Workforce trends facing the A&D industry: PwC

Our 2024 report series provides an extensive analysis of two complementary data sets, AIA’s survey of membership organizations and the results from our survey of 2000 labor market participants. AIA’s data evaluates the year-over-year employer trends related to turnover and attrition, hiring strategies, upskilling, and representation, while our survey draws insights from labor market participants in a variety of industries across all 50 states, all of whom have varying tenures, generations, gender identities, roles, exemption status, and responsibilities.

What we’ve found is that broader labor market perceptions of the industry are strong. In other words, attraction isn’t necessarily an outsized problem within A&D. The challenge that A&D organizations seemingly continue to face is in creating sticky experiences that drive retention once an employee has accepted an offer.

Data from our AIA employer survey and the labor market study highlighted five key labor trends that should be considered when evaluating broader corporate and organizational strategy:

Labor market perceptions of the aerospace and defense industry are strong.

Ineffective workforce planning practices have generated unsustainable tenure distributions within organizations as emerging retirements and turnover plague the industry.

Employees within the industry do not feel empowered to drive change because they don’t believe they have the right tools, processes, and ways of working to drive progress.

Employee onboarding, development experiences, and skill gaps continue to drive engagement challenges and contribute to higher-than-average quit rates, especially within the touch-labor population.

A divergence in experience between salaried and hourly workers is at the heart of a cultural divide within organizations.

In summary

A&D firms need to address pressures across cost, capacity, capability and compliance. A company’s workforce plays a significant role in each of these factors.

The 4 C’s for A&D firms to address

Labor and supply chain costs continue to rise, coupled with meaningful turnover and productivity challenges. There is an opportunity for organizations to optimize their total rewards and leverage short-term costs to facilitate long-term benefits.

A common refrain across the sector is the need to scale throughput. Organizations should understand the demand and supply for specific skills within their labor pool and the market to improve workforce planning efforts. Effective training and process improvements can also unlock productivity.

Long-standing leaders in the industry are increasingly facing competition from newer, more agile players. To drive innovation within their workforces, organizations should support lifelong learning, cross-functional interaction, and knowledge management.

Organizations remain focused on delivering acceptable outputs regardless of where they operate through leader-driven cultures of compliance, quality, and resilience, enforced by employees within the organization.

Throughout our series of thought leadership pieces, we will share some perspectives on addressing the gap between strong labor market perceptions of the industry and ongoing challenges related to attraction and retention of key talent. Specifically, we’ll share some points of view on:

Empowering employees to improve the way work gets done

Leveraging workforce planning and knowledge management tactics to future-proof your organization

Evolving the organizational employee value proposition to address the gap between exempt and non-exempt workers

Reimagining the employee development experience

Discuss opportunities to improve employee empowerment

The A&D industry’s highly regulated nature can sometimes generate significant barriers to agility in delivering products and services. Government regulations, security measures, and complex global supply chains frequently disrupt business processes. For example, the cost to drive compliance with government regulations continues to increase every year, with the federal regulatory burden now costing small manufacturers at least $50,000 per employee per year¹. These constraints, coupled with rigid customer operating procedures and legacy tools and technologies, can often hinder innovation and limit the empowerment of employees to drive change in process and ways of working.

^{1. “Regulatory Onslaught Costing Small Manufacturers More Than $50,000 Per Employee.” Press Release, 25 Oct. 2023.}

Our 2024 report breaks down three ways organizations can work through these constraints:

Our labor market study highlighted that 48% of A&D employees believe their organizations do not have the proper tools and technologies in place to support their roles. However, by embracing new tools and technologies, organizations can empower their employees to drive innovation and enhance productivity. Prioritizing change readiness and adoption in transformation initiatives will be crucial when introducing these new tools and technologies within the organization. This will enable real-time sharing of data-driven insights, allowing organizations to adapt to disruptions in the supply chain and improve their talent to drive progress.

The A&D industry has a significant opportunity to foster employee-led innovation and process improvement by focusing on developing transformative leadership capabilities, resulting in increased empowerment within the organization. Our labor market study indicates that only about half of managers and supervisors in the A&D industry feel empowered to drive change, compared to 79% in other industries. One of the key leadership capability gaps we have identified is the ability to lead and manage work products effectively. By coaching leaders and staff to standardize and improve their work, organizations can (1) reduce performance variability, (2) increase output without greater operating costs and (3) realize the efficiency gains promised by new tools, technologies, and machines.

Enhance visibility and transparency: Where appropriate, share information and data with third parties (i.e., customers and suppliers) to enable enhanced insights on program health. Leveraging data analytics will lead to supply chain visibility, which will mitigate risks and manage disruptions proactively and lead to stronger partnerships.
Break down silos within your organization: Breaking down silos within the organization by promoting collaboration and effective communication between different departments and teams can solve problems more efficiently and foster innovation, creating a culture of unity and partnership that drives employee engagement and productivity.
Drive a culture of trust: Driving a culture of trust, both internally and with third-party partners, is critical for effective communication, collaboration, and problem-solving in the A&D industry. Building authentic relationships and fostering a customer-first mindset can mitigate challenges, enhance agility, and improve the overall employee experience.

Review levers to improve the employee development experience

The past few years have been transformative for the labor market, with shifting employee desires, evolving employer expectations, and a change in working population demographics, as an estimated 30% of the U.S. civilian workforce is now part of Generation Z.

Recognizing the need for stronger upskilling programs for new hires and seasoned staff alike, organizations continue to invest in employee development and skills. However, our study of the market indicates that this investment is not materializing into improved employee engagement.

Our labor market analysis indicates two compelling points: (1) A&D employees were the least likely to believe that their organizations provide learning opportunities and career advancement when compared to other industries, and (2) labor market participants perceived the A&D industry to be among the least attractive sectors for career growth, learning, and advancement opportunities.

Ongoing prioritization of real-time development is crucial to drive enhanced engagement and minimize attrition, especially for mission-critical roles within engineering and manufacturing.

Organizations can reimagine employee development and skills growth by:

Tie onboarding back to the business strategy: Consistently connect back to the company’s value proposition and how the new employee’s efforts contribute to the mission.

Create a tailored, sticky experience focused on skill development: Build role-specific onboarding by identifying the key skills and competencies for success.

Conduct regular improvement reviews: Evaluate the effectiveness of the onboarding experience and determine adjustments needed.

Enhance through tools, don’t replace: Enhance the employee experience through onboarding tools that can quickly provide solutions, including person-to-person engagement and coaching.

Leverage a combination of learning modalities: Effective learning or foundational skills leverages a combination of asynchronous and synchronous, on-the-job upskilling.

Rethink tools and technologies: Functional and HR leaders must collaborate to create custom learning pathways for each end user group that prioritize both current skill development and future-focused competencies.

Embed learning within your culture: Upskilling should be championed by HR and business leaders alike from top to bottom. While these efforts may be viewed as ‘unallowable’ costs, organizations can reap the long-term benefits of a highly skilled workforce.

Effective performance management moves beyond traditional methods to:

Focus on team performance with some individual metrics

Create a culture of collaboration through team goals

Engage real-time feedback seeking systems

Empower employees to seek ongoing real-time development

Leverage clear and transparent goals that are tied to business strategy and individual career goals

Deliver feedback in a just-in-time, continuous improvement manner

Focus on shifting the exempt and non-exempt employee value proposition

Organizations in the A&D industry are curating their hiring and retention tactics based on job profiles, but there is a divergence in perception and experience between touch labor and salaried back-office staff. Customizing the employee value proposition (EVP) is crucial to address this and drive retention while cutting costs.

In order to properly address these issues, A&D organizations need to understand the growing divergence between exempt and nonexempt employees, how to use data to create an EVP, and the interconnectedness of employee well-being and a successful EVP.

Non-exempt employees (46% in A&D) feel unfairly compensated and lack strong benefits.
Customizing the EVP is essential to address higher turnover and disengagement.

The new employee experience connects meaningful work, balances individual and business needs, and is centered on mutuality and trust.
Persona-based approach: Evaluate job profiles, demographics, and tenure to curate the EVP.

Financial well-being refers to an individual's sense of financial security and stability. To address financial well-being, organizations can consider implementing competitive salaries, performance-based pay incentives, financial education and counseling programs, retirement plans, flexible compensation packages, employee stock ownership plans, and financial wellness programs.
Physical well-being refers to an individual's overall physical health and wellness. Organizations can address physical well-being by offering flexible work arrangements that allow for a better work-life balance, implementing health and wellness programs that promote physical activity and healthy eating, and providing health insurance coverage options that cater to different employee preferences.
Psychological well-being refers to an individual's mental and emotional state. To address psychological well-being, organizations can provide access to mental health resources, such as counseling services or employee assistance programs, implement recognition and appreciation programs, offer professional development opportunities, initiate employee engagement initiatives, and ensure that employees understand the purpose and impact of their work.

By leveraging employee preference analytics to curate the employee value proposition, organizations can address the divergence between touch labor and salaried staff, drive retention, and achieve cost savings, while also improving offerings and creating a more inclusive workplace experience. This approach can help address challenges related to attracting and retaining critical talent.

Share key workforce planning strategies to plan and future-proof the organization

In the A&D industry, efficient workforce planning has become crucial to meet existing program demands and address customer growth priorities. The data from our 2024 On the Horizon series reveals that the A&D workforce is reaching an inflection point in terms of tenure, age, and employee breakdown. Without proactive workforce planning, organizations face challenges in attracting and replacing retiring or departing employees.

The age distribution within A&D organizations is concerning, with only 7% of employees under 25 years old and 25% aged 56 or older. Additionally, the tenure trend shows that a significant portion of the workforce (43.3%) has been with their current company for less than five years, indicating a potential loss of experienced talent. Furthermore, the A&D industry is lagging behind other sectors in terms of demographic representation, including gender breakdown, Black/African American, and Hispanic/Latino employees. This misalignment with the US working population presents an opportunity to enhance diversity and inclusion within the A&D labor population.

Recognizing the need for a workforce strategy, organizations are placing emphasis on developing a comprehensive workforce plan and investing in upskilling and reskilling employees to meet evolving work and technology requirements. By prioritizing these initiatives, companies can attract and retain the right talent with the necessary skills, increasing productivity and ensuring long-term success. Critical aspects of effective workforce planning includes anchoring efforts on skills and competencies that can be informed by data, rather than backward-looking roles.

To effectively prioritize workforce planning, organizations must adopt a cyclical approach embedded in ongoing business planning processes. This model requires continual monitoring of progress to help keep the action plan on target with the business strategy and can incorporate DEI into existing planning processes to address key representation gaps. This will enable a firm desire to expand diversity across all aspects to prepare for a younger, more diverse workforce. The six steps include:

Analyze business strategy to identify talent needs
Diagnose the organizational genome – the attitude, ethos and culture of the organization

Identify and inventory skill and competency requirements necessary to support the business strategy
Project future need for talent, timing, expertise and location

Assess talent pool against competency models
Analyze market trends
Compare your compensation strategy and value proposition to the market and competitors
Conduct talent gap analysis