Doing Business in Vietnam vs China

More and more companies are setting up offices and moving production to Vietnam as the cost of doing business in China increases and Vietnams labour costs are as much as 50% lower

The Vietnam government has proved itself very stable and its officials very welcoming and helpful. The government has been creating modern business parks and Hanoi has quickly caught up with Ho Chi Minh (Saigon) as a good place to do business. Hanoi also benefits from its closeness to China and having a port close by at Haiphong

The Vietnamese labour force is young and plentiful but is not so overtime hungry as China as there is less migrant labour. Rather than building a dormitory you will need to create parking spaces for the motorbikes of your labour force!

Vietnam has large and efficient ports in Ho Chi Minh, Da Nang and Hanoi (Haiphong). Rent, rates and utility costs are low.

Vietnam is also less susceptible to the anti dumping duties that have been imposed on China. For the apparel industry China suffers a 12% anti dumping duty that Vietnam does not. Add this to the payroll saving of 50% then you can already see a significant cost advantage. However as in China you need to take account of Social Security costs, which are also lower than China. Social Security costs 45-49% in China, and 21.5% in Vietnam. For 2018 it has been announced that these costs will also apply to Expatriates

Setting up a Representative Office is very similar to China. The RO can be 100% foreign owned and just like China this cannot be involved in commercial activity or manufacturing. The main permitted activities are market research and promotion of the business. You cannot sign contracts or issue invoices

If you want to sell, trade or manufacture you will need to set up a “Wholly Foreign Owned LLC” just like China’s “Wholly Foreign Owned Enterprise”. You only need one shareholder who can be a foreigner, open a local bank account and inject capital proportional to your intended business operations. If it’s a service business it could be as little as US$10,000, but for trading US$100000 or manufacturing US$250,000.

So what are the downsides? Recruiting experienced management. Having a young labour force and only becoming significantly industrialised over the last 10 years Vietnam has a significant shortage of experienced middle and senior management. Most companies have had to import middle management from China, Taiwan, Malaysia, Philippines. Senior management have often been western expatriates


If you need further help or advice please contact:

Interviewing Blindfolded

Enter 2018 with a plethora of legislation which is going to make the task of recruitment a lot more difficult, both for employers and recruiters.

No Compensation questions!

In the USA, legislation banning employers from asking for compensation history is being rolled out to assist women reaching pay parity with men and remove an unconscious bias from employers toward women who refuse to answer the question

Laws against asking about a job candidate’s salary history have already gone into effect in the states of Delaware, Oregon, New York and California as well as in New York City, Pittsburgh and New Orleans and later in 2018 in Massachusetts and Puerto Rico and close to 20 states. In some places, such as Illinois and New Jersey, salary history laws have been vetoed. In others, such as Philadelphia, they have faced legal challenge.

What is certain is that employers and their recruiting partners must revamp what has been a key part of the hiring process and for determining market rate of compensation for a position. Historically, client organizations have expected recruiters to collect information such as base salary, target and actual bonus, as well as equity plans from each candidate early in the recruiting process. For years this information has been regularly collected to determine whether a candidate falls within the target compensation for a position. Not anymore!

With no information from candidates until after an offer has been accepted, recruiters can, in theory, focus solely on finding qualified candidates with the right skills, knowledge and experience, and then base salary on the position. Supporters argue this will eliminate a key factor in the cycle of gender discrimination, low pay and low raises, which compound over women’s careers.

The legislation includes the following:

  • Employers are barred from asking candidates about compensation history in interviews, applications, as well as from their current or former employer. Screening of applicants based on past salary is also prohibited.
  • If an employer inadvertently learns a candidate’s salary history, it may not be used for the basis of an offer.
  • If the law is in effect for states or cities where interviews and conversations take place for both candidate and interviewer, as well as where the position is located, the question of past compensation may not be asked.
  • Candidates may voluntarily disclose their salary history without being prompted by interviewer.
  • Employers may ask a candidate what compensation expectations they have for the position.

After an employment offer has been made and compensation terms have been defined, the law allows for confirmation of past salary. If reported by candidates, sanctions for employers unintentionally or wilfully violating asking job candidates for past compensation, range from fines as high as $250,000, mandated training or possible jail time.

Over in Europe there is “GPDR” – General Data Protection Regulation

From May 2018, the rules and regulations regarding the way in which data is stored, shared and moved will change dramatically, significantly impacting on the working practices of the executive search profession.

The legislation will impact all organisations that are either based in or do business in the EU. It will give individuals greater rights and control over their data by way of consent as well as the power to access, rectify or erase information held and the right to be informed.

Whilst the legal basis for the processing of data has always been present in previous data privacy rules, under the new legislation, the bar has been raised on the requirement for Consent.

This Consent must be freely and clearly given, based on an active opt-in, documented and easily withdrawn. You are required to notify data subjects that they have the right to withdraw their Consent and you cannot demand Consent as a condition of providing a service. The new legislation requires you to record and be able to clearly demonstrate compliance with the principles – for example by documenting the decisions you take about a processing activity.

The changes will have a significant impact on the executive search profession. Any firm that operates in the EU, has clients that operate in the EU, or that processes data on EU citizens are subject to these changes in legislation, regardless of where information is stored, whether it is held in emails, a database or in spreadsheets. The rules will have a similar impact on technology suppliers to the industry, with those who act as a data controller or data processor.

Executive search firms will have to show that their systems and technology are compliant. There are significant financial and reputational implications for failing to comply with the changes. Organizations will be required to notify supervisory authorities and affected individuals of a data breach within 72 hours of discovery. With severe non-compliance penalties of EUR20 million or 4% of worldwide turnover, the GDPR will make organisations more accountable for their approach to data and the changes must be given appropriate consideration.

Whilst the changes do not come into force until May 2018, it is important to invest time to understand and plan for the legalisation to ensure that any required changes can be carefully considered and that the GDPR will cause minimal disruption to your organisation.

Back to the USA – there is “PII” Personally Identifiable information

If you are dealing with the USA, especially California, you need to be fully aware of PII.

Personally Identifiable Information (PII) or Sensitive Personal Information (SPI) as used in information security and privacy laws, is information that can be used on its own or with other information to identify, contact, or locate a single person, or to identify an individual in context. The abbreviation PII is widely accepted in the U.S. context, but the phrase it abbreviates has four common variants based on personal / personally, and identifiable / identifying. Not all are equivalent, and for legal purposes the effective definitions vary depending on the jurisdiction and purposes for which the term is being used.

The following data, often used for the express purpose of distinguishing individual identity, is classified as PII

  • Full name (if not common)
  • Home address
  • Email address (if private from an association/club membership, etc.)
  • National identification number
  • Passport number
  • IP address (when linked, but not PII by itself in US)
  • Vehicle registration plate number
  • Driver’s license number
  • Face, fingerprints, or handwriting
  • Credit card numbers
  • Digital identity
  • Date of birth
  • Birthplace
  • Genetic information
  • Telephone number
  • Login name, screen name, nickname, or handle

States and cities each have their own jurisdiction, but all require fines as high as $250,000. There typically is a grace period for employers after the law has taken effect before enforcement begins. Civil actions, for example, are not permitted against employers in Oregon until January 2024.

It is recommended that organizations should:

  • Remove compensation questions from hiring forms, such as job applications, candidate questionnaires and background check forms.
  • Update interview and negotiation policies and procedures.
  • Train hiring managers and interviewers on the new provisions.
  • Make interviewers aware that this law has an oral component which applies to their conversations with candidates via phone or in-person. 

Happy New Year!
(Acknowledgements to Hunt Scanlon, Search-Consult, UK IPD)

Expanding overseas needs a diverse leadership team

Many of Asia’s corporations are expanding their brands overseas. Cross-border promotion of a brand is relatively new for China and increasingly diverse for Japan. Japanese car and technology brands such as Toyota, Sony and Honda are already global household names. In China it is Alibaba and Lenovo that spring to mind.

Any company that is looking to expand internationally must ask itself whether the corporate culture be applied elsewhere? And can it be inclusive?

The number one issue is the management itself. Whether your aspiration is expanding your brand into a new country or acquiring overseas businesses and exporting your expertise, you are ultimately likely to export your management structure, style and brand values.

There is no one-size fits all management or business plan. The successful multinational usually has satellite offices that have different practices based on local laws and customs. However there  needs to be a basic corporate ethos and standards of conduct. The successful multinationals tend to have multicultural leadership that promotes equal opportunity in leadership.

That may sound too simplistic and obvious. However, often companies expanding overseas like to have senior leadership that is largely from their home nation, they do not change the acquiring company’s management and therefore do not add value beyond cash infusion. A leadership team that all looks and sounds the same puts a company at a disadvantage by shutting the door on diverse outlooks.

As companies do their due diligence on expansion, not only do they need to consider if it is strategically a fit and the finances are right, they also need to question if they have the right management team and integration plan. Establishing world-class management processes is the first step, not the last one.

Companies should ensure they have leadership programmes in place where they share the mission and strategic intent of the company. What the leadership programme looks like will vary from company to company, but having one is an absolute must, both for the home and host teams. Establishing best practice enables knowledge transfer and promotes a cohesive corporate ethos. Both the home team and the host team will need help to adapt to new ways of communication and doing business. It’s also crucial for recruitment: the best and brightest are not going to work for a company where they do not see opportunities for promotion. Leadership programmes highlight a path.

The second critical component companies need to have is genuine succession planning. Managers at both at home and overseas will need to develop new skills. Your people will need training in leadership, cultural sensitivity and the opportunity to gain experience in different parts of the business. Leadership programmes and succession planning have long been basic building blocks of world-class management

The bottom line is that as Asian companies look to expand their businesses into overseas markets they need to make sure their management teams are up for the task. Their aim should be to build a diverse leadership group that embraces best global practices.


Chinese bloggers vs Western bloggers

When it comes to generating sales, Chinese bloggers beat the Western bloggers by a landslide. Bloggers in China have social and technological advantages for converting fans that bloggers in the West can only dream of.

Chinese fans are OK with being sold stuff on social platforms

In the West, bloggers should be discreet about their sales pitch or completely forthright. There is no middle ground. It’s like bringing up money among friends — it happens inevitably, but all parties understand they are wading into awkward territory.

In China, social media and e-commerce are completely integrated into each other. In other words, social platforms have e-commerce functions, and e-commerce platforms have social functions. This makes the line between entertainment and commerce blurry.

A recent article from Boston Consulting Group stated: “In China, shopping is about more than just the transaction. It is about entertainment, discovery, and social engagement with friends, celebrities, and internet influencers.”

A study by Accenture found that up to 70% of Chinese Gen Z consumers — those born after 1995 — prefer buying products directly via social media than other channels. The global average is 44%.  Simply put, bloggers are at the heart of the Chinese shopping experience.

People want social media platforms to entertain them. Their favourite bloggers help them discover new products through via content. Consumers are entertained and purchase products at the same time and it’s all possible because Chinese social media platforms have e-commerce capabilities joined with them. Chinese consumers value word of mouth recommendations above all else.   As long as the content is good and the bloggers trusted they do not feel they are being used

E-commerce platforms make full use of social media and bloggers

Imagine if Amazon had its own version of Periscope built-in where people live-streamed themselves using products while fans browsed or Expedia had a travel-oriented version of Snapchat connected to its site.  Now you can see how shopping and sharing work in tandem on the Chinese net.  Most e-commerce platforms have social functions and even their own bloggers. For example, Taobao and have integrated live streaming and articles.

Western social platforms make sales inconvenient and clunky. Look at Instagram, which does not even allow URLs in a post.   Chinese bloggers have the tools to convert followers into customers easily. Their platforms gave them these.

Here’s an example: Chinese social media apps allow product links in post copy and additionally allow consumers to open the links, view the products, put them in their shopping carts and pay for them while still seeing the original post. Meipai’s video sharing app has been unrolling a feature recently for content creators to put product link tags directly in their videos. Viewers can click on an overlayed tag and buy the product while watching the video.

Live streaming platforms such as Yizhibo allow streamers to create a shopping cart of items which viewers can access and purchase by clicking an icon on the screen during the live stream.  For example, if a streamer is giving a makeup tutorial and viewers ask what products she is using, she can direct them to her cart.

“Check out my cart right here in the top right corner to learn more about the products I’m using,” makes much more likely to convert to sales than “Please find my list of products on another site.”  The first generates quick purchases, the second, bounces.

Chinese bloggers can create custom products for their followers

In China, you will find a growing trend of bloggers creating their own products and brands. With access to fast-react manufacturers who can offer small volumes and frequent changes to production lines, Chinese bloggers can create products their followers ask for. They can sell it themselves without relying on big brands.

Zhang Dayi is one such Chinese blogger. She is an expert at using online engagement to gauge her followers’ preferences. Her team avoids inventory overstocking by utilizing big data analytics to measure consumer sentiment towards newly released products. Their methods have been wildly successful. In 2016, Zhang’s store reportedly pulled in US$46m in revenue.

Chinese bloggers have an advantage. With the vast amount of resources available to them, those who understand their audience and create excellent content have the ability to not only create awareness for a brand but generate actual sales results.

China’s digital economy: A leading global force

China is now a leading force in digital technology, including virtual reality, autonomous vehicles, 3-D printing, robotics, drones, and artificial intelligence. China accounts for more than 40% of the value of worldwide e-commerce transactions, up from less than 1% about a decade ago. China has also become a major global force in mobile payments with 11 times the transaction value of the United States.

Three factors are propelling the expansion of digital China and suggest that there is far larger upside potential for digital in China than many observers appreciate.

In 2016, China had 731 million Internet users, more than the European Union and the United States combined. Beyond scale, it is the enthusiasm for digital tools among China’s younger consumers that will support growth, facilitate rapid adoption of innovation and make Chinese digital players and their business models competitive. Nearly one in five Internet users in China rely on mobile only, compared with 5% in the United States. The share of the Internet users in China making mobile digital payments is 68%, compared with only around 15% in the United States.

The three Internet giants in China are Baidu, Alibaba and Tencent. They have been building dominant positions in the digital world by taking out inefficient, fragmented, and low-quality offline markers while driving technical performance such as computing efficiency to set new world-class standards. These companies have been developing a multifaceted and multi-industry digital ecosystem that touches almost every aspect of consumers’ lives. In 2016, Baidu, Alibaba and Tencent provided 42 percent of all venture-capital investment in China, a far more prominent role than Amazon, Facebook, Google and Netflix who contributed only 5 percent of US venture-capital investment in that year. Beyond China’s big three, other digital innovators such as Xiaomi and NetEase and traditional players such as Ping An are building their own ecosystems. China’s digital players enjoy the notable advantage of close links to hardware manufacturers. The Pearl River Delta industrial hub is likely to continue to be a major producer of connected devices because of its strength in manufacturing hardware.

China moved slowly to regulate the digital sector which gave innovators plenty of space to experiment. As the market has matured, both the government and the private sector have gradually become more proactive about shaping healthier digital development through regulation and enforcement. Today, the government is playing an active role in building world-class infrastructure to support digitization as an investor, developer, and consumer.

China has increased its visible presence on the global stage and is making an increasing impact on the global economy. China runs a trade deficit in services but a trade surplus in digital services. Over the past two years, China’s top 3 Internet companies made 35 overseas deals, compared with 20 by the top three US Internet companies. Chinese digital companies are also expanding business models outside the country’s borders, and sharing their technology with foreign partners. China is already more digitized than many observers appreciate and has the potential to set the world’s digital frontier in coming decades.


Innovation in the 50-Plus Work Group

Decades continue to be characterized by how much younger we all are in an age where movement and evolution are key. Fifty is now the new 30, and 60 the new 40. Because the baby boomers and those just behind them live longer are generally healthier and desire to work beyond 65 more senior individuals are filling more spots in the workplace, often reinventing themselves to fit a “new mold”. Studies show that up to 80 percent of baby boomers continue to do some sort of paid work until at least age 70, thereby staying mentally sharp and keeping socially and professionally engaged. The current financial reality also assumes that while boomers live longer and are healthier, they also seek to maintain their lifestyle and, to do so, need additional income.

People who make a career change later in life tend to be happier, healthier and, more active than others who have opted to become retirees. Money Magazine published an article about baby boomers who reinvented their careers with considerable success and the consistent was creativity and keeping the brain active. Would-be retirees were remaining in the workplace and retirement as a concept became outmoded as reinvention took its place.

Money Magazine highlighted a 57-year-old sales manager in a real estate firm who became increasing discontented and struggled to do the job she had done for a number of years. At the same time at home, her washing machine stopped working and she had to visit a laundromat. Appalled by the conditions she found, she decided to launch a chain of cleaner, more energy-efficient laundromats “Wash Day” and focused on a younger demographic. The business clearly filled a need in the community. After the first year, they opened two additional facilities and they are now looking to further expansion.

Similarly, a retail executive who worked for the same company from the age of 15 to 46 in both management and corporate positions was terminated in a downsizing. She decided to use the skills that helped her to become a successful executive to develop an idea for a card that could be used to track and simplify discounts on health care expense given to workers. The company, “freshbenies”, gradually expanded and in 2013, had revenue of US$1.3 million. By 2016, the revenues tripled. A simple reallocation of skills with a mix of creative thinking.

These individuals shared common traits: they were willing to take risks, they used past skills as leverage for new challenges, they used their networks to help in the transition and they were creative.

source: Frederick Lamster is a partner at Battalia Winston International, and an ex-CHRO at L Brands. Sharon Tunstall is a consultant at Connect the Dots, and former CHRO at Nike.



Technology is changing the ways we live and work – the emergence of a ubiquitous internet, connected objects (e.g. self-driven cars), digital technology, robotics and virtual teams working from remote locations. They are affecting the world of work so deeply. Talent readiness and talent competitiveness will largely determine which economies will be leading in the race to turn technological advances into job creation.

The effects of technological change are increasingly impacting talent competitiveness. Jobs at all levels are being replaced by machines, technology is also creating new opportunities. However, people and organisations will need to adapt to a working environment in which technology know-how, people skills, flexibility and collaboration are key to success. Horizontal networks are replacing hierarchies as the new leadership norm.

Governments and business will need to work together to build educational systems, change ways of working and re-engineer talent attraction policies. But our school system, dating from the factory age, prepares our children for routine work rather than for creativity and projects, also neglecting to foster the learning-how-to-learn mentality that is needed in a world where people will have multiple careers during their lives.

The Insead Business School has recently released their fourth edition of Global Talent Competitiveness Index. Switzerland and Singapore occupy the top spots in 2017, with four Nordic countries in the top 10 (Sweden, Denmark, Finland and Norway). The United Kingdom and the United States rank third and fourth respectively.

These countries share key traits, including educational systems that meet the needs of the economy, employment policies that favour flexibility, mobility and entrepreneurship, and high connectedness of stakeholders in business and government.

The fast advance of automation and artificial intelligence is the source of the most disruptive changes of our time in the way we live and work. The transition will be rocky, so governments and business must act.

Education system reforms are urgently needed to provide the right technical and people skills, and the ability to adapt to change. As a multi-career reality becomes the norm, workers must boost employability by committing to life-long learning. At the same time, employment policies must combine employers’ need for flexibility with social protection.

Technology is having a profound impact on the nature and structure of work. In this digital era where work is constantly evolving, a premium is placed not on employees who possess the highest level of technical competencies, but on those who have the ability to learn and re-learn on the job. Many employees will find themselves facing technological and structural unemployment if they do not re-invent themselves.

Successful transformational change is most likely to occur where there are strong ecosystems. Cities and regions are showing the way in talent competitiveness because they enjoy a higher level of higher financial independence and economic growth rates than the countries in which they are located and have more agile decision making and innovative branding abilities. The top ten cities combine high quality of life, high connectivity, and high levels of opportunities for international exposure and careers.

The Insead Report offers an interesting picture of a world in which talent moves not only from country to country but also from city to city, often across national borders. Cities are hence emerging as global players on the talent competition scene. The rankings show that although megacities such as San Francisco, Madrid or Paris are among the leaders, smaller cities such as Copenhagen, Zurich, Gothenburg, or Dublin are competitors to be reckoned with. They are cities where talent can find excellent career opportunities, good connectivity (broadband and transport) and a high quality of life for themselves and their families.

Many small cities amongst the top performers have less than 400,000 inhabitants. Top performers combine the best of both worlds (high quality of life combined with opportunities for international exposure and careers). Interestingly 3 Scandinavian cities feature in the top 5, having benefited from concerted strategies for attracting and retaining talent.

Technology and hyper-connectivity are already changing the nature of work: along with demographic, economic and social factors, they are driving the rise of a more independent and dispersed workforce. Flexibility is the watchword of our age, as we are shifting from an environment in which work was based on traditional (salaried) employment to one where 30% of the USA and European working population are free agents. Foxconn the mega supplier of Apple has already replaced 60,000 of the 110,000 workers at its giant plant near Shanghai by deploying thousands of industrial robots.

Technical skills plus social/project competence are crucial for the new talent profile since innovation increasingly comes from collaboration. As the world we live in is so unpredictable, young people must be empowered by ‘learning how to learn’, along with creativity, problem solving and communication skills. Curricula must consist of experiential and project based approaches, including work-based training opportunities, such as apprenticeship systems. In a multi-career age, moreover, life-long learning is a must.

We are experiencing a profound transformation of society, organisations, careers, education and employment. Organizations are becoming flatter and interconnected; results and collaboration win over authority and hierarchy and a ‘multi-career’ has become the norm.


Why all the noise about Coding?

Programming languages are shaping business in this century and well into the future. Today’s pre-collegiate students are the super tech-savvy Generation Z, the pioneers of the future’s digital workforce. In a world where business innovation will be formatted in code, the languages influencing business in coming years will include Objective-C, JavaScript and Python.

Jeff Immelt, Chairman & CEO of GE, explains why. He is transforming GE into the world’s largest digital industrial company to one that is focused on decentralized decision-making, speed and startup-like mentality.

“The Industrial Internet and the economic potential of connecting a locomotive or a jet engine to the cloud has much more potential than the consumer internet! We can now use software and analytics to unlock the incredible value of machines and increase productivity, something that wasn’t available before.

How will GE will get there? “Our culture. We may be a century-old company, but we need to move quickly, take risks, fail fast and behave like a startup to keep winning. I joined GE 34 years ago, and until recently our management could make every decision in the headquarters. Those days are over. We have to embrace decentralization and use technology to help our people to stay connected and allow more automated decision-making so you can look at an app and see what’s going on inside the company.“

“But culture is not just apps. It’s a combination of people and technology. If you are joining the company in your 20s, unlike when I joined, you’re going to learn to code. It doesn’t matter whether you are in sales, finance or operations. You may not end up being a programmer, but you will know how to code. We are also changing the plumbing inside the company to connect everyone and make the culture change possible. This is existential and we’re committed to this.“

“GE is giving up employee ratings, abandoning annual reviews and rethinking the role of HQ“

“Culture and attracting the right talent are also why we are moving from suburban Connecticut to downtown Boston. It’s an ecosystem made by and for innovation. In Boston, we can be challenged by a doctor from Massachusetts General or by a student from MIT. We need to be in this environment.“

“We are also changing the way we evaluate our people. We’re trying to end anything that was annual or quarterly and make everything more real-time. We wanted to make the feedback process more like how we give each other advice in the real world. Instead of an annual review, we have an app PD @ GE where our people are getting continuous insights from their colleagues that they can use to get better every day.“

President Obama in his final State of the Union Address highlighted the need to invest in computer science education and outlined plans to help students learn to write computer code in hands-on classroom lessons “to make them job-ready on day one.“

Many of the US’s largest public school systems have announced their intentions to expose students to computer science. Currently in the U.S., only one-tenth of high schools offer a computer science course and this does not factor in middle and elementary schools.

President Obama has asked the U.S. Congress to fund a $4bn program for states plus $100m for districts to train teachers and get the necessary tools for elementary, middle and high schools to provide computer science classes

Schools globally need to teach modern students how to handle data, integrate that data into applications and understand strategies to solve problems related specifically to software. There are already areas in which computer science education is noticeably hamstringed, such as a serious skills gaps and a slim talent pool for IT departments.

The recent Oxford Economics global survey of senior business and technology executives found that 78 percent of enterprises believe the shift to becoming a software-driven business will be a critical driver of competitive advantage.

The C–suite faces a situation where their kids will know more about code than they do!

In this era of digital transformation, businesses will have to engage customers through new channels using apps and multimedia content. This is driven by trends in mobile, multichannel and transforming social digital landscapes. Being able to read, understand and use code will be fundamental to creating and integrating those content formats, and today’s students will be responsible for doing so.

Generation Z will need be equipped with the knowledge and abilities to compete in the job market, especially as more companies are digitally transforming their businesses. Students need to be consistently exposed to computer science programs at a young age, instilling coding proficiency that grows as they do. A student who knows how to write code will become an employee who is fluent in business and be a very valuable company asset. English may be the world’s spoken business language, but code will be where business innovation is born

Manufacturing needs to fix an Image Problem to solve its Talent Shortage

Today, 6 in 10 openings for skilled production positions remain unfilled because of a talent shortage. Looking ahead, the U.S. will need to fill nearly 3.5 million manufacturing jobs between 2015 and 2025 – yet about 2m of those jobs are expected to go unfilled because companies won’t be able to find workers with the skills needed in today’s technology-enabled industry.

Equipping the current and future workforce with the necessary skills is crucial. But we also need to clear the outdated and mistaken perceptions that exist which are preventing many from seeking careers in manufacturing in the first place.

Manufacturing has become very digitized. Smart factories are replacing primitive production plants. Workers are spending more time at computers and less time at manufacturing equipment. Advancements around newer processes, like 3D printing are continually pushing the limits of conventional manufacturing.

Unfortunately, public perceptions have not caught up with this new reality. As a result, many people hold the same views of manufacturing careers that their grandparents had – decent-paying jobs that often involve long assembly lines, manual labor, and loud machinery.

This perspective was reinforced in a study conducted by Opinion Research Corporation. The survey revealed:

71% of respondents do not view manufacturing as a high-tech career choice.

People mostly believe manufacturing jobs are working among machines (55%) and on assembly lines (50%). They only envision robotic technicians managing automated machines (20%) or software developers working in front of computer screens (10%).

Only 31% of respondents think a career in manufacturing is high paying.

Changing perceptions about manufacturing and sparking interest of the millennial generation is essential. A number of companies are already demonstrating how to do this.

GE, for example, created its “digital industrial” ad series starring millennials, Sarah and Owen. It is just as much a rebranding effort as it is a recruitment tool. GE premiered ads on late-night comedy shows and posted them on YouTube – with some videos including links to the GE careers page. The company even created a clever “Digital Industrial” filter for Snapchat, a popular social network among millennials. Chairman and CEO Jeff Immelt has stated “The Industrial Internet and the economic potential of connecting a locomotive or a jet engine to the cloud has much more potential than the consumer internet! We can now use software and analytics to unlock the incredible value of machines and increase productivity, something that wasn’t available before.” And that all new recruits to the company, even finance and HR will need to learn Code

Lincoln Electric has used virtual reality to engage with young people, transporting them from a career fair to a plant floor to try their hand at welding.

SKF USA created an outreach program for community and technical colleges that included free instructional materials and training for teachers.

Proto Labs have given away tens of thousands of free manufacturing aids, like demo molds and design cubes, to help the faculty at the nation’s top engineering schools teach aspiring mechanical engineers about the latest technological advancements in manufacturing

The digital transformation of manufacturing has opened doors to STEM-rooted careers in the fields of software development, mechanical engineering and computational data sciences. This expertise is absolutely critical in further advancing both conventional manufacturing processes, like injection molding and CNC machining as well as industrial 3D printing. The proliferation of industrial robotic equipment, automation controls, digital scanning devices, and M2M learnings has and will continue to create an increased demand for a highly-skilled workforce capable of operating and maintaining this type of equipment.

A rewarding career awaits the next generation of manufacturing talent – many of them just don’t know it yet. By dispelling age-old misperceptions and enlightening young people about what modern manufacturing really is, we can begin to close the skills gap and inspire a new generation of workers to pursue high-tech and high-paying careers in our industry

Dec 21, 2016
Vicki Holt President & CEO, Proto Labs

China’s Impending Robot Revolution

Foxconn has long been considered a bellwether of Chinese manufacturing. When, four years ago, China’s largest private employer and primary assembler of Apple iPhones raised wages by up to 25% for its 1.2 million workers, manufacturers throughout China were forced to follow suit. Then in May, Foxconn announced a move of even greater import, disclosing that it had replaced 60,000 of the 110,000 workers at its giant plant in Kunshan, near Shanghai, by deploying thousands of industrial robots.

Analysts in the West either hail the coming robot revolution as a harbinger of unprecedented prosperity or warn of the widespread upheaval and massive loss of jobs it will leave in its wake. Does Foxconn’s rising robot army spell doom for the “world’s factory”?

Far from being blindsided by these new technologies, China’s private manufacturers have the opportunity, thanks to robots, to emerge stronger and more competitive than ever. China was late to embrace the robot revolution. There are still only 36 robots per 10,000 manufacturing workers in China, whereas in Japan there are 315 robots per 10,000 workers, and in South Korea, 478. But China has been moving boldly to close the gap. Beijing has set a goal of raising the robot-to-worker ratio to more than 100 by 2020.

The vast size of China’s manufacturing industry offers huge potential for economies of scale. President Xi Jinping has declared automation a national priority. Made in China 2025, an industry strategy announced by Beijing last year, provides manufacturers with billions of yuan for technological upgrades, including advanced machinery and robots. The provinces of Guangdong and Zhejiang alone have allocated $150 billion and $120 billion, respectively, over the next five years to equip factories with industrial robots.

According to the International Federation of Robotics, China was already the world’s biggest market for industrial robots in 2013. By 2014, Chinese factories accounted for 25% of the world’s industrial robots, a 54% increase over the previous year. Last year, Chinese manufacturers bought 68,000 of the 248,000 industrial robots sold globally. Industry experts expect that share to continue rising.

Along the Pearl River Delta, the familiar stereotype of the Chinese factory-thousands of workers in smocks bent over assembly lines performing the same tasks over and over-is giving way to a more complex reality in which small cadres of skilled workers toil in tandem with sophisticated machines. Midea Group, one of China’s leading appliance makers, is investing $800 million over the next five years to automate its residential air-conditioning subsidiary.

China’s leaders are also pushing for China to become not just the world’s largest robot buyer, but a leading robot maker. At the forefront of that effort are firms such as GSK CNC and Shanghai’s Siasun Robot & Automation, which are developing a range of robots for use in factories, and SZ DJI Technology Co is now the world’s largest consumer-drone maker by dollar sales.

Forecast International, a private market researcher, recently predicted that by 2023, Aviation Industry Corporation of China, a state-owned Chinese defense firm, will produce nearly $6 billion worth of unmanned aerial vehicles and control half the global market for such devices.

Yet despite the breakneck pace of transition, the risk of political instability in China is small. The country is used to rapid change. Job turnover in the manufacturing industry is 2.5 times that of the U.S. and has been so for decades.

China’s changing demographics are altering the way employers think about their labor force. They can no longer count on an endless supply of cheap workers. Labor costs have risen 15% a year since 2000. The working-age population will peak this year, and is projected to shrink 16% by 2050.

As China forges ahead with automation, there are at least three reasons to believe its chances for success are higher than the U.S., Europe or Japan.

First, China has developed a unique manufacturing ecosystem. Its companies, working in partnership with global firms, have created an extraordinarily sophisticated supply chain and built a network of collaboration between people and machines that allows for maximum flexibility at minimal capital investment. There is no parallel to this in any other economy in the world.

Second, with the possible exception of India, no other nation can match China’s capacity for producing the number of engineers necessary to oversee industrial robots at significant scale. One recent analysis concluded that each year China graduates at least three times as many engineers as the U.S.

Finally, the rising purchasing power of China’s consumers will provide a solid anchor for China-based manufacturing. Even with a slowing economy, China remains home to the world’s fastest growing middle class. Already there are 116 million middle-class and affluent households in China, with annual disposable incomes of at least $21,000. In 2000, there were just two million such households. With spending power of that magnitude, global companies have ample incentive to keep factories in China.

We see little cause to expect manufacturing to shift back to developed markets. China will not only remain the world’s factory, but it could increase the size of its manufacturing sector by as much as 22% by 2025. Western leaders would be ill-advised to imagine that these new technologies will play disproportionately to their advantage. Far from being left behind, China is at the forefront of the robot revolution.

Mr. Sneader is the chairman of McKinsey & Company, Asia. Mr. Woetzel is a director of the McKinsey Global Institute.

Aug. 3, 2016 12:30 p.m. ET
Kevin Sneader and Jonathan Woetzel