Addressing the Looming Human Capital Crisis. A PRACTICAL INSIGHTS GUIDE FROM HUNTINGTON

The nation has enjoyed one of Increased employee turnover TO the longest economic expansions is beginning to undermine 50 200% in its history. While this is company productivity and ANNUAL PAY good news for manufacturing profitability. As front office and According to Gallup, the companies who have experienced shop floor employees depart for estimated cost to replace a robust growth and reaped record new opportunities, they create single employee§. For a worker profits, it has also exposed a extensive knowledge gaps earning $50,000, a company potential long-term challenge: within the organization. What’s could spend up to $100,000 to finding and keeping good more, without sufficient staffing get an employee up to speed. employees. on the shop floors, it can be more difficult to grow or even meet With the economy at near-full demand. A study by Deloitte and There’s also a significant bottom employment, workers have The Manufacturing Institute line impact. had more opportunities than shows that between 2018 ever. Both skilled and unskilled and 2028, the skills gap may The cost of recruitment, laborers, as well as managers, leave an estimated 2.4 million interviewing and onboarding have a wide range of employment positions unfilled, risking up to can add up fast. According to choices, and they have the ability $2.5 trillion in economic output†. Gallup, the estimated cost for to change jobs more easily and an individual organization to frequently if they desire. And then there are the safety replace a single employee can risks. The Bureau of Labor conservatively range from one- more than Statistics reports that injuries half to two times the employee’s an hr problem. are far more common in the annual pay§. For a worker earning a business problem. initial period of employment. $50,000, a company could spend The current labor crisis isn’t According to their study, one- between $25,000 to $100,000 just putting strains on human third of non-fatal occupational to get a new employee in that role resource departments, it’s injuries or illnesses that involved up to speed. That’s a tremendous affecting the heart of businesses. time away from work were burden to bear for businesses suffered by workers with less with already tight margins. than one year of service‡.

1 Huntington Practical Insights: Addressing the Looming Human Capital Crisis The long-term worker shortage.

Some businesses may be looking and Mississippi will see their This generation generally places at the current human capital crisis working-age populations drop more a different value on work. While as a temporary problem that will than 10 percent, while New Mexico, those in the past may have resolve itself over time. However, it Connecticut, Rhode Island, New devoted a significant part of their is far more likely that this shortage Hampshire, , lives to building their careers and signals a systemic and long-term and will see theirs fall by about working their way up the ladder, transformation. 5 percent#. This ongoing population Millennials are looking for more shift is leaving companies in the balance. According to a survey Midwest with fewer qualified workers conducted by the World Services perspective than ever before. Group, work-life balance was the top priority, ahead of both wealth The Hidden Downside “There is a profound set of shifts and leadership opportunitiesҰ. of Automation occurring that will alter the Technology today is truly amazing. In addition, Millennials have dynamics of the workforce for In business, it has enabled us not been invited to consider the foreseeable future. These to accomplish unprecedented careers in manufacturing. In a include population migration, productivity. It’s helped us recent survey, less than 3 in 10 automation, and a seismic open new revenue streams and Americans encouraged their demographic transformation¶.” new markets. But it has also children to consider this as a — Josh Eichenhorn, executive managing contributed to the worker shortage career option. And fewer than director middle market banking in one unexpected way—a skills half believe jobs in this field to be shortage. And according to one interesting and rewarding¥. study, manufacturers believe the On the Move number one cause of this shortage Reality Check As the great migration continues in is a shifting skill set due to the To attract a new generation to the United States, young workers introduction of new advanced the factory floors, manufacturers are flocking from the Northeast technologies and automation†. are getting more creative. It’s an and Midwest to the South and uphill climb, since many now in the West. According to an analysis of Changing Attitudes work force don’t see themselves projections by the University of Welcome to the Millennial Age. in blue collar positions. Virginia Weldon Cooper Center, As the Baby Boomers retire, a new generation has taken their place. But the cause is not lost. between 2010 and 2040, the Innovative companies are looking population of prime working-age Much to employers’ surprise, the goals and priorities of Millennials at a wide range of strategies and adults will decline in 18 states. tactics to lure Millennials. And , Vermont, Maine, are vastly different from those who came before them. many are succeeding.

2 Huntington Practical Insights: Addressing the Looming Human Capital Crisis Taking the proactive approach.

As many manufacturers continue Working with Associations personnel to factory workers to grapple with the worker In decades past, trade unions on the shop floor, companies shortage, they are finding took on the responsibility of are looking to all areas of their themselves in a perpetual reactive training the next generation operations to help fill vacancies. mode. Job openings are addressed of workers. But, with unions By offering financial bonuses on a case-by-case basis as less prominent than ever, many to workers who recommend employers try to fill vacancies as manufacturers are looking to potential new hires, employers quickly as possible. While this is trade and industry associations to are able to short-cut the hiring a challenge for companies of any fill the void. Recently, The National process, saving the company both size, it is particularly overwhelming Association of Manufacturers money and time. Talent acquisition for small and mid-sized firms who announced a pledge by organization Jobvite reports that don’t have the luxury of a robust manufacturers of training employee referrals result in a HR department. opportunities for close to 1.2 nearly 40 percent conversion rate, million workers to enhance their and that these new hires tend to To be both effective and financially skills and prepare them for the stay with a company longer Ⱡ. prudent, companies need to take next step on their career journeyⱢ. a step back and develop long-term Forging Partnerships strategies to keep their current Many companies are working workers and recruit new ones. with public entities, like local NEARLY taking on the role of 40% governments and schools, to talent management. help them recruit new talent. Conversion rate of employee Community colleges and Astute business owners and referrals, according to talent universities are developing executives are quickly learning acquisition company JobviteⱠ. programs that meet the training that talent management has to needs of local businesses. be their responsibility. In order High schools are bringing back to run a healthy and sustainable shop classes to help spark business, leaders can expect Incentivizing Employees interest in the trades and train that 30%-50% of their time will For manufacturing companies, a new generation of workers. To be spent on talent recruitment recruiting new employees has encourage workers to relocate, and retention, according to John become a full-time job. So, some local governmental bodies Augustine, Huntington’s Chief many are starting to seek their are offering financial incentives to Investment Officer≠. And they employees’ help in the hiring potential new hires. need to figure out how to fit that process. From management into their already busy day.

3 Huntington Practical Insights: Addressing the Looming Human Capital Crisis The Kansas Department of package has a positive impact on should estimate the overall cost Commerce, for example, is offering recruitment and retention. of the plan, account for it, and many new, full-time residents commit to it. Functionally, this state income tax waivers and/or According to a recent study by should involve collaboration student loan repayments as an recruitment firm Robert Half, among all departments, including incentive to move, through its Rural the most highly desired benefits leadership, finance, accounting Opportunity Zone (ROZ) program, (non-wage compensation) include and human resources. as a means of attracting new talent health insurance, paid time off, and retirement savings. The In the real world, this can to the state∏. According to Rachell Rowand, program manager at the most popular perks (nice-to-have be a challenge. Margins in Chamber, the program has resulted additions to pay and benefits) many manufacturing sectors in a higher quality of life for over among employees include flexible are already razor thin, and 600 new residents so far, giving work schedules, a compressed bandwidths within departments †† them the ability to do things like workweek, and telecommuting . are often stretched to their limits. buying a home sooner than they For this reason, many savvy could without the programΩ. Organizations should consider: companies are looking to partner • Salary with expert advisors who can Upgrading Pay and Benefits • Health insurance broker attractive packages for Of course, for most candidates, • Wellness programs today’s demanding workforce. the decision to accept a job comes • Flexible Hours down to compensation. For this • More paid vacation To mitigate these expenditures, reason, organizations need to take • Strong and competitive companies can work with their a hard look at how their packages 401(k) offerings to find ways to reassess stack up against competitors’. • Signing bonuses fee structures, maximize working capital, and use cash on hand Research shows that an attractive, As part of their strategic and more effectively. fully-developed employee financial planning, companies

improving benefIts, reducing turnover When your company is facing a 150% They discovered that the package the employee turnover rate, you look for help. company offered didn’t match the needs of the That’s why one firm turned to Kristin Janutolo employees. So, Kristin and Dan helped develop a and Dan Rankin, Huntington’s Employee benefits plan that did. Benefits Insurance Senior Consultants. Even though the package they implemented had Before Kristin and Dan began developing a slight cost increase, it included offerings that a Huntington SMART strategy plan for the the employees desired. company, they met with employees for insights on what was important to them. Specifically, The result: The employee turnover rate they talked about benefits. dropped 60%.

4 Huntington Practical Insights: Addressing the Looming Human Capital Crisis Solving the human capital crisis through automation.

Despite aggressive recruitment it still provides a critical efforts and investment in advantage to manufacturers by attractive benefits packages, reducing the employee recruiting conclusion companies in certain industries and retention risk caused by this As the worker shortage continue to experience chronic pervasive worker shortage. continues to intensify, labor shortages. Many are coming Michael DiCecco, EVP of manufacturers must reframe to the realization that these jobs how they see the problem. may never be filled. Huntington Asset Finance, explains how Huntington is This growing lack of available Out of pure necessity, some working with manufacturing human capital is more than organizations are turning to companies to explore these an HR issue; it could threaten automated technologies to fill options. “We’re focusing on shop financial performance, their labor needs. These include floor automation approaches customer relationships, and machine to machine (M2M) and tactics that optimize ROI. the ability to grow and technologies, industrial robotics, Once identified, we help these expand business. However, and the use of machine sensors. businesses finance the purchases manufacturers who address through a variety of methods this issue strategically do While this strategy can shift the including leasing and other loan not have to be debilitated allocation of total production structures‡‡.” by it. At Huntington, we costs rather than reducing them, have the experience to help our customers compete in this profoundly shifting employment environment.

See how Huntington helps manufacturing companies address the ongoing human capital crisis in new and innovative ways. Talk to a local Huntington banker today or visit www.huntington.com/commercial/insights to learn more.

5 Huntington Practical Insights: Addressing the Looming Human Capital Crisis About Huntington Huntington Bancshares Incorporated is a regional holding company headquartered in Columbus, Ohio, with $108 billion of assets and a network of 868 full-service branches, including 12 Private Client Group offices, and 1,687 ATMs across seven Midwestern states. Founded in 1866, The Huntington National Bank and its affiliates provide consumer, small business, commercial, treasury management, wealth management, brokerage, trust, and insurance services. Huntington also provides vehicle finance, equipment finance, national settlement, and capital market services that extend beyond its core states.

Visit huntington.com for more information.

† Deloitte and the Manufacturing Institute. Skills Gap and Future of Work Study. 2018. ‡ Bureau of Labor Statistics. Employer Reported Workplace Injury and Illness, 2018. November 7, 2019. § McFeely, Shane and Wigert, Ben. “This Fixable Problem Costs U.S. Businesses $1 Trillion.” Gallup. March 13, 2019. ¶ Josh Eichenhorn interview. January 16, 2019. # University of Virginia Weldon Cooper Center. National Population Projections. December 1, 2018. Ұ World Services Group. Generation Now Survey. January 3, 2018. ¥ National Association of Manufacturers and Deloitte. A Look Ahead: How Modern Manufacturers Can Create Positive Perceptions with the US Public. 2017. ≠ John Augustine interview. October 16, 2018. Ɫ Shapiro, Michael. “Manufacturers Pledge Training Opportunities to 1.2 Million Workers.” National Association of Manufacturers. July 25, 2019. Ⱡ Hudson, Kristen. “4 Reasons to Invest in Employee Referrals.” Jobvite. January 25, 2019. ∏ Kansas Department of Commerce. Rural Opportunity Zones. Accessed August 23, 2019. Ω Rachell Roward interview. August 26, 2019. †† Robert Half. 10 Top Perks and Benefits That Win Employees Over. November 5, 2018. ‡‡ Michael DiCecco interview. January 4, 2019.

Loans subject to credit application and approval.

Insurance products are offered by Huntington Insurance, Inc., a subsidiary of Huntington Bancshares Incorporated, and underwritten by third-party insurance carriers not affiliated with Huntington Insurance, Inc. Investment, Insurance and Non-deposit Trust products are: NOT A DEPOSIT ⚫ NOT FDIC-INSURED ⚫ NOT GUARANTEED BY THE BANK ⚫ NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY ⚫ MAY LOSE VALUE

The information provided in this document is intended solely for general informational purposes and is provided with the understanding that neither Huntington, its affiliates nor any other party is engaging in rendering financial, legal, technical or other professional advice or services. Any use of this information should be done only in consultation with a qualified and licensed professional who can take into account all relevant factors and desired outcomes in the context of the facts surrounding your particular circumstances. The information in this document was developed with reasonable care and attention. However, it is possible that some of the information is incomplete, incorrect, or inapplicable to particular circumstances or conditions. NEITHER HUNTINGTON NOR ITS AFFILIATES SHALL HAVE LIABILITY FOR ANY DAMAGES, LOSSES, COSTS OR EXPENSES (DIRECT, CONSEQUENTIAL, SPECIAL, INDIRECT OR OTHERWISE) RESULTING FROM USING, RELYING ON OR ACTING UPON INFORMATION IN THIS DOCUMENT EVEN IF HUNTINGTON AND/OR ITS AFFILIATES HAVE BEEN ADVISED OF OR FORESEEN THE POSSIBILITY OF SUCH DAMAGES, LOSSES, COSTS OR EXPENSES.

 Huntington National Bank is an Equal Housing Lender and Member FDIC. ®, Huntington® and Huntington® are federally registered service marks of Huntington Bancshares Incorporated. © 2019 Huntington Bancshares Incorporated. Third-party product, service, and business names are trademarks and/or service marks of their respective owners.

6 Huntington Practical Insights: Addressing the Looming Human Capital Crisis