A good client of mine is trying to buy a company to get the employees. The firm is not making money, but he is so desperate to hire workers near his main operation in Ohio that he is willing to overlook the financials because he believes acquiring the firm will enable him to bring in his own lucrative work to make the transaction pay.
How did the machining world get into this pickle? It is not new, but rarely has it been this acute.
I have studied it as a participant in the industry with skilled and semi-skilled employees, and as an observer. I am curious if you agree with my opinion and observations.
The industry has grown up over the last 100 plus years in America, first under the leadership of people with Western European ancestry. Then it evolved over time to include a lot of Eastern European ethnicities. These owners and managers have tended to attract employees with similar backgrounds. Some companies became almost like small tribes and families through the years, reflecting their ownership. They often were passed down from generation to generation, and fathers, sons, and cousins often took on similar jobs over decades.
Unique skills developed. The best companies tended to prosper and go on for generations. It was an effective system as long as enough workers, primarily male, landed in the industry.
The financial system, often local banks, provided capital for growth. American businesses liked doing business with folks who looked like their managers, and it became increasingly useful to work with the small and medium-sized businesses, which provided very palpable skills and economically convenient pricing. Then one day, Big Business decided price was everything and started to send work out of America, primarily to Asia.
Everything started to get more complicated for American machining firms. Immigration of Europeans to the US slowed dramatically. College education became more available with loan programs. It also became more desirable with great numbers of white collar jobs available and diminishing opportunities in machining as Big Business increasingly looked to China for cheaper pricing. The US government encouraged offshoring during the Nixon-Kissinger days to develop a counterforce to a bellicose Russia.
China became a highly valued trading partner for the United States. Machining businesses continued to bump along, protected by defense and aerospace spending and the ingenuity of generational firms, which still had funding from domestic lenders.
Eventually recessions, merging companies, and lack of capital devoted to training and recruiting sapped the traditional family businesses. Wages were not raised enough to bring in the numbers of young people needed to keep businesses healthy long-term. Hispanic males gradually replaced the European tribes to some degree in larger cities.
One thing that stands out is the small number of women attracted to work on the factory floor. Machining does not appear to excite women as a career, though there is no premium on physical strength in today’s machining environment.
The field also seems to have little appeal in the African American community, male or female. The machining industry and the tribes within it are not reaching out to them, and when they have in the past the reception has been tepid.
Another major factor is the rise of Amazon, Costco, and other major firms, which have raised their wage structure and provide health insurance benefits. They have effectively changed the traditional minimum wage and made it obsolete. They have also eliminated the rationale for Unions, which we saw in the recent Birmingham election. Only in government situations, where the opponent has little incentive to fight them, have Unions managed to thrive.
Graff Pinkert customers who can’t hire, moan that clients like Caterpillar allow them no pricing power, yet they buy CNC machines and robots, so they clearly have both capital and pricing power.
If there were no options to hire, we would have no customers, yet we are very busy at Graff Pinkert right now. Machining companies are managing to deal with the people problem.
How are you approaching it today?
Question: How do you usually find new employees?