Morgan Philips Group acquires Hudson’s operations in Europe
This time, I would like to discuss the current conditions and difficulties with recruiting qualified personnel in the transportation sector. I am reporting from my perspective as Senior Consultant at Morgan Philips Executive Search, where I lead the field of Logistics and Supply Chain for Germany.
From my conversations with leaders in the logistics sector, there is a clear picture of the status quo of the development in the labor market of this field. The demand for specific rolls is growing, especially in the transportation sector. The consumption behavior of younger generations, which is rapidly gaining purchasing power, and the resulting demand for e-commerce solutions will make the shortage of operational personnel even more significant.
Interestingly enough, the shortage of staff is not only limited to executives in strategic roles, but also the operational positions in day-to-day business.
The logistics sector, especially the transport sector, is without a doubt exposed to many external factors that have a direct impact on the annual result and liquidity. Diesel prices have doubled in the last 20 years and have increased sevenfold since the 1950s. On the customer side, one always tries to push the logistics costs and thus the prices of the corresponding service providers. These are just two examples.
As a result, salaries in the logistics industry – especially at lower levels of the hierarchy – are rising slower than in other industries. As a result, the “other side of the table”, i.e. the customer side, becomes increasingly interesting as an employer and well-trained specialist personnel are more difficult to keep in the company. (This growth is not as intense in contract logistics companies as with transport service providers).
In addition to the employee retention problem, HR departments are finding it increasingly difficult to fill vacancies. Besides salary, many good candidates are not willing to relocate. Market-driven salaries are often not enough to motivate a potential employee to move with their family. Of course, this does not apply to VP / CxO / Head of- Level positions, but rather for leading positions in the operation (for example, branch and forwarding managers).
The German economy is one of the world’s most stable and long-term growing economies, because it has stood for innovation and quality for decades. It is often forgotten that the infrastructure network in Germany (although partially in need of renovation) and the favorable geographic location, with nine direct neighbors, are part of the backbone of growth. German companies are also among the innovation leaders in logistics services and developing transport and distribution networks. This plays an important role in the economic success of other industries. The production processes of the German automotive industry are hardly imaginable without just-in-time and just-in-sequence delivery and without a strong contract logistics provider, transport service provider, 3PL, 4PL, value added services provider etc.
Nevertheless, the logistics sector often does not have the same reputation as the automotive industry or mechanical engineering. Most people in the logistics market probably know the phenomenon from a personal understanding: Logistics is often seen as the equivalent of simple transportation services, and few are aware of the complex and challenging service this fascinating industry offers.
At the same time, certain roles and positions lose their flair and appeal to young adults (see more under point 3). To give a simple example, I see this phenomenon in the various areas of the drivers and warehouses. The occupation of the “truck driver” has lost the association of the adventurous long-distance driver and society thinks that motorists are often exploited and work under questionable conditions. A client, Managing Director at an international transportation company, recently said that the external impact often seems to be “that the job has little to offer” and “that the salary is too low to be away from their home and family for many days.”
Also with executive positions, which I fill as a consultant, the jump on the customer side, i.e. in the industrial sector, is increasingly viewed as an alternative. Within the industry, it is preferable to seek global players and not necessarily mid-sized or owner-managed companies. This trend is clearly visible in my discussions with customers and candidates.
This image is particularly important for young, new participants in the labor market, when choosing an apprenticeship or a degree program. As a customer from a medium-sized freight forwarding company explained it: “Everyone studies something somewhere and with their Bachelor, they have the same salary expectations as someone in the past with a diploma.”
It goes without saying that the quote is lucid and provoking, but it is reflecting and cross checking the negative development. The generation which is currently emerging into junior management positions, the Millennials or Generation Y, is often misunderstood about their motivations and priorities. High starting salaries are often expected and taken for granted while, however, “learning the hard way” by working long hours and doing simple tasks at the beginning is not considered appropriate by young job starters. Flexibility and work-life balance are high assets; money alone is not an incentive. As discussed above, high starting salaries and flexibility in the workplace are not the first terms associated with an operational position in a logistics company or forwarding agency.
There is a lack of qualified and highly motivated young people. Most of the Baby Boomers (born 1946-1965) are now retired and need to be replaced, in addition to the “normal” demand for new employees.
With the abolition of civilian and military service in Germany, there are far fewer young men every year who have previously driven motor vehicles in the military and who have always been easily hired as a driver by transport companies.
In the occupation of strategic and operational management personnel it is becoming increasingly clear that managers should not only be measured by their technical abilities and successes, but also how they can motivate and build their team. My clients pay attention to how key positions affect the underlying organization, and what social impacts are associated with being hired.
The industry has a lot of catching up to do when it comes to employer branding. Many multinational logistics groups are actively benchmarking in other sectors, such as the consumer goods and life sciences sectors. Initiatives to retain good and long-term employees often achieve unexpectedly positive results with little effort and low additional costs. When someone shows their gratitude, it leaves behind a trace of appreciation.
Second, there should be a performance culture where every employee is aware of what is their goal in order to reach the next milestone in their career – even at the lower hierarchical level. Such a culture can act as a magnet for the employees of rival companies.
Furthermore, it is imperative that even the smaller companies engage in university marketing to show young graduates what you as an employer and the industry have to offer. Since the topic of logistics and supply chain is neglected in current business degrees, it is necessary that companies exhibit what challenging and exciting careers can be offered.
After all, an adequate reward is also relevant. Attractive compensation structures are not just “nice to have,” but absolutely necessary. In the current labor market, there is low unemployment and a high demand for very good workers. Meanwhile, the employees are in the position of power as can often choose between several offers.
I would be happy to hear your ideas on this topic, gladly with a telephone conference or a personal meeting. Morgan Philips is the Digital Headhunting Company and I am responsible for the logistics sector and supply chain positions. We are currently celebrating our four-year anniversary in Germany and are offering an attractive discount for new search mandates, starting at management level.
Qais Felix El-Chami
Senior Consultant Supply Chain & Logistics
Morgan Philips Executive Search