Inside the Current State of Manufacturing Competitiveness in The United States

By: John Birch, CEO of The Birch Group

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During the past 20 years, manufacturers have been a sizeable portion of The Birch Group’s core business. It has truly been a pleasure to work with companies that produce a broad spectrum of products. I have come to respect and admire how they manage the significant changes that have occurred in the industry in regards to infrastructure, creativity, operations and leadership. The constant change and demands from their clients and competitors is exhausting to watch. However, the organizations that we work with seem to be able to “Get It Done” doing more with less as the marketplace demands. To become more knowledgeable about expected changes in the technology economics, productivity and other challenge facing our clients, The Birch Group participates in various trade organizations, most recently with the U.S Council on Competitiveness, which was formed in 1986. The following is a synopsis of manufacturing related information that I have gleaned from their symposiums and other sources:

The good news is the United States continues to be the most productive large economy in the world, where GDP per work hour rose almost 60%. GDP per work hour rose from $40.30 to $62.90 between 1986 and 2015 (1). However GDP growth has somewhat stagnated behind historical norms. During the 1990s the rate averaged 2.0% and in the 2000s the rate averaged 2.5%. In 2011 the rate decreased to an average of 0.6%, continuing to decrease to a point where the productivity growth was negative (2). 

However, things are improving in the manufacturing sector. Employment in the U.S. Manufacturing sector peaked in 1978. By 1986 it had fallen by 9.6%. There are several factors for the decrease. Significant improvements to automation, outsourcing of products and components, and a lack of competitiveness in some sectors as well as taxes, regulations, fluctuation in currency values drove U.S. Manufacturing employment to its lowest point during the Great Recession of 2009.  Since the recovery, manufacturing employment rose 7.4% by the end of 2015, employing a total of 12.3 million people. Manufacturing is here to stay (3).

On a positive note, U.S. Manufacturing production has risen steadily over the past 30 years, with dips during the 2001 and 2009 recessions. Manufacturing Gross Output has risen 169% since 1986, from $2.21 trillion to $5.9 trillion in 2015. Also impressive is that Value Added grew by 160% over the same period, peaking at $2.11 trillion in 2015 (4).

However, as a share of GDP, manufacturing has declined over the past 30 years, reflecting the change to the economic landscape as the growth of the service and digital industries continue to grow. It should be mentioned that this phenomenon is true in all major manufacturing nations including China, Germany, France, The United Kingdom, and Japan (5).

Although manufacturing relative to total GDP is decreasing, it will not become less important to the U.S. economy. Manufacturing has the highest multiplier effect of any sector in the economy. For every dollar of U.S. Manufacturing value-added, another $3.60 of value-added is created elsewhere in the economy. Therefore, for every manufacturing job created, 3.4 full time jobs are created in non-manufacturing industries (6). Another factor important to the U.S. economy is that manufacturing firms fund a disproportionate share of business research and development, critical for U.S. companies to remain competitive in innovation and new product development (7).

Today, the U.S. culture and economy is undergoing a major transition. Significant revolution and innovations in science and technology are ushering in a new area of unprecedented knowledge. Never imagined technological power and innovations, previously inconceivable, are and will continue to have unparalleled implications for the U.S. economy and its competitiveness in the world market. The new digital revolution will allow manufacturers to drive optimization and efficiency, thus profits. Firms will gain insight into the operation of energy machine, the movement of supplies, the overall performance of products and the consumption of energy. Big data will transform the way manufacturers approach markets, manage their organization, design products, deploy people and other resources, conduct R&D, and more. With this revolution, many manufacturers are already making investments towards leveraging advances in robotics and artificial intelligence. These smart manufacturing investments will equate to generating cost savings and productivity gains potentially adding $10-$15 trillion to global GDP over the next 15 years, almost the size of the current U.S. economy (8). Other factors in driving the new smart manufacturing landscape are Nanotechnology which has already reached a $1 trillion market. It will continue to grow with a huge impact in shaping major industrial sectors, in not only the United States, but in the other industrial and emerging nations as well.  

These changes and advancements will also significantly change the U.S. workforce. Manufacturers will need to continuously make finding, retaining, and developing employees’ skills their highest priority. Unfortunately today, hundreds of thousands of jobs in the U.S remains open due to the lack of skilled applicants. This skill gap is projected to leave up to 2 million jobs unfulfilled over the next decade. Employees skilled in the new technologies will be in heavy demand.

As the new manufacturing technologies will require higher skills and education, new approaches to leadership and organizational culture will be a critical factor in attracting developing and retaining employees. The management style of “Command and Control” is no longer acceptable in today’s workforce. The Generation Xers and Millennials will no longer tolerate old management styles. Also, the ability for employees to function in highly effective teams will be critical to the company’s bottom line profitability. Therefore, those skills that were once considered “soft skills” are now as important as technical skills as they play a significant role in both the culture and the organizations reputation.

The Birch Group is excited about the emerging innovations and new opportunities and promise for Connecticut Manufacturers to grow and profit. The Birch Group is here to help.

Notes:

1.     Organization for Economic Development and Cooperation, GDP per hour worked in constant 2010 U.S. dollars. Data extracted 2016.

2.     Bureau of Labor Statistics, Non-Farm Labor Productivity Growth, United States Department of Labor.

3.     National Employment Statistics Survey, Bureau of Labor Statistics, United States Department of Labor.

4.     Gross National Product by Industry Data, Bureau of Economic Analysis, United States Department of Commerce.

5.     Manufacturing Value Added as a Percentage of GDP, National Accounts Data, The World Bank.

6.     Meckstroth, Dan. A New Model for Manufacturing’s Multiplier Effect, Manufacturers Alliance for Productivity and Innovation, April 27, 2016.

7.     Advanced Technologies Initiative, Manufacturing and Innovation, Deloitte and U.S. Council on Competitiveness, 2015.

8.     Wince-Smith, Deborah. Testimony before the Senate Committee on Energy and Natural Resources Hearing on Innovation Technologies on Advanced Manufacturing, April 16, 2016. 

Leadership Missteps

By: John Birch, CEO

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Even with the best intentions, leaders that lack credibility and integrity can wreak havoc on their organizations, creating issues that will ultimately lead to the firm going bankrupt or them having to find new positions elsewhere. In working with high school and college students, we stress which factors are most important for leaders to possess. We see leaders in both politics and business lie and deflect blame in order to escape personal accountability for their actions. Although this may work at first, the long term consequences certainly outweigh any short term gains. What many leaders fail to realize is that lapses in integrity can permanently destroy their credibility, harming themselves, their employees and the organization. In his book “Return of Character”, Dr. Fred Kiel completed a study of 84 CEOs and compared employee ratings of their behavior to their organizations performance. He found that CEOs rated highly on integrity had multi-year return of 9.4% while low-integrity CEOs had a yield of only 1.9%. Also important is that organizations led by high-integrity CEOs had employee engagement 26% higher than low rated CEOs. In Emotional Intelligence (EQ) we say that people believe what they see, not necessarily what they learn as actions speak louder than words.

According to Dr. Travis Bradberry, an award winning co-author of the best-selling book “Emotional Intelligence 2.0”, the following traps are sure ways of how a leader can lose their credibility.

1. Fostering a cult of personality. It’s easy for leaders to get caught up in their own worlds as there are many systems in place that make it all about them. These leaders identify so strongly with their leadership roles that instead of remembering that the only reason they’re there is to serve others, they start thinking, ‘It’s my world, and we’ll do things my way.’ Being a good leader requires remembering that you’re there for a reason, and the reason certainly isn’t to have your way. High-integrity leaders not only welcome questioning and criticism, they insist on it.

2. Dodging accountability. Politicians are notorious for refusing to be accountable for their mistakes, and business leaders do it too. Even if only a few people see a leader’s misstep (instead of millions), dodging accountability can be incredibly damaging. A person who refuses to say “the buck stops here” really isn’t a leader at all. Being a leader requires being confident enough in your own decisions and those of your team to own them when they fail. The very best leaders take the blame but share the credit.

3. Lacking self-awareness. Many leaders think they have enough Emotional Intelligence. Many times, they are proficient in some EQ skills, but when it comes to understanding themselves, they are woefully blind. It’s not that they’re hypocrites; they just don’t see what everyone else sees. They might play favorites, be tough to work with, or receive criticism badly. And they aren’t alone, as a TalentSmart research involving more than a million people shows that just 36% of us are accurate in our self-assessments.

4. Forgetting that communication is a two-way street. Many leaders also think that they’re great communicators, not realizing that they’re only communicating in one direction. Some pride themselves on being approachable and easily accessible, yet they don’t really hear the ideas that people share with them. Some leaders don’t set goals or provide context for the things they ask people to do, and others never offer feedback, leaving people wondering if they’re more likely to get promoted or fired.

5. Not firing poor performers. Sometimes, whether it’s because they feel sorry for an employee or simply because they want to avoid conflict, leaders dodge making the really tough decisions. While there’s certainly nothing wrong with being compassionate, real leaders know when it’s just not appropriate, and they understand that they owe it to the company and to the rest of the team to let someone go.

6. Succumbing to the tyranny of the urgent. The tyranny of the urgent is what happens when leaders spend their days putting out small fires. They take care of what’s dancing around in front of their faces and lose focus of what’s truly important—their people. Your integrity as a leader hinges upon your ability to avoid distractions that prevent you from putting your people first.

7. Micromanaging. You see this mistake most often with people who have recently worked their way up through the ranks. They still haven’t made the mental shift from doer to leader. Without something tangible to point to at the end of the day, they feel unproductive, not realizing that productivity means something different for a leader. As a result, they micromanage to the point of madness and fall off schedule. An important part of a leader’s integrity rests in giving people the freedom to do their jobs.

Bringing It All Together

The bad news is that these mistakes are as common as they are damaging. The good news is that they’re really easy to fix, once you’re aware of them.

Positive Impact Life for Coaches & Mentors

By: John Birch, CEO

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As business or personal coaches, our primary responsibility is to help our clients grow personally and professionally. Through understanding our clients and their needs, we as coaches facilitate changes away from self-defeating behaviors that block our clients from achieving their full potential. In order to help our clients succeed, we need to also help teach them how to properly plan and monitor growth while providing the necessary feedback. The result being they become more personably accountable for their own actions and progress. In short, as coaches, our ultimate goal is to get them to the point where they no longer need us to be successful.

Have you ever wondered what could help you facilitate your clients’ progress on a regular basis even if you don’t meet with them regularly? We are pleased to introduce you to Positive Impact Life (PIL), our new system developed specifically for coaches and mentors. PIL is a revolutionary new cloud based change management system.  PIL helps coaches and mentors increase their effectiveness by providing a tool that allows you to teach your clients the process of how to develop clear and concise action plans, prioritize their goals and objectives, while being able to monitor their weekly, monthly, and yearly results.

What separates PIL from other assessments is the ability to let you work with your client on identifying and changing those self-defeating behaviors, developing a personal action plan and monitoring their progress in ten minutes or less each week. PIL has already been used and tested by coaches, most who don’t necessarily meet with their clients on a regular basis. The results have been overwhelmingly favorable. As you and your clients work together, the ability to identify need for improvement, self-evaluation skills, as well as personal accountability and commitment to their goals are greatly enhanced.

PIL is perfect for:

·      Professional Coaching

·      Weight Loss

·      Pain Management

·      Sales Team Training and Development

·      Sports Teams

·      Cultural and Change Management

Please feel free to contact us if you are serious about creating cultural change, enhancing sales, training or improving your effectiveness as a coach or mentor. We would be pleased to give you an on-line demonstration to show you how Positive Impact Life can help your clients to reach their goals. We look forward to hearing from you.

How to Destroy Morale and Engagement

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By: John Birch, CEO

Recently, we worked with a medium sized manufacturing organization where the founder created a mission statement for his company that included an ending phrase of, “…and we will have fun.” In fact, this statement insisted on managing his organization under the outdated “Command and Control” management style. Morning, afternoon and lunch breaks were highly discouraged, people would be scolded in public, personal initiative was never rewarded, time off for family issues were not allowed, and employee training and development was non-existent. Morale and engagement was pathetically low, even among his children and other family members who would eventually take over the company. Scrap turnaround and surplus compensation claims were exorbitantly high, productivity continued to decrease. When he asked us what was going on, he was told, “simply you are the only one in this company that is having fun.”

This gentleman began to defend himself and blame the organization’s issues on a long list of excuses and refused to take any ownership for his predicament. In short, he neglected to realize that people aren’t usually disengaged in their jobs but instead are disengaged by their managers. We have found that the engagement level of 90% of the American worker is a direct reflection of their relationship with their boss.

Bad management affects all levels of the organization, even the senior levels. Poor management can also manifest itself in exhaustion, poor sleep, anxiety, divorce, depression and a multitude of health issues. In today’s rapid paced and global economy, American firms are in a position where they must “get extraordinary results from ordinary people”.

If you properly maintain your equipment, you must also properly maintain your most valuable asset, your people.

If you want to engage and retain your best employees, the following practices must be abolished in your organization:

Overworking People

Overworking people is never a good idea as it can lead to “burnout”. When people become burnt out, they begin to make mistakes, serious mistakes, not only technical mistakes, but also mistakes in dealing with others. Recent research from Stanford University showed that per hour productivity significantly decreases when the workweek is over 50 hours. When the workweek exceeds 55 hours, productivity decreases and scrap increases so much that you are actually in a losing situation.

Holding People Back

Some leaders feel that their top employees do their job so well that they cannot be replaced, so those top employees don’t advance. In this instance you are damaging your employees’ best interests to satisfy your best interests. This selfish practice is a surefire way to destroy an individual’s morale and to lose your key employees to competitors.

The Blame Game

Instead of placing blame, strong leaders don’t point fingers; they work collaboratively with their team members on solutions. Discussing problems with an individual employee must take place in private, not in front of others, as it is extremely humiliating.

Frequent Threats of Firing

This practice is a lazy and shortsighted method to try to control people and typically disengages the entire organization. People who feel disposable will eventually leave the firm for one where they feel appreciated.

Discouraging Passion

Your most talented people are typically those that are most passionate about their jobs. Providing opportunities for them to pursue their passions in the workplace will ensure that they maintain or improve their production. Studies show that employees that are able to pursue their passions experience “flow, a euphoric state of mind that is five times more productive than the norm”.

Withholding Praise

All employees want to feel valued and appreciated, particularly those that are intrinsically motivated. Praise should always be earned and when communicated, it must be genuine and sincere. A leader who neglects to praise their employees will find a disengaged and non-committed team.

Leaders must always keep in mind the four basic keys to effective leadership:

1 – Always maintain or increase your team members’ self-esteem

2 – Focus on someone’s actual behavior and not your perception of their attitude

3 – Consistently encourage team member participation

4 – Actively listen to what team members are saying

Leadership can be a very rewarding experience while managing people can be drudgery, leading to a heightened level of frustration and stress for everyone involved. Your teams engagement and job satisfaction is a direct result on how you lead or not lead.

The Bad Apple in Your Workplace

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By: John Birch, CEO

Congratulations, you have just hired a new employee.  You feel great.  They have what you deem the appropriate grooming, potential talent, eager, industrious and pleasant to work with.  They seem to be assimilating rapidly in your organizational culture and are totally immersed in their job.  They seem to be the employee of your dreams.

Less than a year has gone by.  What was once a highly efficient team starts slowly to unravel as productivity decreases, subtly at first.  Your team is becoming less participative during team meetings and those you have been leading successfully now have trouble looking at you in the eye.  It seems like your team is becoming more disengaged each day.  You do what any good leader would do and soul search to see if you have been using the appropriate leadership techniques, and you are.  You begin having in-depth conversations with your team and others that interact with them daily.  The results of your search….you have hired a bad apple.

That new employee that you had such great hopes for has been lying, stealing, talking negatively about other teammates, spends more time trying to get out of work rather than working, takes credit for the work of others, and the list goes on and on.  Your team is now disengaged and dysfunctional.  Your spirit is crushed, you now feel somewhat incompetent for bringing that employee into your team, and you feel deceived. 

Recent research by Professor Gretchen Spreitzer from the University of Michigan clearly proves that one bad apple in your organization will taint the performance of your team and everyone else that that individual regularly comes in contact with.  These results are fully examined in a soon to be released paper “Destructive De-energizing Relationships: How Thriving Buffers Their Performance.”  The results show that the more a person had to interact with de-energizers, the lower that person’s job performance became.  Another study showed that one toxic employee wipes out the gains for two or more super stars.  In fact, a super star defined as the top 1% of workers in terms of productivity, adds approximately $5,000 to the company’s profit, while a toxic worker costs about $12,000 per year.

To ensure that the right person is hired for the right job and the right organization, many companies are using pre-employment assessments that accurately measure a candidate’s skill sets, interests, behaviors and acumens to ensure a proper fit.  Target Training International (TTI)’s TriMetrix System has had a proven track record in quantifying a proper fit for the position.

Here are some steps that both employers and employees can do:

Employees:

·      Limit interactions with the de-energizers to only when necessary

·      Increase the time spent with people who are positive and make you feel good.  If you must meet with a de-energizer, try to meet with other positive people later in the day.

Leaders:

·      Always set standards of acceptable behaviors and enforce them.  Leaders need to enforce the work culture and norms.  Typically, your de-energizers are technically very good at what they do, so often times, leaders indulge them in their inappropriate behavior. People need to know that there are consequences to the prima-donna syndrome.

·      Consider behavior when promoting people.  Historically, people have been promoted for their technical skills regardless of their effect on other people.  Being good technically does not equate to having good leadership skills, in fact, the skill sets are very different.

·      Provide your employees with regular feedback and put a priority on training that relates to work culture and professional behavior.

·      Interview for civility, asking a candidate, “How they managed a particular situation” provides more insight than asking them, “What would they do.” Ask for 2 or 3 examples.

·      Ensure that you ask each candidate the same questions in the same specific order.

·      Carefully observe these behaviors:

o   Did the candidate arrive promptly for the interview?

o   Does the candidate speak poorly about former employers or co-workers?

o   Does the candidate take responsibility for inappropriate behaviors, results and outcomes or do they point fingers at others?

·      Have others on your team interview the candidate.

·      Ask their references about their level of civility towards others, how other subordinates liked working with the candidate, how emotionally intelligent did they seem, do they work well with different types of people, Are they a team player, do they react well to authority, and most important, would you rehire that person?

In any case, do not let a toxic employee wreak havoc on you, your team or organizational culture.  Address poor behaviors expeditiously as soon as you begin to see them emerge.  Procrastination will not make the situation go away, it will only compound it, making the lives of you, your employees and your family extremely stressful.