SOLUTIONS FOR THE AUTOMOBILE INDUSTRY:
OVERCOMING KEY HIRING AND RETENTION CHALLENGES POST-COVID.
People have always been key to success in the automotive industry.
Manufacturers need the very best talent to achieve operational excellence, and they need to hold onto this talent in the long term.
In the post-Covid environment, however, new challenges and obstacles have emerged. Many of these issues were already existent, but they have been exacerbated by the struggles of the Covid-19 period. All of these challenges need to be overcome. Read on to discover more about these key challenges, as well as a range of potential solutions.
THE CHALLENGE: A SLOW RETURN TO PRE-PANDEMIC SALES IS UNSETTLING EMPLOYEES
One of the most immediate effects of the pandemic in an economic sense was consumer unease. Faced with an unprecedented scenario, consumers were understandably concerned.
As such, big-ticket purchases were often shelved as buyers instead waited for more favourable market conditions. As a result, auto sales slumped during the first year of Covid-19.
Worldwide, sales dropped from 74.9 million in 2019 to 63.8 million in 2020. Percentage-wise, this does not seem like such a dramatic downturn, but the figures become more alarming when we examine individual markets during the worst months of the pandemic.
In Europe, the biggest year-on-year slump occurred in April 2020, as sales plummeted by 80% compared to April 2019. In other global markets, the effects were similar – in the USA, April 2020 was also the worst month, with sales falling by 52% year-on-year, while the Chinese market experienced an 82% year-on-year fall in February.
The good news is that recovery is already underway. The bad news is that this recovery is expected to be slow, and the global automotive industry is unlikely to return to pre-Covid levels until 2023 at the earliest.
All of this has a marked impact on the employee hiring and retention strategies of businesses in the auto industry. This is because such an extreme slump – followed by a slow and uncertain recovery – unsettles employees. New hires may be unwilling to enter a market that they believe to be experiencing difficulties, while existing employees may see the uncertainty as an opportunity to rethink their career options and explore other paths. In both instances, it becomes more difficult for businesses to find and keep hold of the staff they need.
TARGET INCREMENTAL GROWTH AND MANAGED RECOVERY
Europe’s automotive industry is certainly not the only sector to be hit hard by the pandemic. Across a broad range of markets, the unprecedented scale of coronavirus, coupled with viral containment and prevention measures, took an enormous toll – the effects of which will continue to be felt for many years. In light of this wholesale catastrophe, the current state of play for the automotive sector is relatively positive.
After going into freefall during the early months of the Covid-19 period, the market has since begun to recover. Growth between 2020 and 2021 was 4.5% – a slow but steady and respectable rate. While we are still a long way off the 74.9 million sales achieved three years ago – and even further off the 80 million annual units projected before the pandemic struck – the market is at least moving in the right direction.
Employers in the automotive sector can certainly use this positivity to their advantage. By recalibrating pre-pandemic growth projections, and instead targeting incremental milestones and short-term growth targets, automotive companies can implement a managed recovery phase. As they regularly achieve these milestones and remain on track, companies will instil optimism in their existing workforce as well as energise their recruitment processes. Honesty and transparency will be key here, as businesses demonstrate ongoing growth and optimism to their employees in an open manner, putting communication at the forefront of their employee retention initiatives. A reputation for honesty and communication will also help to attract the right kind of talent in future hires.
THE CHALLENGE: RISING COMPETITION IS EXERTING UPWARD PRESSURE ON SALARIES
The European market is becoming increasingly competitive as new entities join the automotive landscape across the continent. After a catastrophic year in 2020, confidence is gradually rising, and the way is clear for new companies to launch into the space. What’s more, many ventures were deferred and delayed during the Covid-19 pandemic, and the executive teams behind these ventures may now be feeling that the time is right to get their projects back on track.
While the companies producing the cars that run on European roads remain largely unchallenged, the component supply market is growing increasingly dynamic. Original Equipment Manufacturers such as BMW, Audi, and Tesla need tier one component providers to keep their vehicles competitive.
New challengers especially in the EV space – such as Polestar, Genesis, and several Chinese companies launching their products both in Europe and globally – are entering this space and pitting their products against longer-established market entities.
The result is a highly competitive market and a large number of employers all vying for the same talent pool. In turn, this talent pool demands higher salaries and remuneration packages – something that represents a key concern for cost-conscious businesses as they seek to hire and retain the best staff.
THE SOLUTION: A FLEXIBLE APPROACH TO REMUNERATION
There is no way to escape the need for more attractive remuneration packages as a means of enticing talent of the highest quality. However, businesses can manage the way in which they achieve this.
For example, automotive firms may decide to offer high-level medical insurance to their employees. Even in nations where medical treatments are largely free, such as in the UK, private medical care can still provide an attractive benefit. Other potential benefits include options on stock, profit sharing schemes and retirement packages.
With this approach, businesses are creating a point of differentiation between themselves and their competitors. There are other aspects to consider – such as the company identity and ethos we’ll discuss later – but a flexible remuneration and benefit policy can be a crucial motivating factor for hiring and retention.
THE CHALLENGE: HIRING AND RETENTION ARE
INCREASINGLY ABOUT SUSTAINABILITY
Public perception is a complex but highly important factor in the automotive industry. On the one hand, the majority of citizens in key automotive markets drive cars and utilise auto products. On the other, there is a growing understanding that sustainability is key for our society as we move forwards and that traditional auto manufacturing and fuelling practices are not supporting progress on environmental issues.
The Covid-19 pandemic has only added to the complexity here. A joint project carried out by representatives of Peugeot Citroen and researchers from Comillas Pontifical University suggests that restrictions such as social distancing and other control measures had actually led to an enhanced public perception of the auto industry. However, many respondents felt conflicted and forced into an ethical dilemma.
The rise of electric vehicles – or EVs – has further underlined the importance of sustainability in the market. Subsidies and government incentive programs in key sectors around the world, including Europe, have seen unit sales soar, reaching 6.7 million for the first time in 2021 and projected to go from strength to strength in the coming years. By 2026, the EV market is expected to be worth in excess of $1 trillion.
But how does this relate to hiring and retaining staff members? Because sustainability is becoming increasingly important to these team members.
In 2020, a report from Dr Leyla Acaroglu found that 65% of employees were more likely to work for a company with strong environmental principles and a commitment to sustainability. A year later, in 2021, a study released by IBM found that 71% of those surveyed said they would like to work for more environmentally sustainable organisations after the pandemic, and around 50% said they would take a pay cut to do so.
The message is clear –
Companies must commit to sustainability
or risk losing out on key talent.
THE SOLUTION: PROMOTE CORPORATE VALUES AND IDENTITY
This idea of a commitment to sustainability is particularly acute in the automotive industry. Around 11.9% of global carbon emissions are produced by the burning of petrol and diesel in road transport – a far greater proportion than the 1.9% of emissions produced by aviation. Of road transport emissions, around 60% is produced by passenger vehicles, including cars, buses, and motorcycles, with around 40% produced by freight. This is before direct carbon production from auto manufacturing is factored into the equation.
But this also means that auto companies have a huge role to play in improving sustainability and will be instrumental in achieving a more environmentally stable tomorrow. If auto manufacturers and associated businesses are able to take the lead on decarbonisation and eco-responsibility, the impact will be enormous.
In terms of hiring and retention, the values and identity of the business need to take centre stage. We’ve already looked at the importance employees now place on the eco-credentials of the companies they work for, and businesses can tap into this motivating factor as they craft their Human Resources strategies. There is no room for half measures, or for deception – automotive businesses will need to be 100% honest and transparent, demonstrating a real commitment to sustainability and making this a core part of their corporate identity. It is this commitment that is going to make businesses an attractive proposition for employees.
THE CHALLENGE: A LACK OF RECOGNITION FOR CORE TALENT
Deloitte identifies core talent as “the primary driver of a company’s development and transformation.” This echoes similar sentiments from thought leaders across the worlds of business and industry, many of which were made long before the pandemic hit.
For example, research published by McKinsey back in 2012 identified significant productivity gaps between average performers and high performers – gaps that widened as job complexity grew. In low complexity jobs, high performers were found to be 50% more productive than average performers, rising to 85% more productive in jobs of medium complexity, 125% on high complexity jobs, and 800% in very high complexity roles.
Identifying and developing core talent continues to be critical in the automotive industry as we look towards the post-pandemic landscape. And yet, many businesses are failing to identify their most valuable performers. This is down to a number of different factors, including a reactive approach to hiring and replacing talent, a lack of visibility for the best performers in the workplace, poor future planning, and an inadequate understanding of market forces.
This means key talent is not recognised and is left vulnerable.
THE SOLUTION: IDENTIFYING AND FILLING KEY POSITIONS AND TARGETING PHASED EMPLOYEE DEVELOPMENT
In order to begin recognising core talent, automotive businesses first need to recognise their core roles. Which roles are key to ongoing evolution and success? Which positions are instrumental in achieving operational efficiency and effectiveness? Understanding this is the starting point in identifying, hiring, and retaining the most critical talent.
Filling these positions, and keeping them filled with the most effective workers, is the priority. However, talent recognition goes beyond this. Managers need to take a more active role in monitoring and assessing the performance of their teams in the field, building an understanding of which members of staff are achieving the highest levels for the company.
With this data, management can ensure that these key personnel are appreciated in their roles – something we have seen to be critical in retaining employees – and can decide on the best deployment strategy. Are these employees being utilised to their full potential in their current position, or do they need to be moved to one of the business’s core roles?
It’s important to remember that the pandemic is not wholly behind us yet. There are still challenges in the industry, and these challenges look likely to remain for at least the next few years. This makes a phased approach to employee development important. In their article on talent development in the workplace,
Deloitte recommends a proactive approach, making moves to strengthen their workforce “as soon as the environment improves.” This phase of improvement has already begun in the automotive field – in light of steady growth over the last 12 months – so businesses should already be looking towards hiring key talent in critical roles and then retaining that talent in the long term.
THE CHALLENGE: AS WORK BECOMES
MORE FLUID, WORKFORCES FOLLOW SUIT
Much has been made of the “remote work revolution” during the pandemic. In the UK, 36% of adults surveyed in January 2022 said they had worked from home at some point over the last seven days. Around 46% of these respondents said they had reduced their general spending as a result, demonstrating one of the factors that have made remote work attractive to both employers and employees. In the United States, 59% of workers who were able to work from home said they were doing so “all or most of the time” in January 2022, while only 22% answered “rarely or never.”
As is so often the case, however, the true picture is not black and white. Workers don’t necessarily want “the freedom” to work at home all the time, and they may find themselves isolated and detached as a result of this. At the same time, workers don’t want to return to the office in the way they did before, restricting themselves to wholly on-site work. Instead, a hybrid model is the preferred option for many personnel, resulting in a far more fluid and dynamic approach to work.
In the automotive industry, the situation is more complex. Automotive manufacture is a secondary industry, so it is not universally suitable for work from home or a hybrid model. Staff members are still required to perform physical, in-person tasks, such as maintaining and repairing machinery on the production floor and managing material and product inventory storage.
These tasks cannot be carried out on a remote basis. But, in fact, this is just one part of the automotive industry – aspects such as design, quality control and monitoring, systems management, and Human Resources departments, can still be operated remotely, meaning that the fluid, hybrid workforce is still a fact of life for car manufacturers and producers.
A more fluid working environment results in a more fluid workforce. Top performers in fields such as automotive design or Human Resources within a manufacturing plant suddenly find themselves freed from geographical restrictions – they can work almost anywhere in the world, telecommuting and utilising web conferencing tools to fulfil their roles.
They can even work freelance, if they wish, achieving even more freedom as well as recognition of their value. As we move beyond Covid-19 and the need for social distancing decreases, this hybrid model looks likely to remain in place.
THE SOLUTION: EMBRACE THE HYBRID MODEL WHEREVER CONDITIONS ALLOW
Businesses need to take a considered look at their own working practices and the teams within their organisational structure. From here, they will need to identify where the hybrid model can be implemented. As discussed above, the factory floor is still going to require hands-on, in-person teams in order to keep production moving, but there are likely to be ample other opportunities in which to implement hybridity.
A detailed audit of roles, departments, and tasks will be required. This will already have begun during the analysis of core talent and key positions within the organisation, but here the business will need to go a step further. Management will need to understand precisely which roles can utilise a more hybrid working model, and identify precisely which tasks can be handled on a remote basis.
For example, quality control personnel will be required to be active on the factory floor, carrying out in-person tasks, at least some of the time. However, their data monitoring and systems analysis tasks can be conducted remotely.
Pivoting to a hybrid model may involve some initial difficulties. Personnel might not be aware of what is expected of them in terms of in-person and off-site hours, or the collective morale and shared identity of the workforce may be eroded by the more dynamic working environment.
However, by maintaining strong communication and ensuring widespread engagement with the hybrid project, automotive manufacturers can overcome these issues and reap the benefits of this new way of doing things.
THE CHALLENGE: CAREER PATHS GROW INCREASINGLY DIVERSE,
AND RETENTION GROWS MORE COMPLEX
The ongoing evolution of the automotive industry is leading to an increasingly diverse, and increasingly complicated, network of different career paths for those entering the industry. For those already working within the industry, this also means more choice in terms of direction, as well as short and long-term career planning. With multiple avenues open to employees, automotive companies will need to work hard to achieve acceptable rates of retention.
Much of this diversity is contributed by moves towards sustainability. For instance, automotive manufacturers will play a huge role in the “net-zero carbon emissions by 2050” initiative, introducing new vehicles that support a cleaner, more environmentally friendly society. In order to hit this target, it is predicted that production of new vehicles using fossil fuels will need to be halted by 2035, with carbon reduction modifications made to cars that are already on the road. This means producers will need to start manufacturing cars that run on renewable energy sources, and this move is already underway. In some global markets, including the United States, electric vehicles represent one of the fastest-growing industries and something that is very interesting for employees planning the next steps in their careers. Modification is another rapidly growing concern for auto manufacturers and related businesses, offering another viable career option.
It is understandable that European automotive employees want to consider their futures and ongoing careers.
There has been much concern in recent years that the rise of electric vehicles and phasing out of traditional vehicles could deplete job opportunities in the industry. Reports from Germany warned against 400,000 job losses in the country’s auto sector between 2020 and 2030, with the latter hinting at a catastrophic “Detroit style” decline.
With the right management of a shifting industry, and with the right stimuli from governments, this should not be the case. In fact, moves towards electric vehicles could result in job creation rather than net job losses. Despite this, automotive sector firms are still needing to work harder to retain their employees in the face of this change.
THE SOLUTION: FUTURE-PROOFING OPERATIONS AND PROVIDING DIVERSE OPPORTUNITIES
There is no quick fix for automotive manufacturers and other, similar organisations within this industry. We’ve touched on the facts above – transport and auto manufacturing are two of the most significant polluters on the planet, and growth remains slow following the impact of the pandemic. Because of these two factors, auto companies need to think very carefully about their future direction and how this will impact their personnel hiring and retention strategies.
Becoming sustainable and environmentally sound is no longer a choice for automotive companies – it’s a necessity. With the phasing out of traditional, fossil fuel vehicles in Europe and across many of the world’s markets, only auto manufacturers who are able to adapt will survive in these new global conditions. By innovating and opening up new avenues of research and development, businesses are essentially future-proofing their operations and giving themselves a head start on their competitors. At the same time, they are actively creating new roles and positions for their personnel, supporting the diverse array of opportunities that this personnel will seek.
INNOVATION IN A CHANGING AUTOMOTIVE LANDSCAPE:
OVERCOMING HIRING AND RETENTION CHALLENGES POST-COVID
Europe’s automotive industry is changing – there’s no doubt about this. In the new normal, where sustainability and environmental responsibility are key – it will be the businesses that can innovate and adapt that will survive and even thrive in a changing landscape.
This also applies to hiring and retention. By providing personnel with new roles that reflect the more diverse nature of today’s automotive sector, and by putting environmental sustainability at the heart of business identity and core values, organisations can overcome these key challenges in the industry, achieving a workforce that is ready to succeed.
As mentioned, in the above document companies need to be both highly adaptive and creative to recruit and retain the best talent in the Automotive and Tech space which means –
1. Senior management need to constantly promote and keep true to the vision of the company.
This helps employees understand what is expected of them and empowers them in their work life.
2. Adopting and maintain a flexible working environment for employees to help a better work/life balance which should not be seen a ‘utopian’ solution but a part of the company culture.
3. Reviewing and keeping abreast of the competition with regards to market compensation levels as well as looking at ever more inclusive benefits packages. This is key to ensuring that employees are continually motivated to build their careers within the company.
4. Recognition in the workforce for outstanding achievement with companywide awards and promotion prospects.
5. Creating a fun and supportive work environments with a focus on recruiting a diverse employee culture.
6. Promotion of sustainability at the core of the company culture/vision.
7. Regular reviews with management and an ‘open door’ policy to pro-actively listen to the workforce for company improvement.
8. HR to ensure company vision is executed from the initial company induction to the promotion of CSR (corporate social responsibility) to help endorse positive values for employees.
9. Clarity of career development plans for employees so that staff can clearly see how their growth can be mapped through the organization.
10. Availability of Upskilling and development training within the organization
Having a trusted recruitment partner that can provide not only market knowledge and a robust process to target and attract Top Talent to your organization is even more important in 2022 and beyond.
If you would like to schedule an initial call to discuss what your options are to succeed in today’s market please contact Mike at Exec Assignments for a confidential discussion.