Indiana, recruiter Joshewa Meurer says his most difficult searches can involve jobs for skilled maintenance technicians, machinists and machine-tool operators. But even filling some production and warehouse jobs can be challenging. Sometimes employers aren’t willing to budge on pay; other times, a rival is offering a better shift of better working conditions, such as indoors or climate-controlled, he says.

“I wouldn’t say there’s a lack of positions as a lack of people to do the jobs,” Meurer says.

He estimates he talks to 20 people that lead to five interviews and eventually one job for a maintenance technician. He talks to about seven people to fill a job for a general laborer.

To replenish the pool of workers, Brian Burton, the head of the Indiana Manufacturers Association (IMA), says his industry needs to do a better job reaching out to school administrators and teachers, even in junior high, and telling them about opportunities in manufacturing.

The IMA says the shortage of skilled production workers will only get worse in the coming years and is holding back companies from expanding. In 2015, 36% of about 275 companies surveyed described a “moderate shortage” of such workers, while 34% described a “serious shortage.” Asked about the coming three to five years, 44% predicted a “serious shortage” of such workers and 25% foresaw a “moderate” shortage.

“Before, we would recruit only as needed,” said Chad Gibson, operations manager at voestalpine Rotec, which makes seat belts not far from the Subaru factory in Lafayette. “Now we try to recruit ahead of time.”

 

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