Manufacturers are missing the "Y-Factor" in how they manage their talent, according to a new analysis from Deloitte's Manufacturing Industry. This "Y-Factor," or Generation Y, is the up-and-coming talent manufacturing companies will base their future success, or failure, upon.

Deloitte defines Generation Y, or "Gen Y" as they are known, as people born between 1982 and 1993 who are entering the workforce for the first time with primary, secondary, college or graduate education. The report estimates that by 2025, 40 to 60 percent of workers across many of the world's most populous nations in both developed and emerging markets will come from Generation Y and younger generations.

As manufacturers relentlessly continue their quest for productivity, growth and increased service orientation, they cannot overlook this new talent pool to fill the demand for higher skills. Deloitte's latest Global Manufacturing Industry report entitled "Managing the Talent Crisis in Global Manufacturing: Strategies to Attract and Engage Generation Y," stresses the need for manufacturers to rethink their talent management model to better attract and engage "Gen Y" in various global markets. This enterprise-wide approach is a business imperative and will benefit all employees by ultimately delivering long-term benefits in enhanced employee engagement and productivity.

Global manufacturers are facing a talent paradox
For many of these younger workers, manufacturing has a negative image. It is no longer seen as a leading source of stable, high-reward career opportunities. What Generation Y doesn’t know is that, contrary to common perception, the job of a modern manufacturing worker requires strong technology, flexibility, multitasking and team problem-solving skills. The environment in most plants is a far cry from the old images of dark, dirty and dangerous.

In addition, there is a growing volume of service-related occupations within manufacturing, including sales, marketing, research and development, customer service, financial and legal services. To succeed in attracting these new workers, the manufacturing industry needs a model of talent management that will address the unique characteristics of Generation Y while speaking to the larger workforce as well. The result is a talent paradox many manufacturers have yet to come up with a legitimate plan to address.

How does the talent paradox affect the globalization efforts of manufacturing firms?
Managing the talent paradox is a global issue for manufacturers. Shifting operations to emerging markets will not resolve the paradox — rather it will make it more complex as manufacturers face similar problems in both mature and emerging markets.

"While this talent gap varies a great deal across manufacturing industries and geographies in terms of magnitude, age and skill type, there are common elements," said Leah Reynolds, national practice leader for generational change and total rewards communication, Deloitte Consulting LLP. "Managing these elements — such as lack of employability, negative image, education, job training and availability of engineering graduates — should be a priority for global manufacturers."

Attracting qualified workers in countries such as China, India, Latin America and Eastern Europe is becoming increasingly more difficult. Although skill requirements vary by location, the skills that were most often cited as insufficient were in the areas of leadership, team work, English language proficiency and managerial capability.

Challenges identified vary by region
The report finds that challenges vary from region to region:

• China — Despite the enormous pool of potential recruits, manufacturers in China face a shortage of talent based on rapid economic transformation, demographic shifts, skill levels, inadequate quality of parts of the workforce and competition for scarce managerial talent.
• Southeast Asia — Growing skill requirements in Southeast Asia indicate that in the long run firms that fail to connect to the younger generation will not be able to take complete advantage of migrating to high-value-adding industries.
• India — Manufacturing faces stiff competition from services and IT industries in attracting and retaining the white-collar workforce. Cost pressures are growing and many skilled technicians also migrate to the Middle East for better pay.
• Latin America — In Brazil, there is a severe talent shortage at the middle management level. As mid-level managers move into leadership positions, there will be an even larger void in mid-level talent pools. Mexico however, is suffering a shortage of technicians (working in production, operations, engineering and maintenance), assembly line operators, engineers, customer sales/service representatives and maintenance managers.
• Eastern Europe — As skill shortages become more apparent in the region, manufacturers feel increasing pressure to pay higher wages. For example, in the Czech Republic, wages were 10 percent higher in the second quarter of 2006 than they were the previous year — one of the highest rates of increase in the European Union.

As manufacturing companies establish operations in these emerging markets there are a few things to consider:

• Take a long-term approach to cost and benefits
• Understand the available skill sets and the changing demographic profile in these countries and formulate strategies to effectively engage talented people
• Develop a flexible business model that is able to withstand dramatic changes in talent supply

What can be done to remedy these talent issues?
For most manufacturing companies the focus on talent management has centered on its end points, acquisition and retention. By doing so, companies have misdirected their attention from what truly matters to key employees — developing people in ways that foster growth, deploying them into roles that tap their strengths and interests, and connecting them in ways that enhance performance.

Now that Generation Y has stepped into the talent management pool, Deloitte's study indicates that manufacturing firms need to consider how effectively they are providing what their employees value most:

• Long-term career development and multiple experiences within a single organization
• Sense of purpose and meaning in work
• Availability and access to mentors across the company
• Work-life flexibility
• Tech-savvy work environment
• Open social networks that embrace open and honest communication

Although these needs are primarily focused on the aspirations of Generation Y workers, older generations of workers also appreciate them, although they may not always have articulated them, or expected them to be met by their employer. Thus, by learning from Generation Y, a company may be able to rethink how it can develop talent across an entire workforce. This provides a unique opportunity to transform their human resource management function and truly engage employees to build a high performance workforce.

"Companies that can overcome the challenge of managing a diverse workforce through well-crafted human resource strategies will have created a unique competitive advantage for themselves," said Reynolds.

Talent management is an escalating issue on the agendas of senior executives worldwide. The challenge for manufacturers is finding the best and brightest to fill the higher skilled roles, while breaking the traditional perception that manufacturing is a lagging industry. Progressive companies have already begun to engage this Generation Y, rethinking their talent management model to address their specific needs in a way from which the entire organization can benefit. They recognize that these strategies to develop, deploy and connect people will need to be adaptable across different geographies and segments of their business creating the potential to bring about fundamental changes in talent management practices across the enterprise.