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Packagers undervalue intellectual capital

Packaged goods companies are shedding irreplaceable talent due to cost-cutting and consolidation strategies. One blogger asks, ‘Where will it stop?’

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While employees with technical training from the Vietnam era are reaching retirement age at an alarming rate, some packagers are deliberately accelerating the rate through downsizing initiatives fed by early-retirement packages and plant closings. Although some of these initiatives may be true downsizing, others are merely aimed at transferring operations to less expensive co-packers here in the USA or to operations in developing parts of the world such as Mexico, China, or India.

When downsizings occur, skills go out the door at rates exceeding the overall attrition rate because people with skills know that they are marketable. Skilled workers can collect on retirement packages while embarking upon second careers. These folks can sell their services as high-priced contractors, sometimes being hired back into the same jobs that they left at comparable rates of pay. I don’t get the new math that CFOs are using. More than likely the CFOs and CEOs of today’s corporations have never suffered through a grueling packaging line startup. They don’t have a firsthand understanding of how much skill and knowledge it takes to get a line up and running at peak efficiency and then to keep it there. The young workers that are being hired to replace the seasoned veteran operators do not come with the basic math and technical skills of their predecessors. The new technical and professional employees don’t stay in place at one job long enough to see a project through from concept to startup and on to optimized routine operation. Executives today must think that packaging lines have an Easy Button or else it all just happens by magic! I know that neither is true.

At a packaging meeting that I attended recently, I did come across one of the world’s largest food and beverage packagers that does understand the value of the knowledge that their long-time employees possess. This company has established a program that aims to capture and manage their at-risk knowledge before it goes out the door forever through retirements. By identifying people with core knowledge, capturing it, and sharing it with younger employees over time, this company will be much better positioned to compete in the global economy.

I would encourage other packagers to recognize the intellectual capital that exists amongst their workforce and to carefully deposit that capital in the type of investments that will be protected and that will produce a favorable rate of return over time. Cavalierly jettisoning these assets will provide neither capital preservation nor growth.

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