Each year, Industrial Distribution interviews executives at the largest distribution companies as part of our Big 50 project. We ask them about business conditions, key industry trends and for a general business outlook. We also ask about their greatest business concerns—the big issues facing not only their companies, but the entire industry.

And each year, finding and retaining workers ranks at or near the top of that list.

One of those conversations with Applied Industrial Technologies president Bill Purser sparked this special report. Like many of his peers, Purser noted the employee crunch as a key issue facing Applied and he put it in a broader context: Where will the industry's future leaders come from, and how will companies retain the talent they already have?

“I think [this is] a very serious problem,” Purser said in an interview last spring at Applied's Cleveland headquarters. He pointed to a retiring generation of baby boomers that is being replaced by smaller generations with different views on work and career. Purser says he doesn't expect a mass exodus of the baby boomers, as their health is good and most will want to keep working. And though the generations following them are smaller, he says there should be a steady stream of workers to fill the gaps—though competition for them will be fierce. What concerns him most, he says, is the industry's need to accommodate these changing employment forces.

“It's somewhat scary because companies are going to have to change,” he says. “They are not going to be able to do things the way they used to … Companies that don't adjust will have a problem.”

And he's not talking about technology. Purser says companies need to adapt to the new generation's views on work/life balance and to retiring workers' desire for a different role—one that may include a lighter workload, more flexible schedule or a new focus on mentoring and employee development.

“Everyone points to the technological gap. And, yes, there is a gap, but I don't know that it's as big as everybody's professing it to be,” Purser says. “It's just one of the things companies will have to deal with.”

Large companies such as Applied aren't the only ones concerned about the industry's employment dilemma. INDUSTRIAL DISTRIBUTION surveyed more than 500 distribution owners and managers from companies of all sizes for our 61st Annual Survey of Distributor Operations and heard similar concerns. More than half of the respondents (52 percent) said they can't find enough qualified candidates to fill job openings and 66 percent said finding technically trained employees is of particular concern. Nearly 60 percent said they are very concerned or somewhat concerned about the issue.

Trade associations are taking note. In 2000, the Power Transmission Distributors Assn. launched its Industrial Careers Pathway program, which has formed industrial distribution degree programs at eight community colleges in the United States and Canada. The program is supported by more than 20 other industry trade groups and focuses on connecting schools, distributors, manufacturers and students to ensure a steady pipeline of qualified workers.

Similarly, the National Assn. of Manufacturers has several training and recruiting programs, including its outreach project called “Dream it. Do it.” The program targets young people ages 16 to 26 with advertisements, research and educational opportunities in manufacturing and related fields. The program emphasizes a contemporary manufacturing environment, focusing on the high-tech and creative aspects of the field.

Through these and other programs, individuals from across the supply chain are attacking the employment dilemma head on. They're reaching out to high schools by offering part-time employment to cultivate an interest in distribution. They're working with colleges on distribution-related curricula, internships and job placement programs. And they're implementing high-tech training tools to invest in existing employees.

Industry watchers say these have become necessary steps in today's work environment.

As Purser explains, “The bricks and mortar, the inventory, even the technical tools, are the easy part. It's finding the people that make all those things come together. That's going to be the issue.”

Many large distributors have anticipated the employment crunch. In Applied's case, Purser says the company refused to cut its training budget when the economy slowed down in the late '90s, cementing its commitment to long-term employee development. Applied continued to fund its COMET program, which recruits and develops newly minted college graduates; developed new recruiting resources for local managers nationwide; and began an online training program that was launched to all 350 Applied locations last year.

The distributor also reached beyond its corporate walls and worked on PTDA's Industrial Careers Pathway initiative to launch an industrial distribution degree program at Cuyahoga Community College in Cleveland.

Underlying those efforts is something much less tangible. As vice president of human resources Barb Emery explains, Applied's managers are always on the lookout for good people, inside and outside the office.

“Our managers are excellent at getting out there and identifying [people] who are doing a great job,” Emery explains, pointing to the need to spread the word about the company and the industry. “[They] are creative on their own, she says. “We can't rely on just putting an ad in the local newspaper.”

Emery points to an Applied manager in Atlanta who developed a partnership with a local high school 10 years ago. His goal was to introduce students to the company by recruiting some part-time workers. Applied has long recruited at colleges nationwide, but the high school outreach program was a new concept—one aimed as much at education as recruitment.

“It's going back to the fact that our industry isn't necessarily one where somebody might say, 'Oh, when I grow up, I want to work in industrial distribution,'” Emery explains. “So we have to get the word out.”

The Atlanta manager has recruited a several part-time workers from the high school, some of whom joined the company full time after graduation or stayed on part time while attending college. Emery says Applied plans to roll out similar programs in other cities.

Distributors of all sizes are increasingly tapping community resources for new recruits. More than 40 percent of respondents to our 61st Annual Survey said they are working with vocational or community colleges to recruit employees. Among the smaller companies we surveyed, 33 percent of those with less than $10 million in sales and 39 percent of those with between $10 million and $20 million in sales said they are developing such relationships.

That's the idea behind the Industrial Careers Pathway, which grooms distribution employees with an introduction to the industry and a focus on business, math and technical skills. The program targets two-year schools such as Cleveland's Cuyahoga Community College—or Tri-C, as it's known—and links the schools with real-world sources from manufacturing and distribution.

Twenty-year-old Brad Miko is a student in the Tri-C program and works full time for Bearing Distributors Inc., a Cleveland-based power transmission distributor that hired him for a part-time job when he was a sophomore in high school. He knew of the company, and the industry, through his father, Ken Miko, a regional vice president at BDI.

Brad Miko started in the warehouse, but now works full time as a global services specialist, supporting customers and working with BDI's U.S. branches. He entered the Tri-C program last fall and takes one course per semester. So far, he's taken an introduction to industrial distribution and a computer skills class, and this fall he plans to add either an English or Math class to fill the program's general education requirements. Miko will finish in three years with an associate degree in industrial distribution.

“I really didn't know what I wanted to be coming out of high school,” he explains. “I tried finding things I wanted to do, but I thought I'd stick with this and see where it took me. So far, it's taken me to a nice job.”

Miko says a full-time four-year college experience wasn't for him.

“I'd rather have a two-year, hands-on, on-the-job experience—and earn money at the same time,” he explains.

And he says he wants to make a career out of industrial distribution, noting that he enjoys the friendly, fast-paced atmosphere at BDI and especially likes helping customers solve problems.

“I haven't stopped learning since I came here,” Miko says of BDI. “I love what I'm doing now. … But I could see myself going to a branch and doing inside sales in the near future. Long-term, if there's an opening for a new branch manager or branch manager replacement, I could see myself doing that after learning the ropes.”

BDI is helping Miko learn the ropes by giving him access to internal training programs and helping fund his degree with tuition reimbursement. And it was BDI that opened Miko's eyes to the Tri-C program; like Applied Industrial Technologies, BDI was involved in launching the Industrial Careers Pathway program at the school. The distributor has since used it as a source for new hires and employee development.

Miko's supervisor, Dan Lacasse, says he's had several employees enrolled at Tri-C in the last few years. Two have moved on to management positions since getting their degrees, two are currently enrolled in the industrial distribution program, and he recently hired a Tri-C intern for a full-time position.

“It's been great pulling from Tri-C and sending my employees [there],” Lacasse says, noting that in addition to tuition reimbursement he often gives pay raises to employees who excel at their classes.

“That's just how much I believe in it,” Lacasse says.

BDI is even further committed to the program, providing employee volunteers as Cleveland representatives for the ICP nationwide. ICP project director Craig McAtee developed a network of representatives from education and industry to serve as “champions” for each ICP site. The group meets monthly via conference call for program updates and to share experiences, answer questions and talk about the ICP's long-term goals.

“We want to take each site … and raise the bar, so that they're on a pretty equal playing field,” says McAtee, who started working on the ICP program four years ago when he was executive director of workforce development at Tri-C. He says his goals are to improve the quality of the ID courses nationwide; develop a stronger connection between the schools, their communities and local industry; and expand the program to other schools in the United States and Canada.

McAtee approaches the program from an industry perspective. Before going into education, he worked for fluid power products manufacturer Swagelok for 23 years, the last three of which he spent working with the company's global distribution network. In addition to his ICP duties, McAtee also serves as executive director of the National Coalition of Advanced Technology Centers, which represents 170 community and technical colleges nationwide.

He says his mission now is to “connect the dots” between industry and education.

“I think the most important thing is to get out of our boxes and have students … tour [manufacturing and distribution facilities] and interact with those industries,” McAtee says. “Get those manufacturing operations to open their doors—in a high-tech environment, with their robots and automation—to show young people that this is not their father's and mother's manufacturing anymore.

“Industrial distributors can do the same thing.”

Attracting new people to the industry is just part of the problem facing distributors. Employee retention and development are taking on greater roles, especially in light of changing workplace demographics. Companies are trying to retain older workers while grooming new recruits for long-term careers (see sidebar, Boomer Bust, p. 25).

Respondents to our Annual Survey listed better pay and more training and education programs as their top two methods for keeping good workers; a close third was improving their benefits packages.

In looking at training, nearly 60 percent of respondents said they've developed formal training programs for employees, and 33 percent said they offer tuition reimbursement as an incentive to pursue higher education goals.

Applied, for one, has taken training to a new level with an online program available to all of its nearly 4,000 employees. The program augments the live training sessions the company runs in-house and through vendors and helps employees fill the 40 hours of training per year recommended by the company. Launched in early 2006, the program offers 27 courses on everything from products to Applied's marketing initiatives.

Training and development director Andy Webb says employee response to the program has been positive. For example, the company launched a course on its new government sales initiative in March and more than 2,000 sales and corporate support staff had completed it by mid-summer—a 98 percent compliance rate for that particular course.

“We have an investment [in people], and a big portion of that is to help us retain the folks that are here and to get people up to speed who are coming in,” Webb says. “We view this as an essential tool that we have been able to bring on that does both of those things.”

Applied employees Cindy Driskill and John Procyk agree that such programs contribute to their long-term success. Driskill and Procyk are inside sales reps in Applied's Forest, Va., and Akron, Ohio, service centers, respectively. Both have taken several online courses as part of their career development plans.

“[The online training program] has really impressed me,” says Driskill, who's been with Applied for eight years. “At first I thought, 'What is this going to be like?' But all doubt has been erased.”

Driskill says the most difficult aspect of the program is finding the time to do it—though she says the convenience of logging on from your desk is a plus.

Procyk, who joined Applied three-and-a-half years ago, agrees.

“[In this industry] there is so much out there to be learned,” he says. “There are so many different parts, so many different products. There's always a need for training. And this is a useful tool.”

Applied encourages all of its employees to meet the 40-hour-per-year education goal. That's a lot of training and a lot of expense, says vice president of communications Rick Shaw. Though the online training program was a significant investment up front, he says it's helped streamline much of the company's training options and fulfill its long-term investment in its people.

“One of our core values is personal mastery, so we expect them to take on the challenge of learning,” Shaw says. “Turnover is unavoidable; you're going to have it in any business. But the idea is to get somebody up to speed as quickly as possible, because it's all about serving the customer.”

And that can be a two-way street.

As Driskill explains, “The more educated you are, the more valuable you are to your company.”