INDUSTRY UPDATE: Manufacturing

Introduction to Industry Update: Manufacturing

At its peak in 1979, manufacturing accounted for 22% of non-farm employment in the US. It now totals about 9%, equating to approximately 11% of GDP. [See source.] Recovery from the pandemic and the resultant surge in consumption helped bring renewed life to this sector. This momentum so far seems to be continuing in 2023. Government subsidies to support sectors deemed critical (e.g., semiconductors) and/or viewed as reducing dependency on China are forecast to boom in the US and Europe. However, threats loom as shipping costs rise, the stronger dollar makes exports more expensive even as global growth has slowed, and US consumers shift spending to services. [See source.]

In Europe, the manufacturing sector apparently comprises a similar share of employment (9%) but twice the share of GDP at 23.8% [See source1 and source2]. While 2022 was indeed a bumpy ride, the forecast is for gradually accelerating growth in the sector over the coming years. [See source].

In the Middle East, manufacturing comprises approximately 12% of GDP [See source] and 10% of total employment. Here manufacturing is facing significant growth prospects as the region continues the shift away from its dependency on oil and gas. One key indicator, the industrial automation market, is now expected to achieve CAGR of more than 10% over the coming years [See source]. Although, as elsewhere, access to adequate skilled labor resources may represent a substantial bottleneck.

The list of trends affecting manufacturing runs rather long.

Here is a convenient distillation:

• Increasing investment in advanced technology including artificial intelligence, automation, and analytics.
• Restructuring of supply chains for resiliency builds on lessons learned during Covid. The resulting interruptions, as well as geopolitical tensions, are driving on-shoring, or near-shoring, trends.
• Labor shortages.
• Anticipating and thwarting cybersecurity challenges.
• Normalization of demand and supply post-Covid.
• Slowing global growth and higher interest rates affect investment strategies.
• Increasing urgency of sustainable sourcing and processing. [See source.]

So far there seems to be an appetite to invest in manufacturing to address these and other risks and opportunities.

In the US, private companies’ investments in manufacturing are up about 22% versus their low point in Q1 2022 [See source]. Since 2020, the “private sector has already invested more than $435 billion in new manufacturing […] in America, including multi-billion-dollar semiconductor factories, electric battery manufacturers, broadband manufacturers, and more.” [See source.]

Europe has some additional issues. These are particularly in sorting out its energy independence after gas curtailments from Russia—a challenge the continent has managed well so far. Beyond this, the increasing competition between the US and China means that Europe must evolve a differentiated strategy to protect itself against over-dependency on China. This explains an uptick in recent trips by European politicians to Canada, Brazil, and many other locations, not to mention China itself. [See source.] Significant investments in alternative energy such as wind farms on the Baltic or North Sea, which may require €800 Billion [See source], as well as in various hydrogen-related processes suggest the region is serious about staying competitive in the energy market.

The automotive industry is also worth a significant mention as it grapples with the largest and fastest shift in technology since the invention of the automobile. Rising awareness of imminent threats from global warming have driven global electric vehicles (evs) and hybrids from 0.2% of unit volume in 2012 to 13% in 2022. “The surge is set to continue. By 2025 evs will account for nearly a quarter of sales, says Bloomberg nef, a data firm, and closer to 40% in Europe and China. Even conservative estimates reckon that by 2040 around three-quarters of new-car sales worldwide will be fully electric, as better batteries make even phevs [hybrids] redundant.” [See source].

This means that much of the manufacturing staff, activity, and assets utilized by the biggest players will become redundant quickly. This is because evs do not require internal combustion engines, transmissions, abundant mechanical engineers, etc. This lowers the entry barrier for newcomers, particularly from China, where software has taken on a far larger importance in buying decisions than brand or horsepower. Manufacturers in the sector are hoovering up displaced software programmers even as the tech industry downsizes. How else will they cope with the challenges of infotainment and autonomous driving that will define the future of the automobile?

Very likely, the automotive industry will look very different in five years. For comparison, John Deere, a manufacturer of farm equipment has actively embraced AI, drones, and autonomous farming vehicles over the last few years. John Deere is hiring numerous software engineers in the process. Their second quarter results speak for themselves: +34% net sales gain over prior year. [See source].

In fact, all manufacturing is likely to undergo significant changes in the near future if half of the predictions come true. Here is a selection of forecast trends: [See source].

• AI, machine learning, and advanced analytics drive efficiencies.
• Digital twin and predictive maintenance improve manufacturing (and operating) performance.
• Factories tend to shrink in size and move closer to their customers.
• Labor shortages require diversity initiatives as well as workforce wage increases and significant retraining.
• Multiple factors drive companies toward carbon neutrality.
• Additive manufacturing goes mainstream.

Exciting times in manufacturing to be sure! So let us now explore the people who will make this happen.

The Market for Executives

Some 1.14 million executives as we define them (see Editor’s Note) work in this sector. This number is down 0.2% year on year (YOY). By gender, they are overwhelmingly male (83%). Approximately 36,000 of them changed jobs in the last year after a median tenure of 3.4 years. While the US and Canada comprised approximately 780,000 (68%) of this population, Europe and the UK covered another 297,000, and the Middle East about 72,000. It was only the latter market that actually showed YOY growth of 0.4%. But this headline stagnation hides a welter of inter-segment activity as introduced in Chart 1.

As we mentioned in the introduction, all of the major segments show relatively modest YOY change. But Automotive has the slowest growth of any major sector. Overall, there are a number of areas with declining populations. Although many sectors are also showing relatively rapid growth. These sectors include Internet (+4.2%), Biotechnology (+2.5%), Renewables & the Environment (+2.4%), Environmental Services (+2.3%), and Management Consulting (+2.1%).

However, please do not confuse growth with demand. These are two very different aspects of the executive market.

For example, Management Consulting shows both relatively high growth and very high hiring demand (per LinkedIn). Whereas other areas such as Information Technology & Services (+0.2%) show weak growth but very high hiring demand. This is presumably due to the scarcity of qualified resources. The same trend is visible for Computer Software, Higher Education, and Hospital & Health Care manufacturing roles.

So what do all of these executives actually do, you might ask. Chart 2 begins to answer this by providing an overview of the specializations execs have listed on their LinkedIn profiles. Note, too, that most will have added more than one area of specialization.

As usual, many of these might be considered specific to manufacturing, Those examples are such as Product Development, Engineering, Manufacturing Process Improvement, Supply Chain Management, etc. However, others might well be highly transferable between industries. Those examples are such as New Business Development, Sales Management, Business Planning, etc.

Suppose for a moment that you find yourself in a sector that is showing minimal growth opportunities.

Should you hang on or consider moving to a new industry? Yes. There is the risk that when changing industries you may have to take a step back compensation-wise. That is if you do not have the professional support required to really demonstrate the transferability of your experience and achievements.

The Barrett Group (TBG) routinely helps executives reassess their skills inventory and migrate from one industry, geography or role to another seamlessly and without sacrificing compensation. In fact, TBG ’s tried and true experience from 30+ years in career management means clients usually negotiate packages that add $10,000, $20,000, $30,000 or more in total compensation. For a sample of these results, visit TBG’s Hiring Line.

As far as the major employers of manufacturing executives are concerned, Chart 3 offers a perspective on the top 50 with rates of change ranging between -12.7% and +71.8% YOY. Let’s start at the top end.

Danone (+71.8%) has made numerous acquisitions. The latest as of this Update is Promedica, “a Polish company specializing in care services for patients at home, as it expands in the profitable Specialized Nutrition market.” “The acquisition comes as Danone, maker of high-end infant formula brands such as Aptamil and Medical Nutrition brands such as Nutricia, has embarked on a revival plan that entails investing in worthwhile brands and innovation and disposing of underperforming assets.” [See source]. Dumex, a Chinese company acquired in May of 2022 probably also influences the YOY effects. Beyond acquisitions, Danone has also attracted talent from competitors including Unilever, Nestle, L’Oreal, PepsiCo, Reckitt, Mondelez, etc.

Citi’s 20.2% growth is also significant. The bank has acquired staff with manufacturing competency (not only executives) from Tata Consultancy Services, HSBC, Accenture, PWC, Infosys, etc. Latest reports indicate that Citi sees growth coming mainly from organic sources, not acquisition. “We’ll be scaling up in the U.S. by building out the investment offering and cross-selling into our existing and new clients across the country,” Chief Executive Officer Jane Fraser said during the firm’s earnings call for the quarter that ended March 31.” [See source.]

At +15%, GE has also been stocking up, apparently in their power, renewable energy, and Baker Hughes (oil & gas) divisions. Alvarez & Marsal, a professional services firm based in New York, has also added significantly (+14.8%) to its executive ranks, adding talent from the likes of Deloitte, EY, KPMG, PWC, etc.—all in support of improving their clients’ business performance.

On the downside, Johnson & Johnson spun off Kenvue (makers of Tylenol, Listerine, Band-Aid, etc.) in May of 2023 contributing to the -12.7% reduction in its executive headcount. Part of their motivation may well have been to help finance the significant expense of their recently reported talcum powder legal issues.

ABB also reduced its executive headcount in part due to the spin-off of Accelleron in October 2022: “The spin-off is part of ABB’s portfolio management strategy to focus its efforts on growing global megatrends in electrification and automation, while at the same time allowing Accelleron to grow with increased flexibility and independence as a stand-alone listed company.” [See source.]

Of course, this Update can only provide a general overview of the industry while typically Barrett Group clients receive significantly more detailed research data as part of their career change programs including general industry or location screening data, specific company profiles, and even close-ups of their interviewing managers as may be required.

Chart 4 compares the number of manufacturing executives per major location, the rate of change, and the relative intensity of hiring activity per LinkedIn. While New York and Los Angeles top the charts in terms of quantity, the growth seems again to be mainly in Europe and the Middle East with the UAE, The Randstad, Saudi Arabia, Milan, and Istanbul showing the fastest recent growth.

However, hiring demand is also important, as many locations may not show the YOY growth but they still have “very high hiring demand,” i.e., a lot of positions to fill, for example, San Francisco (+0.5%), Chicago (+0.8%), Boston (+0.7%), Denver (+0.2%), Paris (+0.7%), Austin (+0.6%), Munich and Nashville (both at +0.8%).

Peter Irish, CEO
The Barrett Group

Click here for a printable version of Industry Update – Manufacturing 2023.

Editor’s Note:

In this particular Update “executives” will generally refer to the Vice President, Senior Vice President, Chief Operating Officer, Chief Financial Officer, Managing Director, Chief Executive Officer, Chief Manufacturing Officer, Chief Marketing Officer, Chief Information Officer, Managing Partner, General Counsel, Head, and President titles. These are principally located in the US, Canada, Europe, the UK, and/or the Middle East. Unless otherwise noted, the data in this Update will largely come from LinkedIn. It represents a snapshot of the market as it was at the time of the research.

Is LinkedIn truly representative?

Here’s a little data: LinkedIn has more than 900 million users. (See source.) It is by far the largest and most robust business database in the world, now in its 20th year. LinkedIn defines the year-over-year change (YOY Change) as the change in the number of professionals divided by the count as of last year. “Attrition” is defined as the departures in the last 12 months divided by the average headcount over the last year.