Perhaps it should come as no surprise that Quad/Graphics Inc. saw a two-fold increase in applications when it boosted its starting wage by $2 to $16 per hour last fall.
The increase was the result of an analysis that considered the unemployment and labor force participation rates along with Quad’s ability to attract talent that would join and grow with the company.
The unemployment rate in Wisconsin has not been above 3.2% for two years, while the state’s labor force participation rate has dropped from 68.5% to 67.2% since mid-2017, a decline of more than 27,600 people from the workforce.
“Base pay was not the first thing that it pointed to,” said Artell Smith, vice president of talent at Quad.
He said the company’s review led to changes in recruiting practices, training for managers on how to welcome and engage new workers and an evaluation of how Quad would accelerate wage increases for new hires as they acquire new skills.
“The benefit of the change in the base rate is not fulfilled unless you can say to the employee ‘In 24 months, if you follow our process, learn the new skills, participate in our program, you could be at 18 (dollars) or higher and then with 24 months after that you could easily be at 20 (dollars) or higher,” Smith said.
Many manufacturers have for years lamented the difficulty in finding and keeping employees. One of the common critiques of companies has been that manufacturers should be paying more.
Data from the U.S. Bureau of Labor Statistics suggests wages are pushing higher. The average hourly pay for production workers in Wisconsin was $21.59 in July, up 5.8% from the previous year. In the first seven months of 2019, the state has averaged a 4.2% increase in pay for production workers, which would be the strongest year of wage growth since 2007 if it continues for the full year.
It is not just entry level or production employees where companies are finding challenges. Milwaukee-based Brady Corp. has been making significant investments in research and development, but the company has found it difficult to hire people to fill innovative roles with unemployment around 3%.
“When you are down at that level, it is a longer process and certainly a more dynamic and interactive process than you historically have had to have to bring in the best talent,” Michael Nauman, president and chief executive officer of Brady, said on a recent earnings call.
Nauman added it is important for the company to still find employees who are a good fit for Brady. He noted there was a situation recently where he thought Brady would hire a number of candidates but decided against it because of a lack of support from the team they would be joining.
“We are not going to settle,” he said. “We will not bring in people that we don’t believe will be strong contributors, but even more importantly, will really love working at Brady and being part of Brady.”
Racine-based Twin Disc Inc. has dealt with a significant number of retirements in recent years. John Batten, the company’s chief executive officer, remarked on a recent earnings call that the company had not brought on that many new hires in decades.
“We hadn’t had a hiring ramp up like that since probably the late ‘60s, early ‘70s,” he said. “It just took a while to get people trained and up to speed, particularly on some of our new products that are a lot more technical and more complicated to build.”
Batten said it has taken time to get new employees trained, but productivity is starting to improve as people get six months to a year of experience with the company.
Joel Quadracci, chairman, president and chief executive officer of Quad, said part of the challenge in raising wages is that the investment is made upfront but it takes time to realize the benefit.
“It’s a little bit of a white-knuckle thing to do,” he said on a recent earnings call, adding that investing in wages and training is paying off.
“We are seeing the productivity improvements and it’s pretty amazing what our team has done,” Quadracci said.
Quad’s training has come primarily in the form of two programs.
The first, Zero-to-60, focuses on helping employees get acclimated during their first 60 days with the company. The idea is to offer structured onboarding to help someone learn how to do their job and navigate around the plant safely.
“That has proven to be a really significant draw into the company as well as to retain the new workers when they get here,” Smith said.
The second program is called Accelerated Career Training, or ACT. It provides deep technical instruction on running Quad’s machinery and handling continuous improvement efforts. It also offers a clear training plan for employees to progress in the company.
“At the end of it, our stated objective to new employees as they come in is we want you to become an operator of our machines,” Smith said.
Ryan Festerling, president and chief operating officer of Brookfield-based QPS Employment Group, said it is good for companies to take a programmatic approach to bringing on new hires, but great companies are ultimately differentiating themselves by how they treat their employees.
“I don’t care if you work for a company of four people or a company of 40,000, these are all people that we work with and you can’t take a programmatic approach to caring for people,” he said.
Festerling added that QPS regularly reviews data with its top customers and, regardless of how established a company’s programs are, turnover and engagement metrics can show which supervisors are doing well or poorly in caring about the people who work for them.
In some ways, the enhanced training programs took Quad back to its roots.
“In the early days of Quad, there was a very high-touch, personalized training approach to new hires coming in,” Smith said. “As the company grew and in some ways became more differentiated in the services, the local organizations, the plant specifically went down a more customized route for what was appropriate for their plant.”
The new programs helped add a more standardized, consistent and rigorous approach throughout the company, Smith said.
He added that Quad also went back to new hires from recent years to evaluate their wages and make pay adjustments based on technical skills, development and performance track of employees.
Smith said the investment in training and wages has paid off in employee retention.
“When an employee came in at $14 an hour, $15 an hour, it was not so complicated for them to go somewhere down the street and get $15.50, but it is a little harder to go from $16 to $17 in the current pay market for the manufacturing kinds of jobs,” Smith said.
Part of the challenge is getting employees to five, seven or 10 years with the company.
“The message from the marketplace has been that in order to improve your wage and career prospects you need to change jobs,” Smith said. “We have to constantly renew our retention approach so that somebody is really feeling the pull year after year. They’re growing, they’re improving their wage, they’re increasing their span of control … it’s a steady march and by the time they get to 10 years of employment with us, they feel really good about being with us and the career they’ve developed.” n
