Putting Talent at the Centre An Evolving Imperative for Manufacturing 2025

Industries direct over 70% of investment towards labour FIGURE 5 Average investment mix by industry, 2010-2021 Labour investment (labour cost) Invested capital (WC+PP&E)Companies have robust capital investment processes, but investments in talent are not rigorously evaluated despite the relative weight in investment factors.Healthcare Industrials Pharma & medical products Business services Consumer Travel, logistics & infrastructure Materials Energy GlobalIndustry Investment mix 88% 83% 82% 81% 77% 76% 74% 48% 74%12% 17% 18% 19% 23% 24% 26% 26%52% Note: WC = working capital; PP&E = property, plant and equipment. Source: McKinsey Value Intelligence platform, McKinsey analysis. The difference in how they do so is stark. For capital expenditure (CapEx), there’s a rigorous process aimed at ensuring the business case is clearly articulated. Companies have adopted disciplined, analytical thinking around CapEx investment – with calculated metrics such as return on invested capital (ROIC). After many reviews and filters, CapEx investment plans are subject to the highest level of board approval thresholds. When it comes to talent, there is rarely as much rigour or consideration – a stark and telling contrast. For example, there is no generally accepted method for measuring “returns on talent investment.” Moreover, talent investments are largely concentrated in upper management and knowledge workers, leaving the frontline relatively neglected. This is a provocation that ripples throughout organizations, threatening both productivity and stability. Those who begin embracing the frontline as an investment will see rewards emerge amid the “people dynamics” of their companies. Summary of ways to invest in talent Talent is no longer an enabler to the strategy; when it comes to operational excellence, the strategy is the people strategy. The research shows that in addition to compensation (pay, benefits, equity, etc.), leading organizations make targeted investments across six critical talent capabilities, introduced here and explored closely in the next chapter. Leaders think of these six capabilities as the “what” and then execute against prioritized initiatives through their integrated frontline operating model between operations, HR and finance to define the “how”: Research shows that in addition to compensation, leading organizations make targeted investments across six critical talent capabilities. Six talent capabilities BOX 1 1 Work design and safety: Reimagining frontline work to create safe and productive workspaces and processes 2 Talent planning: Understanding the frontline skills needed at the organization and site- level; matching demand and supply through dynamic scheduling 3 Attraction and onboarding: Finding and activating the next generation of frontline talent4 Talent development: Building distinctive frontline capabilities for operators and supervisors 5 Talent effectiveness: Managing performance for operators and supervisors, driving the right behaviours to achieve performance aspirations 6 Culture and experience: Defining and delivering a compelling employee value proposition 11 Putting Talent at the Centre: An Evolving Imperative for Manufacturing