Prioritizing Productivity

We have built our own workforce training organization, the Manufacturing Skills Institute. It serves several thousand people a year. We actually expanded into multiple states in order to follow where our manufacturers have other branch plants. We also have a focus around professional development. We do events, seminars, webinars, etc., all around issues related to environment health and safety, workforce development, and the topics that help plants with vertical business units focus on efficiency and operations. 

We’ve had to respond to acute needs in the market and with our member companies to provide different voices for different vertical industries within manufacturing. One affiliate we started in 2010 was the Virginia Craft Brewers Guild, a separate organization. It’s wonderful to see an industry be created and flourish all within your own time horizon as an executive.

Lately, we’re trying to resolve some major issues with improving female workforce participation. A few years ago, we affiliated with Women in Manufacturing (WIM), a national trade organization, and created its Virginia chapter, which is now one of the fastest-growing WIM chapters in the country. We now have hundreds of female executives and the only mentoring program in the country. 

We’ve tried to keep our focus on our mission of productivity and profitability, while providing unique voices and opportunities for the vertical industries within manufacturing, and we’re going to continue building those out into the future. We’re looking at defense and food and beverage and a few other verticals over the next couple of years. It’s exciting to be part of a dynamic industry that’s always looking at the next big innovation and expects the trade association to come along as well.

El Koubi: One of the big issues VMA deals with is related to the workforce. Many call it the skills gap, particularly in the manufacturing sector. Give us a sense of what VMA has been doing on this front. What can leaders at the state or local level do to better align what’s happening in education and workforce development with the needs of manufacturing sector employers? 

Vassey: This year is our Manufacturing Skills Institute’s 10th anniversary. We started with a very broad mission of closing the skills gap, and we’ve added closing the gender gap in the manufacturing workforce. That’s a lot easier said than done because most workforce training is done by government institutions. There aren’t very many of us in the nonprofit sector doing workforce training. Then you’ve got a variety of vendors with programs and services that are maybe in the for-profit space, and of course they’re trying to sell to the government institutions. So that market is very difficult to break through. 

Then you have added complexity in a sector of the economy like manufacturing operating 24/7/365 — there’s no downtime, for the most part. They’ve got to fill positions because there are huge risks, not only to production, but also safety. And they have to be very purposeful and intentional around training before they put somebody into a manufacturing environment. So, training is extremely important and they have to work quickly. The government educational system is built around semesters, and that just doesn’t work for most manufacturing occupations. 

The paradigm shift from 10 years ago to today is that today, not everybody needs a four-year degree, but everyone needs higher education. We have lasered in on fast-tracking industry credentials to 10 to 12 weeks. 

We focus on the alignment of occupations to industry credentials through skills mapping. It sounds simple, but it’s difficult to do for lots of reasons. HR departments are often fixed in the way they’ll do business. Oftentimes, government education institutions simply don’t know what industry credentials exist and how to do the mapping.

The largest challenge is getting as many states as possible to go along with our message, which is to embrace industry credentials for the majority of workers, not just some. Stop constantly surveying and trying to come up with one-off customized programs and focus on aligning skills credentials to specific occupations in high-demand industries. 

If you take principal occupations that are in demand, you can easily map all of those to industry credentials today, whether it’s the healthcare industry or manufacturing. You do it through skills alignment. You then understand how many people are being produced by the government education system. Then the Commonwealth can start setting policy to say, “Right now we’re funding a program at institution X that’s producing outcome Y, but there’s no demand for anybody in those fields in that region’s occupations. Perhaps we need to reappropriate money to another region where there is a demand for those fields.” And then, overall, “Are we adequately funding industry credential attainment and higher education to be competitive?” 

I can tell you right now that the answer is no. Virginia ranks 35th in manufacturing credential attainment as a percentage of overall credentials through the government education system. We need to be in the top 10. VEDP’s Virginia Talent Accelerator Program has really shined a light on this. The state that gets this right is the state that’s going to win the projects of the future. That’s the bottom line. 

El Koubi: Your summary encapsulates a whole lot of ground and issues that are so important. I’ll use this opportunity to make a shameless plug for the Virginia Office of Education Economics, which is doing pioneering work on understanding the relationship between education and workforce and the needs of the labor market — connecting education to opportunity, if you will. 

I’m reminded of a data point I think everybody needs to understand. You’ll see something similar in other states, but in Virginia, there are something like 2 million adult workers who have no education beyond high school, and most of them are in the labor force with adult responsibilities. Going back for a two-year or four-year degree is not only not what’s needed by industry in most cases, it’s just not a practical solution for people trying to provide for their families. 

Tell me more about what occupations are on the demand side. Which ones are most prominent and, in particular, which skills are you seeing in high demand by manufacturers? 

Vassey: The occupations that I would say are acute needs haven’t changed in the better part of a decade, largely because we’ve had waves of retirements over the last 10 years. Right now, about 27% of our workforce is over 55, so we’re looking at another wave coming. Production occupations have been the highest demand for the better part of a decade. Those come in different titles, depending upon the company or industry within the manufacturing sector, but they’re all production occupations. 

They’re the most difficult to fill because they require core competencies people rarely have exposure to because these jobs are multi-craft. You’ve got to understand the equipment you’re working with. Most equipment is now programmable logic controllers, so you’ve also got to understand not only a bit about electricity, but probably pneumatics. You certainly will need to understand a bit about safety. In certain occupations, you’ll need to know a great deal about it. 

You’ve also got to be able to do equipment troubleshooting. Our technicians who run production equipment work on entirely customized pieces or products. All of them need the ability to do some troubleshooting, and often maintenance, on their equipment. That used to be the purview of maintenance technicians, which is another major demand. It’s not the traditional, “Well, I’m a maintenance technician for just our mechanical systems,” or, “I just work on electricity.” Those are also multi-craft. Everything is becoming multi-craft, and you’ve got to be able to do a little bit of maintenance and troubleshooting, if not a great deal. 

Applied mathematics is another area where we see a lot of people fail in their pursuit of these technical credentials. Maybe math wasn’t exciting in high school and they didn’t pursue it. Or they’ve been out of school a while and coming back to get a credential, but algebra is something either they didn’t learn or they’ve forgotten. So, with a lot of training we have to reintroduce applied mathematics or they won’t get some of the higher-order concepts needed to work in this digital manufacturing environment. 

El Koubi: It’s a fascinating perspective and highlights a couple of important things to keep in mind. One is just how rapidly these occupations are evolving within the manufacturing context. Another is the importance of understanding the skills.  

Let’s shift to infrastructure. One of this year’s great moments in Virginia’s economic development was in July 2024, when CNBC highlighted Virginia’s infrastructure strengths by naming the Commonwealth America’s Top State for Business. 

A big part of it this year was infrastructure. It’s something that America needs to invest in generally. We’ve got many infrastructure assets needing maintenance or repair. In many cases, we need new infrastructure. One of the big reasons that Virginia secured the top spot is because of great work on site development. What do you hear from manufacturers on this front?

Vassey: Generally, we hear almost no complaints other than congestion in key markets — that there just isn’t enough land, asphalt, and concrete. But they’re used to that and they understand that, and even that is getting better. 

The big one is Interstate 81. When we talk about big infrastructure projects, the two things that manufacturers generally laser in on are The Port of Virginia and I-81 improvements. We have to focus on those transportation corridors, and we’ve done a good job in Virginia expanding some of those congestion points and hot spots. There are still a few more to go, but I think they’re making sufficient progress so we can get up and down I-81. 

In VMA’s Manufacturing Competitiveness Index, state transportation expenditures as a percentage of states’ total expenditures is one metric we use to give a sneak peek into how each state prioritizes its infrastructure spending. Virginia ranks third in the nation. That’s a testament to where we have prioritized our dollars for infrastructure. 

Manufacturers aren’t necessarily looking for everything to be up in a shiny new building they can go operate in tomorrow. But they are looking for sites that are ready and can be up within 12 months, because that’s generally the time horizon for their decision-making. And they don’t want to get delayed with permits. They don’t want to have a conversation like, “We can get power and we can get gas and we can get water and sewer there within five years.” That’s not what they’re looking for. I think VEDP has made the case that we don’t necessarily have to build shell buildings all over the state like we used to 25 years ago to be successful, but we do have to have sites ready to go that can be pre-permitted and up to meet the needs of customers within a very short time.

Virginia is still blessed with a couple of industries that most states don’t have anymore. We still have a very vibrant pulp and paper industry. We still have a vibrant chemical industry, and we’re home to steel and metal production plants. All of those are dependent upon good, reliable, affordable electricity and natural gas, and we have world-class utilities that have done an excellent job of focusing on reliability first.

El Koubi: You made reference to something I want to talk a bit more about, and that’s the Virginia Manufacturing Competitiveness Index. I believe it’s produced by you and your team at VMA, as well as the Virginia Industry Foundation. Virginia is ranked No. 7, so, reasonably well. Give us a sense of why Virginia ranks so highly. 

Vassey: The reason we’re so bullish on it is that it’s not weighted. All metrics in all categories are single-weight. We don’t put our thumb on the scale and say, “This is more important this year.” It really gives folks an apples-to-apples comparison of where states stand. 

We rank No. 2 in the country in workers’ compensation premiums because we have a very stable workers’ comp system. That’s extremely important to manufacturers. We want our peers to be safe because that keeps premiums down and experience ratings positive. It’s been a hallmark of Virginia’s business climate, in addition to competitive electricity and availability of competitive natural gas. 

When you look at workforce, the share of veterans in our population puts us at No. 1 in the country. That’s because veterans are incredibly reliable, well-trained, mission-driven team members. Bringing them on a manufacturing site is one of the No. 1 priorities of manufacturers. We look at all these things in total, and this core set of metrics lets us know where the levers need to be pulled to improve our productivity.

El Koubi: International trade has come into focus again in our national politics in a big way. What is the manufacturing community in Virginia and around the country saying about trade policy? 

Vassey: Prior to 2020, the phrase “supply chain” was unknown to most people outside of manufacturing and industry. Post-2020, post-COVID, everybody knows that phrase. For the first time in modern history, people saw shelves empty. In our opinion, that created a psychological effect where people finally understood just how fragile the U.S. market was from the standpoint of certain products.

When we think about international trade, for the first time we have the attention of not only the public, but also economic development, which, with the notable exception of your agency and one other agency, has historically been focused on business recruitment. Now, all of a sudden, the question, “How can we help improve the supply chain of existing industry, and how can we increase more opportunities for them to access other markets?” has become more important today, I think, than it’s ever been.

You’re also trying to convince small business owners to diversify their businesses so that when times are tough, different markets are good ways to diversify future sales so they can weather those storms, whether they’re domestic or foreign, or if there’s a disruption in the supply chain. It’s all about risk mitigation. 

That’s often difficult when you have a bird in the hand — you’re focused on that. Sometimes looking at diversifying your supply chain is a difficult sell. But our opinion is that Virginia is poised because of our location, our infrastructure, and our very focused economic development opportunities. 

El Koubi: Let’s look ahead. As we talk, we are less than a month away from the U.S. presidential election. What are manufacturers thinking about for 2025 and beyond? 

Vassey: Manufacturers talk about two things, and I won’t include workforce, because they talk about that at every meeting. That’s a perennial. 2024 and 2025 are critical years for the manufacturing sector. Regulatory predictability is a major concern — what direction will that regulatory environment go? Will it become more hyper-regulatory? Will we have more challenges, whether it be air regulation, water regulation, or whatever? Will workplace rules become more difficult and create advantages or disadvantages?

The unknown paralyzes industry a little bit. You’re seeing that right now. They’re trying to figure out what kind of federal regulatory environment they’ll have to work with, whether it be the workplace, the workforce, or environment health and safety. All of those are risks they try to mitigate. 

The second thing we talk about is energy, which has been integrated into every single policy consideration at the federal level. Other than perhaps data centers, the manufacturing sector is the most energy-intensive. When folks say to us, “We’re going to eliminate natural gas from the marketplace,” that’s an existential threat to an entire segment of the manufacturing economy. 

What opportunities are going to be out there in renewable energy? Virginia is home to one of the most vibrant nuclear industries in the world. We think there’s huge opportunity in the advanced nuclear and small modular reactor markets for zero-carbon electricity generation in the future. And when I say future, we’re looking at the first commercial units in 2030 to 2032. It’s a risk, but there’s also potential reward in creating some value out of zero-carbon goals. Even if those aren’t achievable, trying to get there will open up opportunities. For us specifically, we see opportunity around the area of advanced nuclear. That is positive, but we need stable state and federal policy to help usher in that wave of technology, because it’s incredibly expensive and highly regulated, and it isn’t going to do the economy any good if it’s unaffordable. 

All those things create a little bit of unknown, both on the energy side and the regulatory side. The next 24 months will shake all that out. The sooner elected officials, candidates, and leaders come to some rational conclusions about what they’re going to do in that space, the faster industry will respond, letting go of some capital and starting to build again. 

El Koubi: Brett, thank you so much for this great conversation, and thank you for your partnership and leadership every day here in Virginia. 

Vassey: Thank you, Jason. 

Full the full interview, visit www.vedp.org/Podcasts