Manufacturing is back at the center of the US economic agenda. Yet the sector faces a persistent talent shortage—and to bridge it, leaders will need to rethink how they attract, train, and retain a new generation of manufacturing employees. “Manufacturers need to be driving the conversation, not waiting for the workforce ecosystem to arrive at their door,” says Carolyn Lee, president and executive director of the Manufacturing Institute (MI). On this episode of McKinsey Talks Talent, Lee joins McKinsey leaders Brooke Weddle, Bryan Hancock, and Tyler Freeman, along with Global Editorial Director Lucia Rahilly, to talk about what needs to change, as automation advances and employees’ expectations evolve, to enable US manufacturing to thrive in the age of AI.
The following transcript has been edited for length and clarity.
Attracting new talent to a changing sector
Lucia Rahilly: Manufacturing, specifically the return of manufacturing to the United States, is all over the headlines. What’s less top of mind is the challenge of finding talent in the manufacturing sector. Talk to us about this challenge and how the Manufacturing Institute is helping address the supply: demand mismatch in the manufacturing workforce.
Carolyn Lee: Nationally, a lot of conversations are about reinvesting in manufacturing, but manufacturing never completely left. The United States has had about 13 million manufacturing employees for many years, and that number has been increasing since 2020. Yet we still have a structural workforce challenge. We do not have enough people with the skills we need to fill jobs.
Some people don’t understand that these are well-paying jobs with upward mobility and a lot of opportunity, which is a public perception challenge we need to address. That’s what we do at the Manufacturing Institute. Our mission is to build and strengthen the manufacturing workforce for today and tomorrow.
Tyler Freeman: Younger generations also want different things—for example, more freedom in their schedule. That’s an important consideration. Tools and innovations, including flexible scheduling, digital tools that help with root-cause problem-solving, or even digital work instructions, will be essential as new workers enter the manufacturing sector and we become more creative about getting things done more quickly.
How McKinsey helped the Manufacturing Institute grapple with the talent gap
Lucia Rahilly: McKinsey partnered with the Manufacturing Institute (MI) to grapple with the talent shortage in US manufacturing—and in fact, Tyler collaborated with you on that work. Tell us about how that collaboration helped you think about the scope and scale of the impact the Manufacturing Institute aspires to create.
Carolyn Lee: The McKinsey team helped us think about the opportunity for talent—between existing and untapped talent pools—and understand where the industry is heading and where we could have the biggest impact by scaling our work.
Tyler Freeman: At the tail end of 2024, Carolyn and I had a meeting of the minds that said what we’re doing today, given advances in digital, AI, and automation and their impact on our shop floors of tomorrow, meant that the MI had to take a hard look at some of the things they’re focused on. Manufacturing is a fragmented market, and you need local knowledge to understand the nuance.
Folks in this sector are thinking about the number of open jobs that exist today or jobs that will exist as we nearshore much of our industrial base. The workforce needs of manufacturers entail both growth and understanding why people are leaving and how to replace those workers. Finally, when considering the upskilling or reskilling needed, the total addressable market of workers is twice what many people think is needed for the manufacturing workforce.
Bryan Hancock: Governor Brian Kemp held a workforce summit in Georgia. One big manufacturer said, “If I don’t get somebody interested in manufacturing by middle school, we’ve missed them.” That was a big aha moment for me. What were some of the big aha moments that came from the work you did together with McKinsey?
Carolyn Lee: A big one was that there is no single workforce problem. There are many different levels. Since the COVID-19 pandemic, there has been a focus on retention and culture. What is going to make the next generations come to the industry and stay?
For baby boomers and early Gen Xers, the expectation was they’d start their career and stay for 40 years. The younger generations have a very different set of influences. Looking at what we need to do to tap into those talent pools and train them was illuminating.
This project also helped us think about how to scale. The MI has functioned like a start-up in many ways. When we were building things, we were refining as we went. This was a chance to look at the big picture and determine how to build the most effective process to attract and retain talent so we can scale effectively. It helped us think differently about how to address the problem, even with a small team.
Bryan Hancock: Let’s talk more about workforce flexibility. One of my favorite examples of a company doing this well is Land O’Lakes. Some portion of their workforce can pick their own schedule, and they’ve designed the work so people can pick up and be productive where they are most useful. What other successful examples have you seen of companies bringing that flexibility to life?
Carolyn Lee: There is no one flavor of flexibility; there are many different approaches. For example, you could swap shifts with people, change your start and end times, be a part-time worker, or be scheduled to work four-hour shifts instead of eight-hour shifts. That optionality is critical to help manufacturers get comfortable with the idea that every worker doesn’t have to work the same way. A portion of your workforce could have options that make work more flexible so they can balance the demands in their life.
The first thing we encourage companies to do is poll their workforce about the kinds of flexibility employees are looking for. Let them tell you what they’re hoping for, then design a system that makes it work. They want to make work fit with their life, not have their life be about work. If we want to attract and retain the best talent, we need to provide them with some of those options.
A portion of your workforce could have options that make work more flexible so they can balance the demands in their life.
Tyler Freeman: Another great example is Keurig Dr Pepper (KDP), which implemented a flexible scheduling module at one of their sites in less than 90 days. To Carolyn’s point, the possibilities are effectively unlimited—but do something.
KDP started at one site and scaled that module to the rest of their network. They gave their employees the ability to swap shifts, and that started to attract workers who had previously worked there and even retirees. KDP also attracted a workforce that could help them meet their business goals and increase the value proposition of the current workers on the shop floor. That’s a holistic way to think about it: There may be some unintended consequences, but they could be positive.
Brooke Weddle: Carolyn, you mentioned that people have differing perceptions of manufacturing in the United States. This isn’t always the case in other countries. What can we learn from them?
Subscribe to the McKinsey Talks Talent podcast
Tyler Freeman: In terms of ROI, one of the lessons we’ve learned is that investing in talent is important. Our research found that for every $2 you invest in digital, you have to invest $3 in process optimization and $5 in talent and change management. If you apply that to many of the business cases we see organizations championing, including investments in gen AI and automation, you’ll find that you cannot realize the ROI without investing in talent.
On a broader scale, we’re seeing globally that investing in talent is worthwhile. There are organizations such as the MI that deliver a promising ROI and can help address the workforce problem that everyone is facing globally.
Changing the conversation about work on the shop floor
Carolyn Lee: The number one thing manufacturers should do to solve their own biggest challenge—building their talent pool—is to promote more of what they do.
For example, the first Friday of every October is Manufacturing Day. We encourage companies across North America to open their doors and bring in students to tour, see things hands on, engage with employees. Bring in teachers and parents too, because they have a big influence on students’ career choices. This visibility helps students understand that there is an opportunity in manufacturing for people who look like them in their communities.
I grew up in a manufacturing family, and my father and grandfather would say there was an opportunity to come right out of high school and get a skilled manufacturing role. Some people lament that the pathway is not as simple anymore. Every manufacturing job we have today requires essential skills, but there are many pathways to acquire those skills. We can help people ignite their interest and show them the paths they can take to get the training they need for the jobs they aspire to have.
Manufacturers need to be driving the conversation, not waiting for the workforce ecosystem to arrive at their door. We need to be front and center, helping describe these opportunities and combating fears, including the assumption that AI will replace workers. Jobs will change, but workers will remain. We need to help people understand which skills they need to attain to make sure those jobs endure.
Tyler Freeman: Right, the perception and the reality are different. A young person entering the workforce may assume they’ll be relegated to driving a forklift their entire career. That may be the aspiration for some, but others who are digitally native may have other goals. Many organizations are channeling the transition from operator to technician: They may have workers driving a forklift for the first couple of years, then move them to managing a fleet of automated guided vehicles.
We need to help people understand which skills they need to attain to make sure those jobs endure.
If more organizations lean into optimizing their workforce, it’ll help both the productivity of the organization and the career development of employees by allowing them to do meaningful work and build skills. That’s where shop floors are heading in the future.
Brooke Weddle: Are there any examples of companies that are thinking about this innovatively and seeing results?
Carolyn Lee: The Federation for Advanced Manufacturing Education [FAME] apprenticeship system was started by Toyota in 2010 to train their maintenance technicians. For the local community college to sustain the program the way they wanted, they realized they needed to bring in more companies.
In 2019, Toyota transitioned that program’s maintenance to us. We’ve now more than doubled the size of it. It is a multiskilled maintenance technician and process technician apprenticeship program involving more than 500 companies, in 46 chapters, and in 19 states to help grow the talent they need.
McKinsey Talks Talent Podcast
Bryan Hancock, Brooke Weddle, and other talent experts help you navigate a fast-changing landscape and prepare for the future of work by making talent a competitive advantage.
Is automation helping—or hurting?
Lucia Rahilly: Acknowledging that automation has historically had some effect on the availability of manufacturing jobs in the United States, what are some of the positive effects tech has on factory work—for example, in reducing attrition?
Carolyn Lee: I ask workers, “What do you think about automation? How is the new technology helping you or hurting you?” They all tell me it has made their jobs better, more interesting, safer, and less boring.
I was having this conversation at a factory several days ago. The leader who was showing me around pointed to the autonomous vehicle bringing parts from location to location. He said, “Three years ago, we would’ve had forklift drivers doing that job, but now I can take those individuals and train them in something else.” Now those workers are maintaining the autonomous vehicle, programming it, or managing its supply chain system. So with this structural change, we can free up potential talent and give them tasks that are more inherently human. Along with that comes more interesting, more durable, and probably higher-paying positions. Those qualities make the work more appealing to the next generation who grew up with these technologies.
Tyler Freeman: Rather than thinking about automation purely as a way to remove head count, the manufacturing sector should think about using automation as changing the way the work is done to augment people’s abilities, help them become more productive, and continuously upskill them as manufacturing sites grow.
Carolyn Lee: To that point, a couple of years ago, we conducted a survey and found that 69 percent of employees under 25 years of age stayed at their current employer because of the training and development opportunities, and 65 percent said they stay because of career opportunities. So that engagement and those career ladders are desirable and help feed both sides of the system, making it easier for companies to recruit and retain their workforce.
Lucia Rahilly: The paradox that’s implicit in what you’re saying is that technology necessitates upskilling, but does it also make it easier for manufacturers to engage in the upskilling process?
Carolyn Lee: Absolutely. It makes upskilling easier, less expensive, and safer. You can allow employees to experience roles through augmented reality [AR], VR, and digital twins without having to put them in the environment. We started doing some VR training during the COVID-19 pandemic when people weren’t coming to facilities. They could see some of the facility’s capabilities and how the skills they were learning as part of their certification were applicable to machines. And it works. It’s impactful for companies to have those tools available to help upskill and onboard workers.
Tyler Freeman: Often, the attrition rate is highest in the first 30 to 90 days, so it’s critical to ensure employees feel productive in that time to help retention. I’m serving a client now that has a work stoppage on one of their lines because their employees can’t do the job in the time allocated to them. We found that workers are given less than 20 hours to understand their jobs before they’re put on this manufacturing line to perform a highly complicated process. As a result, employees get frustrated. The line’s not moving, so their boss gets frustrated. Performance management kicks in. People get aggravated at the level of performance, and then employees leave.
Digital technologies allow us to use AR and VR to learn simple processes or even complicated ones, such as maintaining military aircraft. We can increase the number of repetitions, improve safety and respect in our training environments, and ensure a level of proficiency or familiarity before workers arrive on the shop floor so they can be productive on day one. These tools ultimately help provide employees with self-actualizing and fulfilling roles.
What needs to happen next
Brooke Weddle: What are some ways to drive real change, rather than incremental progress, on the manufacturing front?
Carolyn Lee: Across the industry, manufacturers are recognizing that they can’t solve this problem by themselves. They need to come together and look at this through a regional lens. When companies see investments getting announced, they come to us and ask, “What are we going to do when this new plant opens and they’re expecting 5,000 workers? How are we going to compete with that?”
The answer is to come together to recognize the common skill sets across the different parts of manufacturing, then train for those skills together to increase the size of the talent pool. That way, you’re not competing for the same small talent pool. When a person comes into your facility, you have an opportunity to train them specifically for what you need. We have to think differently about how we’re making those investments. That’s one of the things we do through our FAME initiative: We aim to build the regional workforce and talent pool solution together, because in manufacturing, we are each other’s customers and suppliers.
Working together to address the problem and grow the size of the talent pool is effective when it comes to high-demand, high-skill roles. Companies are recognizing this, and it is accelerating momentum. Then they can start building other solutions locally and regionally, which will help strengthen the backbone. It will help strengthen our bonds with the education system and contribute to the national conversation that has shifted away from four-year degrees.
Lucia Rahilly: Let’s close with your outlook on the sector. What makes you excited about manufacturing today and in the future? What makes you feel like workers entering the manufacturing workforce today could achieve as much as, or even more than, your grandfather did during his career?
Carolyn Lee: Manufacturing has had a renaissance in public attention and is viewed again as the backbone of the US economy. We need people to be front and center in that conversation: They are our most important resource in the sector.
With all this attention, there is a lot of opportunity in manufacturing careers, plus constant growth and renewal in these jobs. People coming into the sector today can work alongside the next generation of automation and AI, which will improve manufacturing even more. The youngest generation wants opportunities to work actively rather than sitting at a desk. We can give them jobs where they feel productive and can deploy technology. There’s no better industry to do that than in today’s manufacturing sector.
