Key Talent Priority » CBIA

The following article first appeared in the Insights section of the RSM website. It is posted here with permission.

Diversity, equity and inclusion initiatives have become more visible to companies across all sectors in recent years, and companies that leverage DEI can reap numerous benefits beyond the statistics of a diverse workforce.

In fact, “companies with diverse leadership teams and boards continue to demonstrate a competitive advantage,” McKinsey’s 2023 Diversity Report found. “Such companies are much more likely to achieve better financial results while the impact of delays in this area increases.”

Having a clear DEI strategy can help companies attract and retain talent, improve operational efficiency, and drive innovation and growth.

According to the RSM US Middle Market Business Index, recruiting and retaining talent is already the biggest challenge for middle market companies, and manufacturers are no exception.

“It’s no secret that diverse perspectives help make better decisions.”

RSM’s Kendra Blacksher

Companies in this sector are struggling with how best to recruit, retain and upskill employees, especially as manufacturing roles evolve with the implementation of advanced technologies. As a result, we have identified the fight for production talent as one of the most important industry trends for 2024.

For middle-market manufacturers, adopting DEI initiatives can ultimately drive success.

“It’s no secret that diverse perspectives help you make better decisions,” said Kendra Blacksher, RSM US senior industrial analyst, during a January presentation in partnership with the New Jersey Manufacturing Extension Program.

“I think sometimes we get lost, how do we logically implement this across teams and processes?”

Below, we look at the key considerations companies should consider in three areas to weave diversity priorities and initiatives into the fabric of the organization.

Recruitment and retention

Compensation and benefits remain the cornerstone of companies’ recruitment and retention efforts; Other elements of the talent experience – such as flexibility, workplace culture and professional development – also shape the labor market, according to the MMBI Workforce Report. In addition to how pay affects employee recruitment and retention, the employer-employee lifecycle comes into play.

Before starting recruitment activities, companies should answer the following key questions:

What does the current talent pool look like? How diverse is the recruiting pool?
Do our recruiting efforts include local colleges, technical education programs, and diverse university environments?

Local colleges and high schools are developing special job skills programs, which can be an incredible opportunity for your organization to connect with these institutions to build your talent pool.

Additionally, manufacturers may have the opportunity to co-create curricula with vocational technical education programs. These types of relationships can strengthen your talent pipeline.

To retain existing talent, manufacturers should focus on the following:

Create more diverse teams with different cultures, backgrounds, skills and learning experiences.
Assess the team structure maximize value and determine the right role for an individual when hiring.
Develop a career path it matters most to individuals; this will help them become well-rounded professionals who can contribute more effectively and efficiently.
Be aware creating a sense of belonging for your talent pool.

Having employees from diverse backgrounds is an advantage because their diverse work and life experiences can generate unique ideas and ways of solving problems.

“This diversity of thought and perspective provides adaptability and resilience to changes in market conditions,” said Juan Villafrade, RSM Management Consulting Manager, during the presentation.

Operational efficiency

The real return on investment in diversity lies in the magnitude of its impact on organizational processes.

Companies should start by asking themselves: How do the organization’s processes and products reflect the diversity of its teams?

Manufacturers should also explore opportunities to diversify their supplier relationships, especially small suppliers.

Villafrade told the story of one New Jersey manufacturer who experienced a lack of communication between factory workers and teams in the offices because the factory workers spoke primarily Spanish. Solving this language barrier was key to streamlining disconnected processes.

Manufacturers should also explore opportunities to diversify their supplier relationships, especially small suppliers that offer additional capital during times of market change.

Diversifying your supplier network increases supply chain agility and helps you align with environmental, social and governance metrics, demonstrating a commitment to social investment and environmental awareness.

Innovation and development

In McKinsey’s 2023 report, the business case for gender and ethnic diversity in executive teams was clear.

In a dataset of over 1,200 companies from 23 countries, “companies in the top quartile for gender diversity are 39% more likely to outperform other companies, continuing an upward trend from 15% in 2015.” – stated in the report.

Similarly, “our analysis shows that the top quartile in ethnic representation is 39% more likely to outperform compared to the bottom quartile.”

Diversity of thought is important at every level of a company, including the board of directors.

Diverse teams bring a wealth of diverse ideas, which in turn can result in new products that reach new markets. However, DEI goes beyond new ideas; employees from diverse backgrounds can help challenge long-held assumptions that the company may need to re-evaluate.

This diversity of thinking is important at every level of the company, including the management board. In 2021, Nasdaq introduced rules requiring publicly traded companies to disclose board diversity, and the U.S. Securities and Exchange Commission followed suit.

Such standards for public companies can often become the de facto standard for private companies as well, Blacksher said, making it even more important to address board diversity.

“Do the people in decision-making positions reflect your consumers, your market, your talent?” she asked. “You want to embed diversity into the fabric of everything you do.”

About the authors: Kendra Blacksher is a senior industry analyst and senior manager at RSM US. Juan Villafrade is the company’s management consulting supervisor.