This article originally appeared in the May/June 2012 issue of Industrial Distribution. To view it in its original format, click here.
For a second year in a row, the data on employment as collected by the 2012 survey shows much improvement over recent years’ results. It appears that the sector of industrial distribution, much like the rest of the world, is finally emerging from the deep recession, albeit slowly and gradually.
Figure 1: In which job categories did you add staff?
In 2009, 68 percent of survey respondents claimed to have reduced their staff in the last twelve months, and 18 percent foresaw a need to do so in the coming year. We are pleased to report that those numbers are no longer the norm for the industry. And even though last year saw extensive improvement over the 2009 results, this year’s surveyed individuals indicated that the situation is even better in the current year. Only 11 percent of distributors have reduced their staff in the last twelve months, compared to that 68 percent of two years ago and twenty percent of last year. And even better: only one point four percent of respondents see a need to eliminate staff in the next twelve months, a percentage unchanged from last year’s data.
In addition to reducing the negative numbers, the positive outlook towards hiring more staff has improved significantly as well. In 2009, only 26 percent of distributors had added staff in the year prior, and 34 percent saw a need to add more in the next year. In 2011, those numbers changed drastically: 48 percent of distributors surveyed had added positions in the year prior, and 30 percent saw the need to add or to continue to add more. Even better are the numbers for 2012. A full sixty percent of survey respondents have added staff in the last year, and another 28 percent anticipate adding staff in the next twelve months. The numbers just keep looking better and better for industrial distributors and their employees.
“We plan to implement Workplace Wellness programs in the next year.”
Of those companies that reduced staff over the last year, it is interesting to look at which categories of employment were the hardest hit by layoffs. In 2009, the area of sales was the department where distributors made the most cuts, followed by warehouse staff, and then administration. Employees in the operations departments, in customer support, and clerical areas were less at risk. In 2011, the split was much more even, with warehouse, sales, and administration being the hardest hit areas, followed by clerical, customer support, and operations last. In 2012, we see a different split again. More people were let go from administration in the last twelve months (38 percent), followed by warehouse staff at 32 percent, clerical at 30 percent, and then sales at 18 percent. Customer support was the least impacted department, with only eight percent of respondents mentioning them as areas in which they had to cut employees.
In making sense of these numbers, a couple of trends emerge: as the economy seems to be picking up, so does the need for more outside salespeople. Consequently, as sales adds customers to the growing database, there is also an increased need to keep as many customer service individuals employed as possible to handle the increased volume of clients on the books.
It appears that as sales slumped, the most consistent spot in which companies make cuts in staff was the area of the warehouse. In an environment where time, efficiency, and the bottom line become more and more of an issue, automation becomes a bigger and bigger part of the solution. As technology improves, so do solutions that cut costs, eliminate inefficiencies, and slash product-to-market lead times, creating a leaner process both fiscally and in manpower. These advancements result in reducing the number of unskilled labor positions in favor of more skilled ones, incurring the need for additional technically trained employees able to perform maintenance on the new automated machines.
“Our largest problem is hiring technically trained support staff and good salespeople.”
Although the onset of automation has played a major role in the warehouse in recent years, there appears to be no complete substitution for actual employees. In the past two years, distributors have added jobs in sales, the warehouse, and customer service. Only five percent of those surveyed have fewer sales reps than they did last year, with 43 percent having more and 52 percent saying the number of sales positions at their company has stayed the same over the last year. In 2011, sales made up 72 percent of the jobs created and in 2012, 67 percent of survey respondents said they had added to their sales force. Customer support positions were added at 39 percent in 2011 and at 34 percent in 2012, and warehouse came in at 40 percent and 32 percent in 2011 and 2012, respectively.
As the world has seen in the past few years, when jobs are scarce, education is more and more important. In 2009, when asked to rate the importance of hiring technically trained employees, seven percent of survey respondents said that they placed little to no importance on it in the hiring process. In 2011, the number of respondents who felt this way dropped to three point eight percent, with more than 60 percent of respondents believed that hiring technically trained employees was very important to the success of their business. In 2012, the numbers shifted slightly. Virtually the same number of individuals (59 percent) feel that it is very important to hire employees with technical training, but those who place little to no importance on the subject declined by one percent, leaving 38 percent of respondents who believe that technical training is somewhat important, a three percent increase on last year. It appears that technical training is ever so subtly becoming a bigger factor in the hiring process for distributors.
Figure 3: Which do you use as a means of retaining your employees?
One somewhat surprising statistic was on the subject of engineers. In 2009, 43 percent of distributors employed engineers in their business, with the number rising to 50 percent in 2011. However, the percentage dipped slightly again in this year’s results, stating that only 45 percent of survey respondents employ engineers in their business. These fluctuating numbers likely suggest that distributors are still figuring out how to balance the need for the in-house technical support often provided to add value for the customer with their own need to stay competitive at the bottom line.
Regardless of whether a company is hiring or downsizing, they are almost always interested at figuring out how to keep the great employees that they already have working for them. Some have it down to a science with flexible benefits and performance-based pay, while others may be in an entirely different place when it comes to their human resource management skills. One respondent admitted that they were “not sure” how they retained their best employees, and another said it’s “sink or swim.” Seasoned employees are often the most valuable asset of any organization: they know the company, the position, the protocol, and the breaking point of their boss. Even if social media and websites are the new face of the company, long-term and loyal employees remain the heart. But just as technology forces an ever-changing game on the frontlines of corporate branding and recognition, the rising cost of employer-provided benefits is constantly changing the game for the people behind the desks of the organization.
In ID’s November/December 2011 Annual Salary Report, 46 percent of mid-management level employees reported that they did not feel that they were fairly compensated for their workload and performance. Of the 55 percent on the opposite side of the coin, many employees cited the non-salary perks as helping their level of satisfaction: travel, vacation time, and flex time. One respondent in the sales and sales management category responded that “corporate culture and work conditions have intangible value.” It’s obvious that employee benefits are crucial to satisfaction and retention in the workforce, so how do distributors stack up in their offerings?
As in past years, the number one category for retaining employees is higher pay for higher performance. In 2007, the response in this category was 78 percent, and even rose to 80 percent in 2008. But when the economic bubble burst, those numbers dropped and other means of compensation emerged as more attractive to employers and employees alike. In 2009, the number of respondents relying on performance-based pay dropped to 70 percent, but the area of training rose to almost meet at 66 percent, up eight percent over 2007. As the overall outlook of the economy improved, so did these numbers. In 2011, 78 percent of respondents were again offering pay for performance, and training as an incentive had dipped back to 55 percent. In 2012, these results remain virtually unchanged, with 76 percent of employers offering incentive-based pay, and 56 percent offering increased training opportunities to retain their workforce.
Other categories included improved benefits packages, with 54 percent of employers offering them in 2007, but only 47 percent in 2009. Now the numbers are back up, with 56 percent of survey respondents using improved benefits packages as a way to retain their workforce.
Figure 5: Of the benefits that you don't provide, which do you plan to implement in the next 12 to 24 months?
Although these responses represent what employers are doing specifically to keep what employees they already have, they offer more different kinds of benefits in addition, with 89 percent responding that they have not had to reduce their employee’s overall benefits packages in the past year. Of those 11 percent that did have to eliminate part of their offerings, health insurance was the most common answer, with most companies not eliminating the coverage entirely, but having to pass on some more of the cost to their employees.
Ninety-two percent of respondents currently offer health insurance coverage to their employees, up one percent from 2011, and another 12 percent say that they plan to implement it in the next twelve months (realizing that there is a little overlap there in numbers, perhaps some distributors plan to expand their current offerings for more comprehensive coverage). The second most popular option is a 401k/pension plan with 75 percent of survey respondents currently offering it and another nine percent planning to do so in the next year. The third highest category is bonus or compensation programs. Currently 69 percent of distributors offer these to their employees, with another 15 percent planning to implement them in the future. Falling fairly far back on the list of current offerings is employee recognition programs, with 32 percent of respondents utilizing them now. However, 20 percent plan to start this in the next year or two, placing it as the benefit that more employers plan to adopt than any other in the next twelve to twenty-four months. Other benefits that distributors plan to incorporate into their companies in the next one to two years are sales contests and flexible hours, adding to the idea that pay for performance and non-salary benefits are still important in a world where numbers sometimes rule the roost.
Overall, the numbers for this section of the survey looked optimistic: there were fewer cuts to jobs and benefits than in previous years and more additions of positions and retention strategies. The survey data on employment is encouraging in this respect, and to more than just distributors themselves. A healthy distribution network implies that consumers and businesses are purchasing more goods and at a more consistent level, and with a need for more goods comes a need for more jobs, and of course, more job security means more spending. A look at improving employment data is a step in the right direction of an overall improving economy.