Joe Magliochetti
Dana Chairman and Chief Executive Officer
"Work Force 2000 - Emerging Issues and Creative Solutions"

Thank you, and good afternoon.

I appreciate the opportunity to be here today to discuss some of the important workforce issues that are impacting all of our organizations. I find it interesting that we hear so much talk about the changes we are seeing in industry today; but relatively little discussion is given to the impact that these changes have on the workforce.

It may not surprise you to hear that a recent study of American companies found that, on average, they lose about half of their employees every four years. But what may surprise you is that the same study determined that these companies lost about half of their customers every five years as well. This suggests that workforce issues may have a more significant impact on customer loyalty and the long-term success of a business than is generally acknowledged.

Given the current market infatuation with the notion of a "New Economy" rush for gold driven by B2B and B2C Internet companies, one thing is certain. As employers, we must be proactive in the current market for quality employees.

With this proactive approach in mind, there are really three areas for I’d like to emphasize this afternoon. The first has to do with the rapidly changing labor market in the United States. Secondly, within this changing market I’d like to talk about recruitment; and I’ll finish with a few thoughts on retention.

For those of you who may be unfamiliar with Dana, we manufacture components and systems primarily for motor vehicle OEMs and the aftermarket. You’ll find our products in a wide range of applications, and in fact, we can supply components to 95 percent of the world’s 700 million motor vehicles. Like most of the companies represented here, we need to attract and retain a wide range of employees throughout the entire spectrum of the workforce.

At present we have about 82,000 people working in 33 countries. In addition to helping us achieve sales of $13.2 billion last year, these men and women are in reality the future of our company, just as your workforce determines the outlook for each of your firms.

So let’s begin by looking at this rapidly changing environment. Obviously, the tight labor market is on everyone’s minds. It’s becoming more challenging to fill even the most basic jobs. I’ve read recently that some fast-food and retail businesses have been forced to shut their doors for lack of help. In fact, there’s even a Kinko’s in North Dakota that received some media attention for reducing its hours from a standard 24-hour service to just 15 for the same reason.

In some tight labor situations business owners are even providing chartered bus transportation from nearby communities for workers with minimal skills. The traditional approach to workforce management no longer applies.

The signs are there, 30-year lows in unemployment and rapidly growing entry-level wages. The Wall Street Journal reported just last week that the average hourly wage for production workers has risen to $13.53. It’s interesting, Congress passed a bill this month to increase the minimum wage, and we haven’t heard very much opposition at all. For the moment, the minimum wage has become largely irrelevant – in many tight markets non-skilled workers are earning twice the minimum wage.

The market for skilled employees is even more competitive. The Bureau of Labor Statistics predicts that another 20 million jobs will be created in this country in the ten years between 1998 and 2008. That’s an increase of about 14 percent. Not too surprising, most of this growth will occur in computer engineering (up 108 %) and in computer support functions (102 %).

One Chicago-based recruiting agency was written up in the New York Times last month because it was listing 160 positions for web-savvy workers with a $100,000 signing bonus. That’s the reality of the market in this dot-com sector – computer and technology jobs are being created at a rate more than seven times that of other jobs. And we know this may only be the tip of the iceberg.

Of course, another by-product of this information age is the wealth of data available to the prospective employee. Using company Internet sites and search engines, people are better informed about their career opportunities and earning potentials than ever before.

It used to be that the local job market dictated workers’ opportunities, but now, with the advent of Internet-based recruiting and job posting, the national job market has emerged as the job market.

Unfortunately, the emphasis that many traditional employers place on longevity and corporate loyalty is falling by the wayside in the current "gold rush." Some feel that corporate loyalty is part of the "old economy" and may be just a holdover from days gone by.

Today’s worker wants to feel that he or she is a part of something important, and not simply counting the days until they receive a gold watch. Today we talk about knowledge workers, generation X, tele-commuting, and job sharing. Some constantly surf the net looking for a better opportunity and are willing to jump at the drop of a hat to reach their goal. Still others have a deep concern for family stability and community. As employers, we would be wise to make room for a mixture of both.

Even in this context, there are two distinct areas we should consider. One has to do with the important folks who work in our factories and produce the products that we sell. The other has to do with the talent that develops our products and guides the business on a daily basis. Many of the issues are the similar and yet they differ in some important ways.

So let me start with the folks in our shops who produce our products and serve our customers. In my opinion, the factory worker today is better educated and more highly skilled than at any time in our history. Most have a high school diploma, and many have a college degree.

One of the best aspects of my job is that I get the opportunity to travel to a number of our facilities. In fact, all Dana managers are expected to visit several facilities each year. When I get these opportunities, I generally spend the entire day talking with our people right at their workstations or machines.

I usually conclude my visit with a plant-wide meeting in order to let people know where the company is going, and to answer any questions they might have. In the last few years I have become more and more impressed by the financial questions asked by some of the assembly workers.

At one facility I met a young man on the shop floor with a degree in finance. I was surprised to find that he was quite content running a machine eight or ten hours a day. As we talked I was even more surprised to learn that this young man had a thriving building rehab business going outside of the workplace and also owned a successful silk-screen printing business. When I asked why he was working for us, he had all the facts and figures on our retirement plans and health care benefits, and explained that his fledgling businesses could not support such benefits for his family … yet.

Clearly the talent on the shop floor can be quite diverse, and many long-held stereotypes no longer apply. So when we talk about "knowledge workers" we should really consider the full spectrum of our work force.

Included in that spectrum is the second group I mentioned earlier. Those who engineer our new product developments, market our products and services, and manage for the continued success of our enterprise. Without question, these people today are better informed about their career and employment options than ever before.

We have been hearing for a few years now that these "white-collar" workers have become more and more mobile – that they are less likely to be tied to a company, city, or region. Some of these folks consider themselves to be independent contractors with no particular loyalty or long-term affiliation. As employers, we need to make sure that the total package – wages, benefits, work environment, everything – is competitive with the marketplace simply to attract the talented people we need to succeed.

Through the convenience of the Internet, any prospective employee can easily expand his or her knowledge of job opportunities across the country. And of course we have all heard that people today are more likely than ever to consider opportunities throughout country when looking for a career move. No longer limited to local job markets and compensation ranges, workers in high-demand fields are free to migrate to areas where employers compete most fiercely for their skills.

The result is that a labor shortage in Silicon Valley could very well have a draining effect on talent in Boston, Atlanta, and Indianapolis. This, in turn, creates upward pressure on compensation in those regions struggling to hold onto their talent.

So against this backdrop, what can we as employers within traditional manufacturing industries do to attract and retain the bright and intelligent people we need to succeed? Cash compensation is not necessarily the primary focus any longer. Many young people are anxious to learn how they might benefit from the long-term success of the business. They are interested in stock options and stock purchase programs – initiatives more closely aligned with the success of the enterprise.

Recruitment efforts and compensation packages that were once exclusive to top-level executive positions are being considered within the broad workforce. To be successful as employers, and ultimately as businesses, we are going to have to be more creative in our efforts to attract and retain top-quality people.

In fact, with markets and businesses changing so rapidly, traditional concepts of career development are being tossed aside pretty quickly. Workers are more likely to make major career changes, and to make those changes more often. Thus, there are a lot of talented people with a variety of experiences that don’t fit into conventional career molds.

Within Dana we believe it is important for our people to advance as a direct result of their performance. We also believe strongly in a policy of promotion from within and we are willing to move our people across several disciplines. Rather than limit a search for a manufacturing manager to candidates with ten years of experience in a single discipline, we try to open up the process. We recognize that the best person for the job may be someone with proven skills in another area of our business, which will further enhance his or her capabilities in the new assignment.

People who have a wide range of experience can bring new perspectives and opportunities for development to a particular task. Of course, all of this makes it more important than ever to retain those quality people that you have. And this is my final point.

The primary factor in retention is the development of the right combination of compensation and incentives. The obvious danger, though, is that you will wind up in a bidding war of your own creation. It is happening in some fields as we speak.

In addition to the financial aspect of the compensation package, some firms are now offering home loans, dry cleaning services, free or discounted food service, home computers, and childcare to potential employees.

You may have heard about the young man on his first assignment with a New York investment bank. He is impressed by the fact that they bring him a choice of meals at night from four different restaurants. They even launder his shirts and deliver him home and back at all hours in a taxi. After several months he realized that they do many of these same things in prison! (And the hours are about the same.) Needless to say, some perks can have unexpected implications.

When there is nothing left to provide, some firms are allowing casual dress, flex time, and the ultimate combination of both – tele-commuting. One computer firm I heard about in Madison, Wisconsin, even contracts with an auto-repair business to come out to rotate tires and change the oil in employees’ cars.

Competition for top-quality people is intense, as we’ve seen, and the most talented people are constantly being solicited with other offers. It sounds like a losing battle, but it doesn’t have to be. One of the reasons firms are offering so much in the way of compensation and perks is because they cannot offer much in the way of career development.

What workers today want more than anything else is to know that there are opportunities for career advancement. This may sound contradictory to some of the things I mentioned earlier. But consider this. One of the reasons firms have to try so hard to lure workers away from their present companies, is that people are generally inclined to stay where they have invested time and effort.

This is truly one of the best-kept secrets of the new workforce. Study after study has shown that people forego many opportunities because they are reluctant to leave behind their career investment in their present company.

People really care about their careers and about their opportunities for advancement. This helps to explain why so many people are willing to remain in their current positions in spite of the incentives offered by new companies. If they can find a reason to stay, many people will stay.

Fortunately, encouraging Dana people to grow with Dana is one of the things that we do best. Because we promote from within, based on performance, our best and brightest people are truly motivated to exceed expectations. And they vary rarely accept offers from outside the company. It is not at all uncommon to meet people with 30+ years of experience. In fact, the 24 members of our World Operating Committee average more than 25 years of service with Dana.

Of course, one of the keys is making sure that those years in Dana service are well spent. We make sure that all of our senior managers have several years of international experience. And everyone in our organization is aware of this global focus.

In fact, because of this emphasis on international development, Dana people pursue opportunities for overseas assignments more aggressively than in many other organizations. They view these assignments as important opportunities to invest in their own futures. And this is good for Dana’s future.

We encourage all of our leaders to obtain a wide range of operational and managerial experiences. There are very few "specialists" in Dana who have spent their careers in a single area or specialty. This emphasis on broad-spectrum development is a natural consequence of our promote-from-within philosophy, and ensures that our leaders are well rounded and able to adapt to changes in our industry and markets.

But how do we leverage that knowledge? How do we involve all of our people in the business to achieve optimum performance? Well, the answer for Dana is two-fold. First, we believe that all of our people, at every level of the organization, should receive 40 hours of education per year.

This is not simply on-the-job training, but real classroom education including subjects like blueprint reading, statistical process control, management skills, quality metrics, and understanding customer expectations. One of the primary methods that Dana has developed to ensure our ability to promote from within is Dana University – Dana’s own educational system.

Founded in 1969, Dana U was established to help meet the individual development needs of our employees, as well as the leadership development needs of the company. I like to point out that this goal of 40 hours per person (like all Dana goals) is the same for everyone in the company – from people on the production line to the chairman.

Given this additional education, we ask our people to provide at least two ideas per person per month on ways in which we can improve our business. Ideas can include almost anything from a minor departmental layout change to a sophisticated machining center. This has been our practice for almost six years now and our success has been remarkable.

In some operations our problem solving teams are authorized to spend up to $500 without supervisory approval. The key is to involve our people, especially those who will be affected by the change.

Some might ask what the payoff is. How do you recognize their contributions?

The payoff is in the implementation of the ideas we receive. Our goal is to implement 80 percent of these ideas. That in itself – actually seeing their ideas put into practice – is very rewarding to people and encourages further participation.

Of course, there are a number of other recognition and incentive programs in use at our facilities. As with so many things at Dana, we ask our plant managers and division leaders to determine what works best for their facilities and people.

Let me just tell you about one facility where the plant manager has developed a creative monthly raffle based the Ideas program. Every month as people submit ideas and those ideas are implemented, the originator of the idea receives an entry for the monthly drawing.

The more good ideas a person submits, the more chances he or she will have in the drawing. (The prize is usually something along the lines of a kitchen appliance, a television or a set of tickets to a ballgame.) At the end of the month, all of the plant’s people are called together for the drawing, and more importantly, for a brief plant meeting.

The benefits of the ideas program go beyond the ideas themselves to include such intangibles as increased teamwork and enthusiasm. It is no coincidence that our best facilities have very successful Ideas programs. One visit to the shop floor and you can’t help but be impressed by the pride our people have in their ideas and achievements.

So offer training, continued education, and opportunities for advancement. Invest in your people and the payoff is two-fold: you have a more knowledgeable and valuable employee, and you will very likely be able to retain that person longer if he or she feels that their career is going somewhere. Both results help contribute to a more dynamic and innovative workforce from which future managers and leaders can be developed.

One other point I would like to mention is the need for good communications in order to help people understand their value to the organization. By communicating company plans and objectives to your people, you let them know where they fit in to the overall strategy. Real communication enhances your employees’ understanding of the direction of the organization, and allows them to envision their place in its future.

In closing, let me just repeat that the recruitment and retention of good quality people are two of the most important investments you can make in the future of your company. Look at your current programs and benchmark your efforts with the best companies out there. Don’t be limited to a study of your own industry, because I can assure you that the best of the best are looking across industry lines. Try not to be limited by traditional thinking. Remember that most people are looking for more than compensation packages.

They are looking for opportunities to advance their careers. This, in the end, can work out to everyone’s advantage.

By developing your own talent pool, and making it well known that top performers have opportunities for advancement within the company, you can address the primary needs of your most talented people while building a stronger future for your company. And that’s a win-win result that can be sustained in any economy and in any job market.