CEO Corner

Digital Marketplace Platforms Could Offer New Opportunities for Manufacturers

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As companies in many sectors tap into the digital on-demand economy, the manufacturing industry has yet to develop an industrial digital marketplace to connect buyers and sellers. Yet a new platform has the potential to revolutionize the industry by offering manufacturers the opportunity to buy and sell custom-made parts through an online portal.

In the past six months, the venture capital arms of GE and BMW have invested more than $22 million in Xometry, a digital platform that has been described by US News & World Report as the “Uber of manufacturing.” Xometry serves as a platform to connect industrial parts manufacturers and buyers in a system similar to Uber, Amazon and other digital platforms.

It allows buyers to upload their 3D models, specify the materials, features and components then receive instant feedback on pricing, lead times and the best manufacturing processes. Buyers can review manufacturer profiles and rankings, then make purchase decisions with the click of a mouse. Manufacturers, especially mid-market companies engaged in sheet metal fabrication, 3D printing and urethane casting, can also join the partner network to serve as a seller.

Randy Altschuler, co-founder and CEO of Xometry, says the platform is currently being used by more than 5,000 companies in automotive, aerospace, industrials and medical equipment manufacturing. Altschuler says it will soon aggressively hire more data scientists, software engineers and web developers to expand the platform. While there are many large buyers on the platform, including GE, BMW, the United States Army and NASA, Altschuler says the biggest opportunities on the supplier side will be for mid-market and small manufacturers and shops. And for these large companies, more sellers offers a larger network to more efficiently source the custom parts they need.

“Xometry serves as a platform to connect industrial parts manufacturers and buyers in a system similar to Uber, Amazon and other digital platforms.”

“We’re accelerating our efforts to provide additional features to our online platform, making it easier for engineers and procurement managers to conveniently order a wide range of parts delivered by our expanding network of manufacturers,” Altschuler said.

Altschuler estimates it to be a $70 billion market, and the fact that BMW and GE is investing in the platform is a notable development. As customers of the platform, both companies use it to streamline the often time-consuming and challenging process of ordering custom parts. Zack Barasz, partner at BMW I Ventures, invests in technologies that will impact the automotive industry and will join the company’s board of directors. “You have instant transparency into ‘what is this part going to cost me, and ‘how will changes in material and the shape of the part affect the cost’?” said.

Analysts say it’s innovative ideas such as these that have the potential to further strengthen American manufacturing. Brett Conner, professor at Youngstown State University and director of the Advanced Manufacturing Workforce Initiatives, said the U.S. is still stuck in a model of “industrial revolution-esque manufacturing” and that innovations through digital and 3D printing can change the entire industry. New platforms such as this could offer both new revenue streams and new avenues of parts sourcing for manufacturers.

Eric Schaeffer, senior managing director at Accenture, who leads Accenture’s Digital Industry X.0 program and said manufacturers need to transition more to an “as-a-service” business where they can be flexibly used as a service when needed. Schaeffer said industrial customers continually want “new and fluid service experiences” and that it will require companies to develop a “demand-driven approach that can anticipate and meet the fast and frequently-changing needs of customers in near real-time.”

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Why Manufacturers May Need to Change their Management Style

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With an aging workforce set to retire in droves in the coming decade, manufacturers are looking to younger generations as a prime source of talent. While gen-xers and millennials can have different generational characteristics, they often are lumped into the same group. And one thing they do share is a preference for a management style that is much different than the ones baby boomers use and are accustomed to.

In fact, some experts say the future successes and competitive advantages of manufacturers will hinge on how they manage their incoming talent.

Previous generations may have been content on taking direction and working 9-5 for 30 to 40 years, but younger workers often want engagement and meaning from the moment they set foot on the job. They also tend to request more training, more feedback and a culture of innovation that embraces new technologies and processes.

Jack Finning, partner at AAFCPAs, said that where boomers use a direct management style of dictating the process for workflow management, younger generations often seek a more “holistic approach.” Manufacturers will need not only to change their management style both for the workers, and for the new younger managers, as well.

“where boomers use a direct management style of dictating the process for workflow management, younger generations often seek a more holistic approach.”

“It’s important that outgoing and incoming leadership alike make an effort to overcome these stylistic differences…When the two differences begin to see the similarities in their perspectives, they can start to tackle harder operational issues,” Finning said.

In some places, factories are trying to convince workers to work past the age of 65. Society for Human Resources Management spokesperson Kate Kennedy said that nearly 20% of factory employers are considering the idea of phased-in retirements by asking senior members to stay with more flexible hours or fewer days. And some companies, such as BMW, are retrofitting equipment to make it more ergonomic for their aging workers.

Yet it still doesn’t change the growing need for younger talent, which is now increasingly working alongside these boomers. While manufacturers struggle to keep their older workers, Finning said AAFCPA encourages their clients to understand the younger generations’ need for transparency, and to support their willingness to spend time on the line learning about the employees tasked with production.

Most managers say they are already “challenged” by managing millennials and that they need new strategies, said Jan Ferri-Reed, Ph.D., President of the KeyGroup consultancy. She said that the results of a manager survey found that 70% spend more time guiding and teaching millennials than they do older workers. At the same time, 73% also said they worry about losing millennial employees.

Ferri-Reed recommends that managers encourage open communication, involve workers in decisions and change efforts, and provide continual feedback for performance improvement. She said that millennials like “lots of feedback” that should be done more often than once per year to determine annual pay raises. “They want to know where they stand and what they can do right away to improve and advance,” said Ferri-Reed.

There also are a number of other things manufacturers could do. Ed Potoczak, IQMS industry manager, said this includes changing outdated preconceptions about the industry, considering initiatives to engage with the community, and doing more to promote the “coolness” of today’s technologies. He said they need to communicate the educational requirements for success in manufacturing careers so that students can understand the skills they need. When on the job, he said leaders will want to immediately and actively engage new workers with innovation and fresh changes to keep them motivated. This means manufacturers should offer meaningful responsibilities beyond “paying their dues.”

During the transaction, Potoczak said there should be an effort to bring all generations together to foster the best of each. “Cross-generational” teams can help foster knowledge transfer from baby boomers to younger team members. He said senior management should incorporate strategies that create a “culture, policies and plans that help employer members of each generation be successful contributors.”

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How Smarter Robots Will Benefit Manufacturers

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Manufacturers have been using simple robotics for decades, but rapid advancements in the machines, artificial intelligence and data are coming together to continually create more powerful machines.

From manufacturing and transportation, robots being used in many sectors are becoming faster, stronger, more accurate and more intelligent. And for the first time, robots are being given the green light to operate in public. Delivery robots from Starship Technologies have now been approved with permission to operate in six states: Ohio, Florida, Idaho, Wisconsin and Virginia. These two-foot high robots weigh roughly 80 pounds and will be allowed to travel no more than 10 miles per hour on sidewalks and across crosswalks. While the robots first will be required to have a human observer should something go wrong, Starship Technologies representative David Catania said their pilots are stepping stones to full autonomy in public. “As we socialize the device into the community, that will allow us into the future to be 100% autonomous,” Catania said.

Fully autonomous robots could have big implications in many sectors, including manufacturing. Semi-autonomous robots already are moving about some manufacturing facilities and distribution centers, while “collaborative” robots now can share workspaces with humans and aid in a variety of tasks. They also can collect and share real-time information with warehouse management systems and manufacturing execution systems.

Prasad Satyavolu, assistant vice president of manufacturing and logistics at Cognizant, said the technology is continually growing to optimize not only the productivity of the robots but their relationship with humans. In one example of an aircraft factory, he said a human supervisor could inspect the finished product, then direct a robot to take a detailed inventory of problems, upload inspection reports and run analytic tools to lead to improvements in production.

“You must know what tasks are being done and you need to know what the costs-to-operate are with people to calculate an ROI.”

According to data from Loup Ventures, the market for industrial robots is expected to grow by more than 175% over the next nine years, and much of the growth will be from the collaborative robot space. While these robots represented only 3% of robots sold in 2016, they are expected to account for 34% of such industrial robots by 2025.

Yet Satyavolu said these results will be achievable only if manufacturers shift their focus to new skills for their workforce. Meanwhile, employees will need to work on the back-end to analyze a “floor of processes” feedback, he said. They’ll also have to develop systems and a means to calculate the return on investment of adopting such new technologies.

Brian Dillman of Universal Robots said the challenge of achieving an ROI with robots depends on the processes and objectives. Whereas some manufacturers may use robots for safety to remove people from the process, others may use them to increase production with additional shifts. “You must know what tasks are being done and you need to know what the costs-to-operate are with people to calculate an ROI,” Dillman said.

More companies are currently working to develop operating and brain systems for robots. Self-driving robot company Brain Corp. recently raised $114 million to further develop its BrainOS platform, which will make it possible to create autonomous commercial robots using off-the-shelf hardware and sensors. Brain’s technology will use artificial intelligence to allow robots to control their own motion and sense their surrounds. The company says it could offer equipment manufacturers an easy way to convert their existing machinery into functional robots.

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Manufacturers’ Growing Risks and What They Can Do about Them

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While American manufacturers have been riding a wave of resurgence and technological advancements, challenges and risks remain. From growing cyber threats and a shortage of talent to political uncertainties, manufacturers still have a number of issues they need to identify, evaluate and build into their business strategies.

BDO’s Manufacturing RiskFactor report analyzed 10-K disclosures from the 100 largest publicly-traded manufacturers in five sectors and examined risk factors cited. A few of these problems and risks include supply chain disruption, labor challenges and regulations, Cathy McNamara, partner at BDO, USA told us. But aside from these typical risks, here are 4 other issues she says are growing that manufacturers should be planning for.

1. Access to capital. Despite low interest rates and a generally positive financial environment, McNamara said many companies are wondering how they’ll fund their next big innovation or improvement amid rapid tech disruption. More than 7 in 10 respondents said they worry about their current level of indebtedness and debt covenants could limit their flexibility. Many feel that capital availability is uncertain and the chance that the Fed will raise interest rates sooner rather than later is spurring more concern.

While manufacturers are eager to implement new technologies, McNamara said they should conduct a thorough, honest audit of where they are in the innovation curve and where they want to be in 1-5 years. “To ensure ROI, capital expenditures must align with their current technology architecture and their strategic priorities…attracted by flashy new technology that may be too advanced…some companies want to run before they learn to walk,” McNamara said.

“attracted by flashy new technology that may be too advanced, some companies want to run before they learn to walK.”

2. Cybersecurity. The threat of cyberattacks remains a risk for manufacturers. Nearly 95% of those surveyed said it was their main risk, up from 50% in 2013. While 81% said they felt confident in their risk management program’s ability to address security concerns in a connected manufacturing environment, more than a quarter of manufacturers don’t have a security policy in place for their partners.

McNamara said the integration of new systems across supply chains is creating more potential access points for hackers and that it only takes one point of vulnerability to compromise the entire system. She said manufacturers not only should ensure they have adequate protection in place but that they regularly test their response plan.

“Manufacturers need to be prioritizing proactive threat intelligence, detection and rapid response when they invest in new or updated cyber protections,” McNamara said.

3. The talent shortage. Ninety-eight percent of respondents said they had at least some concerns about labor costs, retention and outsourcing. McNamara said the challenges of recruiting new talent ultimately come down to too few STEM graduates and a gap between the reputuation and reality of wages and work environment in the industry. Two-thirds of manufacturers said they were concerned about strikes or work stoppages, and 75% said they were worried about attracting and retaining key management personnel.

McNamara said manufacturers should prioritize retaining and engaging existing workers by focusing on employee productivity and empowerment. She said it’s essential to communicate a shared vision of the company’s future and the path it will take to get there. Most importantly, manufacturers need to be proactive in addressing talent now and foster a culture where every person is engaged every day in making small changes.

As manufacturers often are in competition with tech companies for advanced roles, she said they should develop innovative ideas that help them capitalize on changes. “Many manufacturing companies take a ‘wait and see’ approach when confronted with new challenges. That’s very different from the tech industry’s approach to embrace and grow from change,” McNamara said.

4. Politics. As negotiations are still in place, McNamara said Brexit is still a “big question mark in manufacturers’ peripheral vision” and should be watched closely. Once the regulations are firmed up, however, she said the separation of the UK from the European Union will take some time to play out. Depending on the terms, she suggested there could be major implications for supplier and vendor relationships and for the flow of skilled labor in parts of the EU.

Meanwhile, BDO’s report also revealed that one in five manufacturers see risks related to the new administration. McNamara said the Trump administration has been vocally pro-manufacturing and that much of the optimism manufacturers have could be connected to the possibility of an improved business environment. She said there is widespread hope on the regulatory front that more balance will be reinstated between the greater good some regulations strive for and the costs of remaining compliant. “That said, uncertainty is still the prevailing feeling for now, it’s business as usual until policies and regulations are actually enacted,” McNamara said.

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4 Ways to Improve Safety on the Manufacturing Floor

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Despite big improvements in safety over the past few decades, manufacturing still can be a dangerous occupation. Injuries can result not only in lawsuits and reduced employee morale but in reduced productivity and reputation damage.

More than 100,000 manufacturing workers are injured on the job every year. The top five injuries to manufacturing workers are due to: contact with an object (40%), overexertion (24%), slips, trips and falls (19%), repetitive motion (8%), and contact from harmful substances (6%).

While all injuries can’t be prevented, organizational initiatives and efforts can go a long way in reducing the rate of injury. Here are 4 ways to improve safety on the manufacturing floor.

1. Establish a culture of safety. The manufacturers with the best safety records are often those that have the greatest safety culture. This culture needs to start at the top with the C-suite and be adopted by front line workers with the mindset that they are responsible for their safety.

MISUMI USA, which makes mechanical components for factory automation, said a culture of safety should start with safety engineered into equipment and processes to reduce human error. Working conditions also should be designed to maximize ergonomics and manufacturers should build in small production breaks, as monotonous work can lead to a fatigued workforce, which is a big driver of largely preventable accidents and serious injuries. “Although fatigue will never be completely eliminated, small production breaks can go a long way to mitigating the concern by greatly reducing extreme fatigue,” MISUMI said.

“At Tesla, we lead from the front line, not from a safe and comfortable ivory tower. Managers must always put their team’s safety above their own.”

When a recent report by a California-based worker advocacy group revealed that injury rates at Tesla’s Fremont manufacturing facility were higher than the industry average, the CEO Elon Musk stepped up and directly emailed all employees. He said that moving forward, all injuries were to be reported to him and that he would understand how to improve it by going down the production line and performing the same task. “At Tesla, we lead from the front line, not from a safe and comfortable ivory tower. Managers must always put their team’s safety above their own,” said Musk.

2. Create checklists and safety programs. At the very least, most manufacturers are cognizant of OSHA regulations and have some sort of basic safety awareness. But beyond that, a series of checklists and safety programs can identify additional risks that may be unique to the individual manufacturer. Doug Schumann, advisor with Safety Management Group, said manufacturers should create a detailed list of potential fire, electrical and ergonomic hazards. OSHA maintains checklists for safety on everything from abrasive wheel grinders and machine guarding to engineering controls, battery manufacturing, aerial lifts and electrical hazards.

“You should identify anything that you could be exposed to…Chemicals, for example, need a hazard communication program in place so you can know where your safety data sheets are and what the process is to use and store those chemicals,” Schumann said.

3. Look to technology. Technologies such as IoT, automation and analytics all can be used to improve safety. Automation and robotic technologies remove workers from harm’s way, and IoT sensors can be used to offer better information on machinery operation and how processes are performing.

Fujitsu is even using sensors and artificial intelligence to estimate ongoing heat stress in workers. When combined with other algorithms, it can tell which and when workers may be more susceptible to heat stroke outdoors or around hot machinery. Chris O’Connor, general manager Internet of Things Offerings for IBM, said the “connected worker” who is enabled with technology is more aware of their environment and inherently safer. Sensors can track how both humans and machines operate on their own and with one another. It also can give manufacturers data to make continuous safety improvements and reduce risks.

“Wearable and embedded sensors are making it possible for workers to be monitored within their surroundings to prevent injury from falls, overexertion, heavy machinery—the list of what wearables allow us to prevent is a lengthy one,” said O’Connor.

4. Engage in regular communication and training. Manufacturers must ensure their factory workers are continually trained in the latest technologies and proper protocols for handling equipment, machines and processes. This includes being trained to identify the risks, the consequences of the risks, and how they can be reduced in various hazard scenarios. Schumann said improper training is a “very common problem” and that in many cases, investigations often reveal workers weren’t properly trained or failed to follow proper procedures.

At a time when they’re already being pressed for labor, manufacturers sometimes can fear downtime for training, but Schumann said it’s a necessity. “There are cost savings in reduced downtime because of injuries, or in retraining people because you have to rotate them out…The overall goal is to reduce injuries,” Schumann said.

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8 Cutting-Edge Technologies Companies Should be Evaluating and Integrating

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CEOs no doubt have discussed the value of new technologies such as IoT, drones and blockchain with both their board and their executive team. But before they can decide which innovations to invest in, CEOs should spend some time with their CIO taking a deeper dive so they understand the use cases and the true value of these cutting edge technologies’ capabilities for their business.

A new report by PricewaterhouseCoopers may help. PwC analyzed more than 150 technologies and whittled them down to the “essential eight” technologies companies and boards should pay attention to:
• Artificial Intelligence
• Augmented Reality
• Virtual Reality
• Drones
• Blockchain
• Internet of Things (IoT)
• 3D printing
• Robotics

The report suggests that directors can get more involved in company strategy and the impact of these technologies by understanding their firm’s tech priorities, increasing their board’s digital IQ and building technology into their board’s strategic oversight process.

“Too often, the CIO and his or her staff are the only ones involved, the report states. “While the CIO is a valuable resource, emerging technologies affect the entire business.”

How one company is making new technology integral to its business
Technology has been a key differentiator for companies like The Solomon Group, which produces live arena productions, televised events and major exhibits. The company has more than 300 employees at its New Orleans headquarters, but it needs to remotely manage operations in cities across the country. IoT technology has “transformed the way the company operates,” says president and co-founder Gary Solomon Jr.

“Because of IoT technologies, there’s more access to building custom solutions to help you run your business, instead of having to build your business around solutions that are on the shelf already.”

To achieve its goal, the company has designed a business management software system that connects all of its employees, no matter where they are, to the business process.

“Because of IoT technologies, there’s more access to building custom solutions to help you run your business, instead of having to build your business around solutions that are on the shelf already,” Solomon says.

The company has leveraged IoT hardware to build “people counter” devices equipped with RFID readers. Solomon places these devices at the access points to its events to scan attendees’ wristbands as they enter and exit the venue.

“I can look at a room in real time with a fire marshal, and the fire marshal can know with a high degree of accuracy exactly how many people are in the room because of the way we’re tracking inbound and outbound traffic,” Solomon says.

3D scanning and printing has been another useful technology for The Solomon Group. For example, 3D scanning allows the company to scan a stadium during a site visit to take measurements and create a model of the venue. “I don’t have to go back to Atlanta and rescan the width of the loading dock. I can go into my 3D model and look at it,” he says.

Solomon acknowledges that understanding so many new technologies can be overwhelming. He says CEOs should know they don’t need to do everything at once, and instead implement various technologies in a modular fashion. They also can find joy and use their imaginations in the process of making their business more connected. “It can be a fun way of creating something that’s custom that you can take pride in, as opposed to the dreaded IT conversion of yesteryear,” he says.

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Statistics: Don’t Believe Everything you Read

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Fake news is a problem, and the Pew Research Center reports that 64% of Americans think it is creating significant confusion about current events and issues. And it’s not just the politically driven websites that are making things up: In April, the Securities and Exchange Commission filed fraud charges against three public companies, seven stock promotion firms and 27 individuals (including two CEOs) for “alleged stock promotion schemes” in which supposedly independent writers published positive analyses while “being secretly compensated for touting company stocks.”

Statistics are often at the heart of fake news and other misleading reports. Sometimes the numbers are intentionally twisted or fabricated to make a point. Other times they have simply been unintentionally misinterpreted. Either way, as executives look to research to help guide decisions, they should keep an eye out for data-driven distortions of reality.

In judging statistics, executives can bring two powerful weapons to bear: common sense and experience. Do the numbers in a study seem unrealistically high—for example, “There are 1 million taxis in New York City”? If the data doesn’t line up with what you know about the world, be skeptical. “If you had no idea things were that bad, they probably aren’t,” writes Joel Best, author of Stat Spotting: A Field Guide to Identifying Dubious Data.

At the same time, make sure your own biases aren’t getting in the way of that skepticism. As a National Geographic visual-data specialist recently said, “Let’s be honest: Not everybody is willing to look further into a chart if the result confirms what they want to believe.”

Who did the research and the reporting? Who funded it? Who stands to gain from the claims being made by a study? Is it an organization with a financial or political agenda? Is a publication cherry-picking findings to make a study more newsworthy?

Watch for conflicts of interest behind the research, sensational headlines and claims that don’t seem to be backed up by the data. Fortunately, the Internet not only makes it easy to spread false information, it also makes it possible to quickly look into the sources behind reports.

As statistics writer Joel Best has noted, “Every statistic is the product of a series of choices made by the people who produce, process and report the data.” Consider that chain as you consume the numbers.

Studies will vary in rigor: A quick online survey will be less structured than a long-term academic study employing control groups. Here, key questions revolve around samples: How large was the sample? Was this an opt-in study where anyone could participate—which tends to attract those with strong negative or positive views—or was it one that used a scientifically determined sample population? It can also be useful to look at what the study asked.

In a recent TED Talk, data journalist Mona Chalabi cited a widely reported study in which 41% of U.S. Muslims said they support jihad. But another question in the study found that the vast majority defined jihad as personal, peaceful religious struggle rather than violent holy war—a data point that was largely ignored in press reports.

Putting two sets of statistics side by side can imply comparisons that are simply not accurate. Looking at the sheer number of murders, rather than percentages of murders in, say, New York vs. Albany, would not really be useful. It’s also important to remember that correlation does not mean causation: Two sets of statistics may have similar trend lines but no meaningful relationship.

To illustrate, a Spurious Correlations website has calculated close correlations between thousands of disparate data sets, including the divorce rate in Maine and U.S. margarine consumption (99.26% correlation); the number of lawyers in Puerto Rico and the number of people who die from falling out of bed (95.70%); and online Black Friday revenues and the number of people killed by dogs (99.56%).

Even if the statistics are correct, the way they are presented in charts can be misleading. Some common mistakes (or techniques, if one is trying to mislead) are shown above. A. Data points are omitted, time scale is uneven—the results look like a constant increase. B. Two sets of unrelated data on one chart create the impression they are linked. C. 3-D rendering makes identical amounts seem different.

D. Cumulative amounts rather than annual amounts create a false impression of growth. E. Use of truncated Y axis starting above zero makes small fluctuations look dramatic. Today’s tools make it easy for virtually anyone to churn out charts that lead to erroneous conclusions—intentionally or inadvertently.

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Ralph Lauren: Reaching Across Industry Boundaries

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Patrice Louvet, CEO of Ralph Lauren

Earlier this year, Ralph Lauren CEO Stefan Larsson left the company over business-direction differences with the firm’s founder. After a three-month search, the company announced that Patrice Louvet would be coming from Proctor & Gamble (P&G) to assume the top job.

Louvet started at Ralph Lauren—#380 on Chief Executive and RHR International’s CEO1000 Tracker, a ranking of the top 1,000 public and private companies—on July 17, when he also became a member of the board. He is only the third CEO the company has had in its half-century existence.

“pATRICK LOUVET has been widely lauded by his staff and peers as a terrific person to work with and for.”—RHR INTERNATIONAL

Louvet faces the challenge of turning Ralph Lauren around. With struggling sales, the company has been pursuing cost-cutting measures and has closed some stores, and is refocusing its products, marketing and shopping experience. In addition, this will be the first time that Louvet has been the CEO of a company.

As he navigates through those issues, Louvet will be able to draw on the insights of founder Ralph Lauren. Lauren was apparently fairly hands-on in the CEO selection process, and it appears he will continue to be closely involved as executive chairman and chief creative officer. In a statement, Lauren said that “finding the right partner to work with me to take us forward in our evolution has been my primary focus over the last several months…” and cited Louvet’s “collaborative working style.” Louvet will report to Lauren, as well as to the board.

Louvet’s background is not in fashion and apparel per se, but he brings some related experience to the table. His P&G career has spanned more than two decades, with his most recent role being group president of the company’s $11.5 billion global beauty-products business. During his time at P&G, he oversaw a number of high-profile brands, such as Gucci and Hugo Boss beauty products, and gained turnaround experience as well. That background may serve him well in steering the company through a crowded and changing market where apparel brands sometimes struggle to stand out.

“Patrice Louvet is an excellent executive leader,” says Paul Winum, RHR International’s practice leader for Board & CEO Services. “I’ve worked with him the last few years in his role heading the Beauty Sector business at P&G and he has been widely lauded by his staff and peers as a terrific person to work with and for.”

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Build American: The Case for Making It Here

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There’s ample reason to be optimistic about manufacturing in America these days. Output has been steadily increasing, with the biggest jump—1%—in April, marking the fastest rate of growth since 2014, according to the Federal Reserve. At 75.9%, capacity utilization is up to a 20-month high.

“These numbers resonate in a state that’s so heavily dependent upon manufacturing investments,” Ian Steff, executive vice president and chief innovation officer at the Indiana Economic Development Corp., told participants gathered at the Chief Executive’s Smart Manufacturing Summit for a roundtable discussion. “Manufacturing is thriving.”

Workforce quality, increased efficiencies, a stable regulatory framework and access to a large domestic market are among the factors driving this rebirth. Patriotism has also helped, according to CEOs who have had success winning market share by bringing production back from overseas.

For example, Stanley Black & Decker’s decision to move toward making at least 50% of its products in the U.S. paid off—despite higher manufacturing costs. Customers reacted with enthusiasm when the company announced it was moving 20% of over $1 billion of global power tool production to facilities in Indiana and North Carolina, said former CEO John Lundgren.

“Depending on exchange rates, initially we were between 5% and 7% higher on delivered product cost, and that was after [accounting for] savings on transportation costs and time on the water,” he said, noting that the company couldn’t recoup the bump by raising prices. “We ate that. Our customers—Home Depot, Lowe’s, Walmart—weren’t going to pay more for a product.”

Click to enlarge

Stanley Black & Decker anticipated favorable publicity, but the reaction of its target market far surpassed expectations. “It turned out to be a grand slam home run,” reported Lundgren. “My target group is 18- to 24-year-old males who build houses and bridges and things. And 35% of the professional contractors building in the U.S. are of Hispanic descent and very proud to be American or to be working in America. It really resonated with them. We expected it to be moderately positive, but we got an incredible lift in market share.”

For some companies, however, expanding production in the U.S. remains challenging, particularly when making products that are bought and sold on price alone. For safety sign manufacturer Accuform, having a 10,000-piece component molded in the U.S. costs 10 times what it would in China. “I would love to have larger orders like that made locally, but I just can’t afford it,” said Dave Johnson, president of the company, which fulfills smaller and less complex orders at its manufacturing facilities in the U.S.

Cost gaps like that may narrow over time, suggested Mark Osmanski, CEO of Atek Companies, who added that in the meantime, American manufacturers are competing on trip time, quality and reliability. “There are buyers that really value the close connection to the complex engineered products we supply, and then there are customers who are value buyers,” he noted. “[The latter] are buying mostly from China because parts are coming here [at cost]. There’s no way China is making money doing that. There are subsidies floating through the supply chain, which I think is something that will eventually end.”

For other companies, moving toward Made in the USA is hampered by the lack of a labor pool. “We are looking to increase the percentage of parts and components we make in America, but one of the concerns I’ve had in the past is having enough people,” explained Alejandro Centurion, president of global manufacturing operations at The Greenbrier Companies, who reports that the rail car company’s skilled workers are often poached by employers with deeper pockets. “In one of our shops in Texas, and in other states, we have problems with our people leaving to go to other companies that can pay more than our manufacturing company. Recruiting and retaining people has been a challenge,” he said.

“I would love to have larger orders like that made locally, but I just can’t afford it.”

Attracting talent may well be the biggest hurdle American manufacturing faces, agreed Jim Ver Woert, enterprise solution executive with the manufacturing training company Tooling U-SME, who pointed to two factors driving the recruiting and retention challenge. “The first is what I call the Silver Tsunami,” he said. “More than half of the Fortune 100 companies I talk to say that half of their workforce or more is getting ready to retire within five years or less. So that’s decades worth of knowledge skill and ability walking out the door.”

The younger generation’s penchant for changing employers ranks a close second, he added. “Most millennials decide after one day on the job whether they will stay long term or not,” Ver Woert said. “And the reason they make that decision to leave is that the employer doesn’t have a plan for progression, doesn’t have support training. They want to see that an employer is going to invest in them.”

Companies like Cicoil are seeking to address that issue by changing the way they approach recruitment. “We needed to bring in millennials to replace employees who have been here 30 years and are now getting near retirement,” explained John Palahnuk, vice president of operations at the flat cable manufacturing company. “So we recruited by offering [college students] a good working environment and a future. We tell them ahead of time, you give us this and we will give you a path to the next position. This is what you can be.”

Manufacturers must also overcome antiquated ideas about working in a factory that are pervasive among both younger generation workers and their parents. “Kids don’t realize that they can make a good living in these jobs,” said Jim Schellinger, Indiana’s secretary of commerce. “A starting welder makes $80,000; a starting architect does not make $80,000. There’s an awareness issue in getting people to understand what great jobs these can be.”

Educating young people—and their parents—early on can go a long way toward addressing that issue, several roundtable participants pointed out. “When I visit automobile manufacturers in Japan, every single one of them has school buses parked out front because they’re touring young kids around the plant, because this is not the plant of the old days,” said Schellinger. “This is a high-tech laboratory, and they get those kids in there at a young age to start to inspire and educate them about what this really is about.”

Taking steps to connect with high school students and their parents is a key element of changing perceptions about a career in manufacturing, agreed Chris Bopp, COO of Standard Textile. “It’s going to take getting involved in the community, bringing the parents in to see that this is a viable alternative for their child,” he noted. “We spend a lot time in the local community doing that.”

Some companies are participating in progressive programs that not only promote manufacturing careers to graduating high school students, but give those incoming workers a head start. Indiana’s Batesville Tool & Die, for example, partnered with four other companies and the local school system to develop a co-op program to give high school students technical training and exposure to real world manufacturing work.

“We actually put an Ivy Tech Community College facility in the town, and the high school kids participating in the program spend about 60% of their time at the high school, 20% of their time at Ivy Tech and the other 20% rotating through each of the businesses,” says Jody Fledderman, CEO of the precision metal stamping company. “So they are actually getting paid, getting their GED from high school and getting trained technically. By the time they graduate, they’re one semester short of an associate’s technical degree and it didn’t cost them a nickel.”

“By the time they graduate, they’re one semester short of an associate’s technical degree and it didn’t cost them a nickel.”

Dated facilities and equipment can also be a hurdle, noted Paul Boris, COO of Vuzix, a supplier of smart glasses, virtual reality technologies and products. “They want to come into a role where they’re [using] new technology,” he said. “But there’s no technology on the plant floor. They come in and are told, you can’t take that technology you’re comfortable with onto the plant floor. You’ve got to pick up a binder with dust all over it and flip through it.”

“It used to be that people wanted to change their plants so they could bring clients in to show off their new stuff,” said Jeff Sanders, EVP of the Hill & Wilkinson construction company. “Now it’s, ‘I want to [update] so I can bring recruits here. The technicians’ work space at the Bugatti dealership we built is nicer than the lobby. Their ROI is greater on retaining those technicians than it is on the next client. That’s a big shift.”

The good news? Investments in painting a more accurate picture of working in today’s high-tech world of manufacturing are paying off. “You have to change the perceptions, because right now it’s ‘college equals success,’ and that’s just not true,” noted Schellinger. “In Indiana, we’re seeing that change. We’ve gotten kids in high school excited again about vocational and tech education.”

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Apprenticeships: How Earn-while-you-Learn Models can Address your Talent Shortage

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Dow Chemical welcoming new apprentices to its Seadrift Operations

Patrick J. Dempsey, president and CEO of Barnes Group, a global industrial and aerospace manufacturer and service company, knows the value of apprenticeships because he began his career with one. At age 16, he became an apprentice at a shipbuilding company in Ireland, learning welding techniques, among other skills. Although he did go back to school for both his BA and his MBA, it was the apprenticeship that set him on course for his future success.

“I realized very early on the power of learning from others and working as a team toward a common goal,” he says. “I believe apprenticeships instill those values from the very beginning of a person’s career, giving them a solid foundation upon which to build and enabling them to go on to do great things, both in the workplace and in society as a whole.”

When Dempsey took over Barnes Group, he ramped up the company’s apprenticeship program, which currently has 124 apprentices in place. “It’s something that is very near and dear to my heart,” he says.

Dow apprentices learning on the job.

But Barnes Group is in the minority of American companies offering such apprenticeships. Unlike European countries, such as Germany and Switzerland, that have made apprenticeships a preferred career path, the U.S. has maintained a focus on the four-year college degree. “Our educational system pushed everybody to go to college and forgot about the technical trade,” says Linda Wood, trainings program coordinator for Oberg Industries, a diversified manufacturer with more than 750 employees worldwide.

Wood, who once taught in the public school system, says the overemphasis on college diplomas is misguided. “We’ve created this conundrum here in the U.S. where we’re grading schools based on how many kids go to college and anyone outside of college is left holding the bag,” she says. As a result, the U.S. has been at a disadvantage in the war for talent, particularly as it relates to manufacturing. “We are coming up on a large deficit of people due to a perceived lack of attractiveness of manufacturing and people having the necessary STEM skills required for them to be successful,” says Dempsey.

The skills shortage continues to grow. Over the next decade, 3.4 million manufacturing jobs will become available as baby boomers retire and the economy expands, but 2 million of them will go unfilled due to the widening skills gap, according to a 2015 study by Deloitte and the Manufacturing Institute. This projection comes despite the fact that 80% of manufacturers say they are willing to pay above-market rates in areas where talent is hardest to find.

Barnes Aerospace machinist Miroslaw Zywicki working with apprentice Yenuel Martinez

Apprenticeships provide a solution for companies willing to invest up front. They offer participants a debt-free “earn-while-you-learn” alternative to the traditional college route, as they typically begin receiving a salary from the moment they’re accepted and, at the same time, earn credits toward an associate’s degree at a local community college. “Our apprentices pay absolutely nothing for the 26 college credits we provide to each of them,” says Wood. “By the time they’re 21, they are making a good wage and can afford a home. We have many people with four-year college educations applying to come into our apprentice program because, quite frankly, they can’t find a job.”

To be sure, there are significant upfront costs, including tuition, educational materials and labs, apprentice compensation and benefits, recruiting and marketing, and overhead. Apprentices are typically paired with mentors who oversee their progress, an additional time-suck. But the return is big, says Dr. James Weinstein, CEO of Dartmouth-Hitchcock Health System, which launched an apprentice program in 2014 to train medical assistants for its new primary care clinic in Lebanon, New Hampshire. “It’s a rural community and we didn’t have the workforce we needed there, so we needed a way to attract new talent, younger folks.”

In the first go-round, more than 2,500 people showed up to apply for 250 apprentice spots. The program cost of approximately $59,700 per medical assistant apprentice was offset by a $48,000 per-apprentice reduction in overtime costs and $7,000 per apprentice in increased revenue from medical appointment bookings, according to an independent study done by the U.S. Department of Commerce and Case Western University. “Whatever it’s costing us to train these people, we’re reducing overtime expenses, physician turnover and staff burnout; and we’re increasing our appointments book and improving preventive care completions with over 40% internal rate of return on our investment, which is amazing,” says Weinstein. “You don’t get that kind of return in the stock market.”

Barnes’s Tim Callahan, a tool design analyst, instructs apprentice Dave Dobai.

Weinstein doesn’t share the fear that some CEOs have about investing big bucks to train apprentices only to have them poached by a competitor. “That’s always a possibility,” he says, noting that so far, the program has a 90% retention rate. “But when you invest in people, when you train people and when you invest in their future, you get loyalty and you create a culture of caring.”

Dow Chemical isn’t worried about poaching, either. “I see why it would be a concern, but at the end of the day, people want to work for Dow because they see a safe, secure, profitable company,” says Carie LaFond, public affairs leader for Dow’s HR communications. In 2015, after a brief pilot period, Dow initiated an apprenticeship program in the U.S. (as it has done for many years in Europe) in an effort to address the shortage of qualified talent.

“We also have an aging workforce here at Dow, so for us, the apprenticeship program is not only filling that immediate gap, but it’s letting us use the knowledge we have in our current workforce and share that knowledge with the new resources we’re bringing in,” explains LaFond. Dow currently has more than 100 apprentices across Michigan, California, Texas and Louisiana, with a 95% retention rate, and has plans to expand.

“We want to target not only high school graduates but our country’s veterans,” she adds. “We’ve found that veterans already have a lot of the skills and knowledge we need.”

LaFond acknowledges that apprenticeships can be a harder sell to parents who may have had their hearts set on a college education for their kids. But she is quick to add that the apprenticeship program is a debt-free path to an associate’s degree. “And then you’re going to have an opportunity to work for a company where one of the benefits is tuition assistance” for those who want to go on to earn a bachelor’s. “It’s really a door-opening experience,” she says.

Today, more than three-quarters of apprenticeships in the U.S. are in manufacturing, but the model is rapidly expanding across industries, with programs springing up in healthcare, IT, advanced manufacturing, transportation and logistics and energy.

“Apprenticeship is really just a model for training that can apply to almost any industry or occupation,” says Sarah Steinberg, vice president of global philanthropy for JPMorgan Chase. In 2015, Houston Community College received a $4.2 million grant to develop apprenticeship programs with a host of companies, including JPMorgan. The bank will ultimately hire 43 apprentices from HCC; they will undergo a year-long information technology apprenticeship and then be transitioned into full-time roles with the company.

“This gives us the ability to fill a pipeline of skilled workers,” says Steinberg. “It’s also a good way of recruiting a more diverse population. If you’re just going to hire people out of the top bachelor’s degree programs, there are a lot of reasons why that doesn’t end up being the most diverse group.”

To learn more about the steps smart companies are taking to find, hire, train, engage and retain talent, register for the CEO Talent Summit.

Read more: 7 Steps to a Successful Apprenticeship Program

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7 Steps to a Successful Apprenticeship Program

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In 2014, President Obama’s Advanced Manufacturing Partnership piloted an apprenticeship program with Alcoa, Dow Chemical and Siemens and two colleges in California and Texas to customize training and close the skills and unemployment gaps. The three companies partnered with the Manufacturing Institute on an “Employer’s Playbook for Building an Apprenticeship Program.” An excerpt follows.

1. Build the business case. A strong business case for apprenticeship will secure leadership buy-in, detail cost and time requirements and promote accountability for success. Identify stakeholders and outline milestone dates for implementation. The business case should be based on your goals for building your workforce.

2. Partner up. Collaborating with the right partners allows you to leverage existing networks and learn best practices. Partners could include local community colleges and high schools; company coalitions; and public entities and labor market intermediaries, such as local chambers of commerce.

3. Focus on the framework. Designing a program to build the skills your organization needs is crucial. Classroom curriculum will introduce theory and concepts, while on-the-job training reinforces and further builds knowledge; the two should work in tandem. Make sure to invest in a collateral support network that includes mentors, coaches and peers.

“Set clear metrics for measuring success and a system for monitoring program performance.”

4. Be smart about marketing. Common overseas, apprenticeships are viewed as less than desirable in the U.S. Invest in creative branding to attract candidates
and target multiple groups with unique approaches.

5. Choose wisely. Develop a fact-based, multi-step, structured selection process that will gather information from many sources, including résumé, standard screening tests, formal interviews and simulations.

6. Track your progress. Set clear metrics for measuring success and a system for monitoring program performance. Monitor your apprentice’s success as you would an employee’s—through fact-based feedback and performance assessments. Be sure also to assess the effectiveness of classroom training and make changes where necessary. Flexibility is key, particularly in the startup year. If something isn’t working, change it.

7. Have a transition plan. Ideally, all apprentices will have the opportunity to move into full-time roles with the company. Once those positions have been identified, the onboarding plan should be developed well in advance to ensure a smooth transition. Guide these new employees through the process with coaching and celebrate the apprentice’s achievement and make sure they know they are valued.

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Companies Benefit When CEOs Help Workers Fight Obesity

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People exercising at a Beachbody gym

Obesity among American workers costs the nations billions in lost productivity—upwards of $8.65 billion per year, which is 9.3% of all absenteeism costs, according to Yale News. When a chief executive provides activities to help workers struggling with obesity, it also can help boost the company’s bottom line.

Obesity has been shown to undermine energy and contributes to absenteeism, so there’s “absolutely a productivity benefit related to helping staff get healthy and fit,” says Carl Daikeler, CEO and cofounder of Beachbody, a Santa Monica, Calif.-based provider of fitness and nutrition programs.

But for the CEO, it goes beyond that: “When staff and management feel good about themselves, they will create a company that feels good about itself,” Daikeler says.

CEOs who serve the needs of their workers are demonstrating the qualities they want workers to demonstrate toward customers, he says.

“There’s a trickle-down effect—showing that being humane is important to our company, which will hopefully be reflected in how the customer is treated,” Daikeler says. “Who wouldn’t want to return to the company that treats them well?

Curbing workplace obesity can be thought of in a similar way to helping employees quit smoking. For instance, if a company is trying to help people stop smoking, CEOs wouldn’t condone jars of cigarettes sitting out on people’s desks. Beachbody has the same philosophy toward helping people achieve their weight-loss goals.

“Anyone can have all the candy and snacks they want to bring in, we just ask them to not put that out on their desk,” he says. “That’s just a respectful way to be sensitive to the fact that people may be trying to build their self-discipline and they could use a little help.”

“When you create a culture of wellness, you find people are more productive and engaged—you see improvements in teamwork, camaraderie and morale. All of that is incredibly valuable for the bottom line.”

Same goes for how to best celebrate birthdays. “We’re not six-year-olds,” Daikeler says. “We don’t have to have cupcakes to celebrate someone’s anniversary of being born. We can sing for them, and we can even have lunch to wish people well. But it does not have to undermine anyone’s health and fitness goals, which is contrary to celebrating the person’s birthday anyway.”

At Beachbody, leaders want staff and management to be steeped in what the company sells, he says. The company provides “Shakeology” serving stations, in which healthy shakes are served to anyone all day long at no charge. The company also has ample fitness facilities that include access to the Beachbody On Demand streaming video service, with all the company’s videos to use all day, every day.

The company also organizes what it calls “Challenge Groups,” in which people organize to complete one of our programs together, like 21 Day Fix, and support each other through the three-week fitness, nutrition and peer support program, Daikeler says.

Employees taking a Sonic Boom yoga class

It’s absolutely critical to create and promote a culture of wellness in any business “because healthier employees are happier employees,” says Danna Korn, CEO and co-founder of Sonic Boom, a high-tech wellness company based in Carlsbad, Calif., that offers fun and active daily challenges via web-based portals and mobile apps.

“When you create a culture of wellness, you find people are more productive and engaged—you see improvements in teamwork, camaraderie and morale,” Korn says. “All of that is incredibly valuable for the bottom line.”

While it’s important to look beyond obesity, some people use it as a benchmark, she says. When a workplace is rampant with it, there also is a higher probability of diabetes, heart disease, high blood pressure, increased stress, problems with relationships and other issues.

“Employers should be focused on the big picture, helping people make improvements in daily health habits—even if they’re small ones,” Korn says. “As CEO, you have to walk the walk and lead by example.”

Korn rides her bike to work, wears yoga pants to work so she can go to the company gym a few times every day, and brings her dog to work and encourages everyone to take breaks and take the dog for a walk.

Sonic Boom also provides bikes for workers to use, and for amusement, company leaders ring cow bells and then people do sit-ups together or some other sort of activity.

Other things CEOs can do, she says:

  • Hold walking meetings
  • Provide bikes/helmets for people to use (maybe to ride to get lunch)
  • Organize group activities on weekends or after work (e.g., hikes)
  • Create competitions for which employee can get the most activity during a weekend
  • Provide optional standing desks
  • Create a “gym”—which can even mean putting a treadmill in a converted office room

“I think the biggest thing as a CEO is giving permission to your employees to have fun while getting healthy at the same time,” Korn says.

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How to Understand—and Deal with—your Company’s Skills Challenges

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Speakers and attendees discuss their talent challenges at Chief Executive’s CEO Talent Summit.

The conversations overheard at every Chief Executive Group event this year undoubtedly echo the conversations you’re having with your board, your CHRO, and the heads of every division in your organization: how to deal with the skills gap that has made it so difficult for companies throughout America to fill available jobs, increase often-stalled productivity, navigate change, and fuel the sort of disruptive activity that is essential for survival in this economy.

Those having the discussions range from small manufacturers who say their Number One problem is “getting workers to show up and pass the drug test” to larger companies who wonder how they’ll fill their workforce pipelines when baby boomers retire and leave few workers to take their place. In addition, all sorts of companies are searching for highly skilled employees whose abilities outpace the STEM-oriented training currently available in much of the country.

To address these issues, some companies have cut deals with local community colleges and developed courses specific to their needs. Others have created their own in-house “universities” while offering employees the choice of reskilling or leaving the company. Several top tech executives recently announced plans to help underwrite and craft STEM education in America’s public elementary and high schools.

How deep is this skills gap? Writing in Bloomberg Businessweek recently, economics editor Peter Coy noted that while businesses are complaining “that they can’t find workers with the skills they need…workers and their advocates respond that employers simply aren’t willing to pay enough.” Other cynics have suggested that complaining companies are simply trying to pass the buck, in an attempt to get government to pay for training programs.

“A skills gap is present when training or education for a given occupation does not adequately prepare students for the demands of that occupation.”

Last week, in an effort to get to the bottom of the skills gap question, a centrist think tank called Third Way released a study that combined five different measures (job fill rate, wage gains, education and credential attainment, employer surveys and state analyses of labor supply and demand) in order to smooth out any prejudices or data inadequacies that might be inherent in one or another of the statistics.

As Third Way explained, “There is little national-level data because much of the data is gathered regionally or is incomplete. This makes it hard to get an accurate picture of how many workers have certain skills and credentials, and which skills or credentials employers really need.” Critically, they continued, “proponents and skeptics of skills gaps each point to different types of data to make their case, or interpret the same data differently.” By looking at all five measures, Third Way felt it could present a clear, balanced, industry- and even state-based picture that not only would be accurate, but useful to the industries and states affected.

Even so, to get at the truth, Third Way needed to go beyond the data in its analysis. For example, while four of the five data sources indicated a dire shortage of healthcare workers across the country, a look at wage growth—which was flat—seemed to undercut the other findings. Wages tend to grow when there are shortages of available employees, so why weren’t they growing in the healthcare industry? As Third Way concluded, “wages in the healthcare sector are largely controlled by public healthcare funding and insurance markets.” So, talent shortage or not, no significant wage growth was possible for healthcare workers.

Breaking down the reasons for the skills gap
Although, overall, Third Way’s research indicated a nationwide, cross-industry skills gap, there were some critical variations by industry, by state and by cause. For example:

• Technology jobs, across various skill levels, are going unfilled due to a lack of qualified candidates. The U.S. Department of Labor noted that this problem was particularly evident for companies seeking “computer user support specialists” in Missouri and California and for those looking for software developers and computer programmers in New York and Washington, DC.

• The shortage of highly qualified K-12 teachers is most evident in classrooms where STEM is taught. “While we actually have a surplus of elementary teachers,” Third Way noted, “we don’t have enough educators being prepared for or entering into STEM teaching roles.”

• Financial services, Third Way warns, is on the verge of a worker shortage—and, unlike with healthcare, wages have been rising to lure skilled workers to available jobs—median wages in financial services rose almost 4% between 2013 and 2015. The shortage of specific types of financial services workers appears to differ by state, reflecting the industries clustered in those areas. So, while Connecticut needs twice as many claims adjusters and insurance underwriters as it currently has, Colorado is facing growing shortages of accountants and auditors. Underlying this shortage, Third Way suggests, is the age of the workforce: with millennials flocking to other industries, there are fewer and fewer employees to replace retiring baby boomers.

• Baby boomer retirement also will contribute to worker shortages in both manufacturing and construction. In the case of manufacturing, Third Way says that even though manufacturing wages are solid, an increase in college attendance has made manufacturing training programs less attractive to potential workers. And this, they suggest, is likely to lead to the loss of U.S.-based manufacturing jobs “as companies relocate to countries with a larger supply of qualified workers.”

Third Way also points to an increasingly important nomenclature issue: the difference between a skills gap, a skills shortage and a skills mismatch. Though these terms are often used interchangeably (even, Peter Coy notes, by Third Way), it’s critical that companies analyzing their own situations—and figuring out what to do—understand what differentiates one from the other. Here’s how Third Way explains the difference:

• “A skills gap is present when training or education for a given occupation does not adequately prepare students for the demands of that occupation.”

• “A skills shortage…is when training for a given occupation is adequate, but there aren’t enough people getting that training and then entering that occupation.”

• “A skills mismatch is when…the supply and demand of skills—usually measured by education level—are out of sync.” This, they note, is often evident when companies are hiring labor “with more education or skills than the job actually requires.”

While Third Way’s study may appear to do little, at least on the surface, to help companies bedeviled by whatever type of “skills challenges” they’re facing, it does underscore what is clearly a nationwide, industry-agnostic problem. It also goes a long way toward explaining not only the common causes of this problem, but also the key differences faced by specific industries, job titles and companies, which can help businesses—and, especially, their leaders—start figuring out how to turn these challenges into opportunities.

Dig more deeply into a wide range of talent issues at Chief Executive Group’s annual Talent Summit, in Orlando on October 25th and 26th.

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Reasons to be Optimistic about the U.S. Manufacturing Renaissance

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The future of manufacturing is one of the most talked-about issues in the U.S. right now, and it clearly resonates with the American people. Overseas companies operating within the U.S., many employing thousands of American workers and contributing to the technological strength of U.S. manufacturing, can play an important role in this discussion.

One such company is Mitsubishi Heavy Industries (MHI), a Japanese company with U.S. headquarters in Houston and a significant number of group companies, partners and investments across the U.S. They locally manufacture a range of industrial products, from forklifts, turbochargers and key manufacturing equipment, to massive machinery like gas turbines and carbon capture technologies.

MHI’s President and CEO, Shunichi Miyanaga, is bullish on U.S. manufacturing and plans to expand operations in the United States. He believes that there are opportunities for the company to increase business scale in the U.S. by 20% over the next two years. The U.S. is MHI’s largest market outside Japan, with North America representing $7.5 billion of MHI’s nearly $40 billion total revenue. Miyanaga also anticipates adding more jobs over the next two years, as well as bringing back key technologies that were initially developed in the U.S. – and fine-tuned in Japan – back to the U.S. Here is an excerpted Q&A.

Q: You have had success in a wide-array of businesses in U.S. and have plans to expand your operations. In what areas do you see growth and what is your strategy moving forward?
A: I believe strongly that MHI needs to be more proactive in the United States market and increase our direct investment there. We are seeing strong growth in advanced industry and technologies such as ICT, artificial intelligence and others. I am confident in the long-term development and growth opportunities in the U.S.

We also have longstanding partnerships with some of the leading U.S. manufacturers and technology companies to supply parts for civilian aircraft, autos, construction equipment, forklift trucks and more. These partnerships give us a strong base for further cooperation and expansion in the U.S. While many of our competitors sell products in the U.S., we are building factories to make products in the U.S. (for example, our turbine factory in Savannah, Georgia) for both the local market and the Americas region. Going forward, I would like MHI to conduct more of our business within the U.S.

Q: The plant in Savannah makes gas turbines – massive machines that turn natural gas into energy. Is energy going to be a growth area for MHI?
A: MHI is the number one producer of 250+ megawatt class gas turbines in the United States. Furthermore, we expect that demand for such large-size gas turbines will steadily increase in the United States, especially if the shale industry continues on its current trajectory.

In addition to gas turbines, it’s also important to remember that the United States has abundant coal resources, including both high-quality coal and clean low-grade coal. For the time being, natural gas energy remains popular and widely accepted, but in the future there may be a tradeoff point for adopting advanced, clean coal technology like IGCC (Integrated Coal Gasification Combined Cycle). MHI is a leader in this field and has already had significant successes with this clean technology in Japan and elsewhere.

“we ensure that newer recruits receive on-the-job training and guidance from our experienced employees, which helps to foster the next generation of engineers and specialists.”

Q: Coal-driven energy remains controversial in the U.S. and around the world. What differentiates MHI’s energy technology as it is applied in the U.S.?
A: We believe our technologies give us an edge in achieving significant U.S. growth. In particular, our large-scale and highly efficient gas turbines can take advantage of the current cheaper gas facilities and contribute to sustainability through environmentally friendly technologies. For example, CO2 capture technology developed by MHI is now being utilized in the U.S., with the world’s largest carbon capture system under construction in Texas and due for completion in early 2017. Using MHI technology, this system will capture and store 1.4 million tons of CO2 per year while simultaneously boosting energy production. This is truly a world first, happening right here in the U.S.

Your carbon capture system is interesting but MHI utilizes other technology that started in the United States but has been absent for many years. You’ve stated that you want to bring technology back to the U.S., which will create demand for more jobs. Please explain.

Many of MHI’s technologies trace their origins to the U.S. For example, some of MHI’s steel processing technology was originally from the U.S., developed on license from companies here. Because of structural changes in the U.S. manufacturing industry, many of these companies disappeared, but we would like to bring these technologies back to the U.S.

Previously, it had been impractical for us to reintroduce such technologies to the U.S., but with recent technological advances, it is possible to do so quickly and smoothly. For example, the technologies used for our U.S.-based gas turbine assembly are standardized, from our factories in Savannah, Georgia, to Takasago in Japan. They use the same assembly processes and the same equipment, which requires highly skilled individuals to utilize and maintain the technologies.

The U.S. is of course globally renowned for the innovative strength and creativity of its advanced industries and ICT. However, the country also needs basic infrastructure technology. Maintaining such industries at some level domestically is important and MHI is well positioned to support this. In this way we can contribute to the United States, working together with the American people. That is my dream.

Q: If you are able to continue to bring these technological breakthroughs back to the U.S., you’ll need a highly trained work force. Are you concerned about being able to find enough skilled workers?
A: With our efforts to bring manufacturing back to the U.S., we are focusing on high-end technology and skills. For large-scale gas turbines, for example, we need to operate repair and maintenance shops for all the equipment we sell. This requires workers with skill and precision.

We are focusing our business on adding more value and on integrated engineering services, so one of the most pressing concerns for me is the impending skills gap employers will face in the coming years. This gap is particularly alarming in the manufacturing sector where, according to some studies, 2 million U.S. manufacturing jobs may go unfilled due to a lack of skilled candidates. This is certainly an issue we must address promptly. One solution is a strong focus on skills transfer. At MHI, we ensure that newer recruits receive on-the-job training and guidance from our experienced employees, which helps to foster the next generation of engineers and specialists. In this way, essential manufacturing skills and craftsmanship can be retained, bringing vitality to the future of manufacturing in the U.S. and elsewhere.

Q: You went to school in the U.S and worked at MHI operations across the country. Is that why this is so important to you?
A: I have a strong personal connection and fondness for the U.S. Back in 1979, I was lucky enough to study at the University of Chicago’s Booth School of Business. Having completed my studies, I then returned to the U.S. in 1983 where I worked for various businesses, including a Japan-US joint venture steel business, and later at U.S. Steel. This gave me first-hand experience of the strength and vitality of U.S. industry.

I continue to have strong interest and close ties with the U.S. and always enjoy my frequent visits there. I have for some time been carefully considering how and when to expand MHI’s presence in the U.S., and I believe that time is now. With the advancements we’re making in the energy sector with our gas turbines and carbon capture technology, the excitement around our regional jet business and the tremendous growth in our forklift operation, we couldn’t ask for a better opportunity.

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Dennis Muilenburg, CEO of Boeing: #24 of Top 1,000 Public/Private Companies

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Dennis Muilenburg

Chairman, President, and CEO (Chairman since March 2016, President since December 2013, and CEO since July 2015)

Previous Position: Vice Chairman and Chief Operating Officer

Company start date: 1985

First position at company: Engineering Intern in Seattle

Age: 53

Education: Received his bachelor’s degree in aerospace engineering and honorary doctor of science degree from Iowa State University, as well as a master’s degree in aeronautics and astronautics from the University of Washington

Annual salary:  $1,640,962
Annual bonus:  $7,268,598
Equity (Stock): $5,200,019
Other:                $837,148
Total:          $14,946,727

The post Dennis Muilenburg, CEO of Boeing: #24 of Top 1,000 Public/Private Companies appeared first on | Chief Executive magazine.

CEO Positions of the Week

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CEO | Consumer Goods/Consumer Health | Barcelona

Antai is looking for a CEO for a new venture in the digital and health space. The CEO will be responsible for developing high-quality business strategies and plans together with the board, ensuring their alignment with short-term and long-term objectives.

The CEO will build, lead and motivate a strong team, oversee all operations and business activities to ensure they produce the desired results and are consistent with the overall strategy and mission. He or she will present the company’s vision, roadmap and results to shareholders and potential investors and build trust relations with key partners and stakeholders.

Experience in marketing roles in the consumer goods and/or consumer health industry is required, along with experience in developing profitable strategies and implementing a vision. The right candidate should have an entrepreneurial mindset with outstanding organizational and leadership skills; analytical and problem-solving skills; an MSc/MA in business administration or a relevant field and a passion for the digital sector and lifestyle brands.

For more information

CEO | Events Management | New York, NY

Eurovet Americas is looking to recruit a new CEO. This position will oversee strategy implementation. As the CEO of a small company, she/he will be the firm’s No. 1 sales and business development representative. This position will manage the key accounts of the company and will look for new business opportunities within and outside the actual portfolio.

Responsibilities include managing growth perspectives within the actual portfolio, launches, and searching for M&A in both North and South America; the financial management of the company (including budgets, controlling, reporting, forecasting, accounting); the marketing direction of each show (including the conception of the campaigns with the Global Eurovet communication team and its local implementation and activation, lead generation, website management, e-marketing campaigns, telemarketing campaigns, publishing, onsite activation, etc.); and supervising the operational and technical management of each trade show.

The right candidate thrives in a fast-paced environment; is able to work quickly and be flexible as priorities change; has excellent interpersonal skills; is able to communicate directly and diplomatically; has an ability to work with geographically distributed teams (headquarters in Paris, France).

The ideal candidate is able to speak and write in English and French, with Spanish a plus. He or she will have an entrepreneurial mindset and leadership; experience in sales and marketing (print and digital); and great planning, organizational and financial skills.

For more information

CEO | Technology | Malta

Harvest, the technology division of Hili Ventures, is seeking to appoint a CEO who will continue to develop quality business strategies and implement business plans in conjunction with the senior management team. Harvest supports and nurtures the growth of the companies which already form part of its portfolio. It also continues to prospect to invest in business opportunities which complement its subsidiaries to build a competence in a broad spectrum of emerging technologies.

The CEO will be responsible for driving the culture, identifying new and significant opportunities, and generating increased profitability. He or she will provide leadership and ensure consistency with the overall business strategy, vision and mission and act to identify solutions for sustainable growth. He or she will work closely with the CFO to set targets for the businesses and review financial reports to help originate solutions and process improvement ideas. The CEO will consult with the CTO on the division’s technical strategy.

The preferred candidate will have a minimum of 10 years’ experience in a senior management role, possessing strong decision-making and leadership abilities to mentor and enable the growth of the senior management team. A willingness to travel extensively to identify international opportunities is essential.

For more information

CEO | XpertTech | Greater Boston Area

A leading Boston-based staffing company with $7 million plus in revenues is looking to pivot to AI/machine learning services and consulting. The vision is to implement custom solutions that deliver cognitive capabilities solving real business needs with a primary focus on healthcare, cybersecurity, autonomous cars and education industries. The goal is to become a one-stop shop for AI and machine learning services with a focus on a data and algorithmic approach and enabling the shift from workflow systems to intelligent systems.

The CEO will play a key part in building and developing a world-class AI consulting team, nurturing the culture forward while transforming the company from generic staffing into a more sophisticated, professionally managed and scalable version of itself.

Requirements include 10+ years of progressive and upwardly consulting and technology experience encompassing general management and commercial leadership; 5+ years of recent experience as CEO or a C-level executive leading a high-growth team.

The right candidate should have an entrepreneurial mindset with outstanding organizational and leadership skills; ability to build out a robust technology, sales and marketing team; experience in developing or improving go-to-market strategies; excellent communication and public speaking skills.

For more information

CEO | Salute Safety Solutions | New York, NY

A post-revenue start-up business focused on enhancing and scaling environmental health and safety and risk operations for research centers and healthcare is looking for a CEO. Created as a joint venture between a top tier academic medical center and a healthcare investment firm, Salute is building a cloud-based management tool as the foundation of an outsourced services operation.

Responsibilities include growing the customer pipeline and revenues through direct sales and strategic partnerships; overseeing technology product development; building outsourcing and advisory capabilities, including channel partnerships; recruiting a high-caliber team and advisors as needed and executing a successful capital strategy.

The ideal candidate is a senior level executive with a track record as a serial entrepreneur. Experience in enterprise sales, technology, and outsourcing in healthcare is required. A minimum of 10 years’ experience in corporate businesses, with at least 4 years in management and or supervision of staff, is required. The right candidate should also have both an undergraduate and graduate degree from a leading academic institution.

For more information

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My First Job: Belfor’s Yellen Learned Billion-Dollar Lessons as 11-Year-Old Dishwasher

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A few months ago, Sheldon Yellen went back to the coney-dog restaurant in suburban Detroit where he got his first job as a dishwasher back when he was 11 years old. One of the owners was still running the place, and that day’s dishwasher was playing hooky.

So, at 59, Yellen—now head of a $1.5-billion property-restoration empire—spent about 45 minutes washing dishes, to help out his first boss, just for the heck of it and maybe for old times’ sake.

“They’re still using basically the same system, the same type of equipment, that I used when I was there 40 years ago,” marvels Yellen, who is CEO of Belfor Property Restoration, based in Birmingham, Mich., and with offices and operations across the United States and around the world. “And you know what, Pete [his old boss] still called me ‘Boy’ just like he did when I was 11 years old!”

Yellen had to take his first job at such an innocent age because his father was severely disabled, his mother’s hands were full raising Sheldon and his three younger brothers, they were living on welfare—and they needed the money. His mother would drop him off at the restaurant after each school day and pick him up at about 11 p.m.

“My responsibility first and foremost is to our people. I owe them security and sustainability and a safe, happy working environment.”

But today Yellen has no regrets about being a child laborer, not only because he helped his family survive financially but also because he learned lessons that have proven invaluable, as he thrived first in sales at his in-laws’ company and then eventually took over and built Belfor into the industry-leading enterprise it is today.

Here are 4 lessons he learned from is first job.

1. Treasure opportunity. “I learned that no matter what you’re doing, if you’re lucky enough to be given an opportunity, you need to make the most of it,” says Yellen, who has expanded Belfor relentlessly through organic growth and acquisitions.

“I was only a dishwasher, but someone was taking their hard-earned money and betting on me to do a job for them,” he says. “And if I did it well, poorly or indifferently, they were paying me for that time. I learned how important it was to do that job right because someone was counting on me.”

2. Look for “quiet heroes”. One day when a waitress didn’t show up for work, Pete said, “Hey, Boy,” took off Yellen’s dishwasher apron, and told him to go start waiting on tables. That evening he made $19 in tips, or about three times more than he made in a day’s wages, and secured a new job at Leo’s Coney Island.

“I learned that if you do the right thing long enough and quietly enough and keep doing it, when something comes up and they have a choice to call on you, or two or three other people, they’ll pick the guy or girl who’s been doing the right thing all along,” he says.

In his business today, he looks for those “quiet heroes” when he wants to advance someone. “I don’t care if they’re a carpenter, a painter, a roofer or a guy who does water extraction—I’m looking for good people with heart and integrity and passion and loyalty and compassion. That’s who I’m going to give the next opportunity to.”

3. Value a dollar. Yellen received one of the biggest shocks of his young life at the end of that first evening of waiting on tables. He received a $1 tip from a customer—about as much as his wage for an entire hour—and in his excitement wanted to call his mother. So, he made change for the dollar and used a dime on the house pay phone.

“And she hung up on me!” he remembers. “When she came to pick me up that night, she said, ‘I heard what you said when you called—but you took 10% of that tip and wasted it on a phone call to me. I’ve taught you better than that about the importance of a dollar.’ That was my life lesson in the value of money.”

4. Provide sincere customer service. The key is to “believe that you don’t just need to provide customer service but that you need to provide it times three,” Yellen says.

So, after he was promoted to waiter at 12 years old, “I used to write on every [bill], ‘Thank you,’ when I would put it on the table. I still do that now when I’m a customer in a restaurant; I write, ‘Thank you for your service’ and sign my name. I learned the power of saying thank you to people.”

5. Prioritize employees. Yet Yellen will tell you that Belfor’s employees are even more important than its prized customers. That’s why he personally signs birthday cards for each of the company’s 7,400 employees each year.

“I don’t believe our customer ‘comes first’; our people come first,” he says. “My responsibility first and foremost is to our people. I owe them security and sustainability and a safe, happy working environment.”

And in providing that, Yellen says, he tries to “maintain relationships with as many as I can. I show up at weddings and funerals and graduation parties and family celebrations. And I spend half my time flying around to town hall meetings of our employees.”

The post My First Job: Belfor’s Yellen Learned Billion-Dollar Lessons as 11-Year-Old Dishwasher appeared first on | Chief Executive magazine.

If you’re Considering Blockchain, Ask your Team these 5 Crucial Questions

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Excitement about blockchain—the revolutionary cryptocurrency technology—has triggered a wildfire of public and private proposals to adopt industry-based blockchain solutions.

But like putting a jet engine in a car, changing fundamental assumptions of where blockchain is implemented will change outcomes. The reason is, many proposals fail to address how key assumptions will change when the technology is deployed in a new environment. And there is scant literature for executive supporters to educate themselves on potential pitfalls. Blockchain may hold the key to propel an industry to new heights. But the technology also could cut you off from your customers and create a serious business liability.

Blockchain 101: What is it and what is it used for?
Blockchain is a highly disruptive technology, which first became popular with bitcoin, that has empowered its cryptocurrency users even when governments have sought to shut it down. Bitcoin is one of many cryptocurrencies now based on blockchain technology. Cryptocurrencies can be used to pay for goods and services, transfer money across borders, exchange for dollars and other currencies, and store wealth, though it is highly volatile. It is all done without rules or permissions other than what is coded into the blockchain. Industry insiders and outsiders are actively looking for ways to disrupt most every other industry out there with blockchain.

Setting aside cryptocurrencies as the biggest single use, you can Google most any industry along with the words blockchain to find companies either using an industry blockchain or to find people investing and building one. Governments that were once highly skeptical are now getting involved as well. Just a very small sample: Our U.S. Federal reserve is now interested in it for monetary transaction. The Indian government recently announced interest in using blockchain to curb financial fraud. The UN is interested in blockchain to bring identity to people as a humanitarian right, and the list continues to grow.

“blockchain activity could
become a window for competitors to
see into your company. Consider
how the BLOCKCHAIN proposal addresses intelligence your competitors will glean.”

Bottom lining it for you
Benefits of an industry blockchain solution include:

  • Distributed, so all participants have access to all the data on the blockchain
  • Reliable, with no single point of failure
  • Transparency, as participants can see all blockchain activity in real time
  • Ability to transact on a blockchain without intermediation of a third party
  • Potential for significantly lower transaction costs

Benefits of cryptocurrencies include:

  • Distributed, with no borders, so no single government can shut them down
  • Highly reliable and redundant, with no single point of failure
  • Governments cannot change how they work without a consensus of its participants
  • Permission and registration are not needed to use them. You can simply download a cryptocurrency wallet app on your phone or computer and begin accepting cryptocurrency.
  • More and more companies are accepting cryptocurrencies as a form of payment.

What you need to know to move forward
Prior to implementation, asking your CIO these 5 crucial questions when considering or shaping a blockchain proposal can help reduce risk and improve success.

1. Will the proposal empower competitors to disrupt my business? Blockchain works by packing transactions into blocks of data. Transactions in one block are used to verify the validity of the next block and thus form a chain. All blocks in the chain must be present for it to work. “Miners”—people who maintain the blockchain—put transactions in a block and then solve complex algorithms to “win” the right to add that block to the blockchain. This picture isn’t as simple as some literature would have you believe. Add to this mix that miners don’t always agree who won and newer blocks get dropped all the time. Ultimately, the more computing power a miner has, the more chances s/he has to win the right to put a block on the blockchain and keep it there.

If you consider a blockchain proposal with other industry participants, manipulation by competitors becomes a serious concern. Your smallest competitor could rent additional cloud computing power at key moments to “win” the right to cut you out. Imagine failing to service customers during key times, or failing to release a liability at a crucial moment because your competitor has cut off your ability to add transactions to the blockchain.

This isn’t an issue in the cryptocurrency world because users know that their transactions are a commodity to blockchain miners. In an industry setting, however, transactions are not a commodity and competitors will not behave the same way. Miner misincentives are a serious issue that should be addressed in any proposal.

2. Will the proposal hand competitors real-time intelligence about my business? In blockchain environments, everyone shares all the data so that new blocks can be verified. In an industry setting, competitors will see blockchain activity in real-time. That real-time activity will tell them who owns certain transactions and how much traffic is attributed to your business. As such, blockchain activity could become a window for competitors to see into your company. Consider how the proposal addresses intelligence your competitors will glean from an industry blockchain.

3. Does the proposal address regulatory issues? For a blockchain to function, every miner must receive a verifiable copy of all the data. Blockchain complicates protecting data because copies of the data will be spread across every blockchain participant. So you may assume liability if your competitor is mishandling your data. Also, you may lose the ability to remove data as may be required by law.

Encryption schemes that attempt to address these challenges cause two problems: 1) A breached encryption key would irrevocably release the data and 2) the quality of encrypted data cannot be verified. You will not be able to verify that your competitors are acting in good faith.

4. Does the proposal address data quality? The world’s best contributory databases require competitors to contribute data to use contributory services and they have implemented rigorous industry-wide analytics to check data quality before adding new data to the database. Blockchain is a poor substitute because it mimics the poorest-quality contributory databases. Blockchain has no allowances for a centralized authority to enforce timely updates or data quality.

The need for timely updates is easily understood. Data quality is a difficult and nuanced topic. Stopping data quality issues in a contributory environment requires complex analytics performed in a centralized location. It may only take one IT mistake to pollute the data for everyone and ruin a blockchain solution. How a proposal addresses data quality is key.

5. Does the proposal force you to share too much? Many markets in which participants share critical data use an intermediary who limits the data shared, the risk and liability. Frequently, only conclusions are shared. A proposal that asks you to use the blockchain to share critical data must address how it maintains data privacy, limits risk and limits liability.

Well-examined risk belongs in any successful business. This applies to blockchain proposals as well. I continue to be enthusiastic about blockchain, and I am optimistic that shaping new proposals is the crucial step to disrupting the next industry with blockchain.

The post If you’re Considering Blockchain, Ask your Team these 5 Crucial Questions appeared first on | Chief Executive magazine.

CEO of the Year Stan Bergman Exhorts Business Leaders: In the Fourth Industrial Revolution, Don’t Leave People Behind

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Last Tuesday night (July 18), Henry Schein CEO Stanley M. Bergman became Chief Executive’s 32nd CEO of the Year. In his powerful acceptance speech, Bergman discussed his own immigration to the United States from South Africa in 1976 (“the country welcomed us with open arms”), discussed the importance of teamwork to Henry Schein’s success (“It takes teamwork to make a dream work”), and told the CEOs who had assembled to honor him that “we are here to bear witness to the irrefutable fact that the United States of America provides that rare environment that allows people to dream big, and to turn those dreams into reality,” creating “the special energy and DNA that gives birth to so many American stories like the Henry Schein story.” Building on that theme, he discussed the role of CEOs in what he noted may be the most important business development of this century: the Fourth Industrial Revolution. Here is an excerpt of his powerful words. 

Since this audience tonight is comprised of so many influential business leaders, I would like to use this occasion to reflect on something that has been on my mind in recent months.

My concern is that the environment of what many call the Fourth Industrial Revolution is threatening this unique American DNA. Right now, the Fourth Industrial Revolution is reshaping our world by accelerating the pervasiveness of technology. We as business leaders have a responsibility to be engaged in the shaping of society.

So here is my appeal to all business leaders: We cannot leave people behind.

Too many in business have been too focused on going fast and not focused enough on going together. The result is a minority of huge beneficiaries and an increasingly vocal majority of those left behind. If we focus too much on the speed of change rather than ensuring that all benefit from change, then we risk greater disenfranchisement and civil dissent, which jeopardizes global stability and all democratic societies.

“here is my appeal to all business leaders: We cannot leave people behind.”

We and our companies are beneficiaries of the Fourth Industrial Revolution, and we have an obligation to civil society to do a better job expanding these benefits to others. Everyone should benefit from the huge bounty emerging from the Fourth Industrial Revolution. Everyone should have a stake in the emerging technologies.

We need a creative commitment by business leaders to impart the benefits of the Fourth Industrial Revolution more broadly. This is not about taking positions regarding taxes, where there is room for genuine disagreement, but about bringing more people into the digital economy.

That is my appeal to you today. As business leaders, we should be societal leaders during this time when civility is severely challenged and when trust in business, government, international institutions, the media and civil society leaders are at historic lows.

As business leaders, we should work with all, including our elected officials, to instill a spirit of bipartisanship and civil discourse. We should demand that our elected officials, regardless of political belief, put aside their political differences to work together for the greater good of all Americans.

Americans thrive on the diversity of thought that is freely expressed by people from all walks of life and diversities. As business leaders, we should work to foster greater tolerance and respect for our differences.

Nobel Laureate Elie Wiesel’s counsel still holds true. He said, “There may be times when we are powerless to prevent injustice, but there must never be a time when we fail to protest.”

“There may be times when we are powerless to prevent injustice, but there must never be a time when we fail to protest.”

Business leaders must work together to bridge our political, religious and cultural differences, which is more important now than ever before. Our democracy is too precious to be torn apart by our differences. Something greater than ourselves is at stake, and that is exactly what a hero of mine once said: The late South African president Nelson Mandela said, “You mustn’t compromise your principles, but you mustn’t humiliate the opposition. No one is more dangerous than one who is humiliated.”

As business leaders, we have the platforms and the duty to gather people together to foster and promote a civil dialogue among people of every political, religious, economic and cultural background.

We should start with our own teams and communities, which we should bring together to advance a dialogue rooted in civility and focused on finding common ground.

I ask you to bridge the divide that rapid technological and societal change has wrought, so that we may fulfill the African proverb of “going far together,” so that no dream remains “too big for Americans.”

It is a big task ahead, but we can take encouragement from President Mandela, who famously said, “It always seems impossible until it is done.” I have total confidence and trust that we can extend the benefits of tomorrow’s world to more people today. There can be no doubt that our best years lie ahead of us, and we are deeply grateful to be a part of it.

The post CEO of the Year Stan Bergman Exhorts Business Leaders: In the Fourth Industrial Revolution, Don’t Leave People Behind appeared first on | Chief Executive magazine.

Beware: Foxconn’s New Plant Could Put your Employee Retention at Risk

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Foxconn Technology Group may be coming to a Midwestern state near you, and CEOs who see its shadow descending on their locale may want to prepare for what’s coming—for better or worse.

An expected announcement by the Taiwan-based manufacturing giant has created one of the biggest pursuits in economic development in the Heartland since General Motors’ Saturn unit selected Tennessee to build its huge complex in the 1980s.

And for good reason. Foxconn, which is best known for building components for the Apple iPhone, is believed to be close to a decision on locating a flat panel-manufacturing plant that would employ up to 10,000 people in Michigan, Wisconsin or another Great Lakes state. Water availability is crucial for its type of manufacturing.

With that level of prize at stake, politicians are extending themselves to the nth degree. Wisconsin Gov. Scott Walker, Michigan Gov. Rick Snyder and Ohio Gov. John Kasich are said to have flown overseas to meet with top Foxconn executives including CEO Terry Gou. The Michigan legislature just passed legislation to free up massive tax incentives for huge manufacturers such as Foxconn, and Wisconsin officials are looking at how they could possibly gear up a Manhattan Project-style effort to supply Foxconn with all the engineering and digital talent its new facility might require.

“MIDWEST CEOs should EVALUATE their employee retention risk.”

Journalists are watching airports and reading flight manifests to chronicle the comings and goings of Foxconn executives in those two states and more. Meanwhile, skeptics are digging up the fact that Foxconn promised a big plant in Harrisburg, Pa., several years ago but never built it.

“This is a very large economic-development deal,” said Larry Gigerich, executive managing director of Ginovus, a consulting firm in Fishers, Ind. “It rivals auto assembly and other major manufacturing projects, like Boeing’s location of its new [facility] in Charleston, South Carolina. You’re looking at an investment in excess of $1 billion, a multi-year construction project and certainly the potential for thousands of new jobs.”

John Boyd, principal of a New Jersey-based site-selection firm, called the Foxconn plant “the mother of all trophy projects” in an interview with Crain’s Detroit Business.

Competition for your best employees
Besides creating interesting industrial drama, if Foxconn moves into your neighborhood, you might want to be concerned. Here are 4 ways Foxconn’s decision could affect your company.

1. Regional transformation. Factory landings of this size are few and far between, and the reason they are so eagerly pursued is because they can make such a huge difference in the economic future of entire regions.

GM’s decision to put Saturn near Nashville, for example, solidified the coming of age of the mid-South as a new region for automotive manufacturing, and in subsequent decades other car companies have built in southern and Southeastern states. Meanwhile, Tesla’s decision to locate its “gigafactory” near Reno helped create a new-technology sheen for the region, which is kicking off a complete economic remake of the old gaming town.

Similarly, Foxconn could be the fulcrum for a Heartland state to establish itself in the kind of digital-era manufacturing that helped Boston reinvent its old industrial heritage and helped Silicon Valley become perhaps the most vital region in the entire U.S. economy. That kind of transformation is something in which CEOs and entrepreneurs alike might want to participate.

2. Competition for scarce labor. Midwestern states already face disadvantages in the labor market, including a scarcity of workers for advanced manufacturing jobs, intense scrambling for engineering talent, and a shortage of the digitally savvy millennial worker who’s become commonplace in tech havens such as Silicon Valley.

Wherever Foxconn places its plant, it could create more stress on CEOs of existing firms that must compete in the areas of recruitment and retention of skilled labor, as well as in wages.

3. Deal matching. CEOs may be very interested in the details of whatever gigantic financial incentives Foxconn receives. In China, the company is used to getting subsidies for utilities and even sometimes for employee dormitories. While that’s not likely in the U.S., the winning state may have to offer Foxconn cut rates on Great Lakes water.

And any Foxconn deal could offer a template of incentives CEOs of other large industrial companies, which also employ many people, might want a state government or regional coalition of municipalities to match.

But Gigerich said that CEOs shouldn’t count on success. “Youre talking about such an enormous project [with Foxconn] that it would be highly unusual for a CEO to knock on the door of a state government and get a deal anywhere near that big,” he said.

4. Validation of right-to-work. Manufacturing CEOs were some of the biggest proponents of the recent flip by Indiana, Michigan, Wisconsin and Indiana to right-to-work status. Economic-development experts have told Chief Executive that the right-to-work distinction alone gets these states on many more lists for potential expansions and new projects. And it’s said to be an important criterion for Foxconn, as well.

Whether Foxconn ends up to be a boon, or a burden, to CEOs in the winning state remains to be seen. But CEOs with locations and employees in the midwest should be meeting with their C-suite, particularly, their CHRO, to play ‘what if’ and ask some tough questions to ensure they are prepared should their employee retention be risk.

The post Beware: Foxconn’s New Plant Could Put your Employee Retention at Risk appeared first on | Chief Executive magazine.


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