The times they are a-changin'

“The line it is drawn, the curse it is cast.
The slow one now, will later be fast.
As the present now, will later be past.
The order is rapidly fadin'.
And the first one now, will later be last.
For the times they are a-changin'.”

Remember a time not too long ago when it was en vogue to outsource practically everything from the U.S. to lower cost geographies? Based on a recent WSJ article “In U.S., a Cheaper Labor Pool”, it looks like the current world order is beginning to shift once again.

Consider the following. According to the BLS, in 2010 U.S. manufacturing labor costs per unit were 13% below the level they were a decade ago. Moreover, the U.S. outperformed Germany (where unit labor costs increased 2.3% vs. a decade earlier), Canada (+18%) and South Korea (+15%). The end result: companies like Caterpillar, Navistar and Electrolux to move production jobs back to the U.S.

So what’s driving this trend? More competitive wages, flexible work practices, increased automation, cheaper energy costs and a weaker dollar are key contributors. Additionally, proximity to customers, tax incentives, simplified supply chain logistics and improved worker productivity have also helped build a really compelling business case for continued insourcing.

While I wouldn’t call this a victory for the American worker (yet), I would chalk this up as a significant step in the right direction. The need to develop talent with a global perspective and management skills, especially in our increasingly global economy, will require companies to maintain workforces in their key markets. This is especially true for services and knowledge-based companies.

Implications for HR. The lower cost argument for outsourcing jobs is holding less weight these days. Over time, more companies will begin bringing jobs back to the U.S., consequently tapping into the same talent pools. To get ahead of this trend and win market share of talent, HR leaders should proactively:

• Analyze their business strategies to understand the organizational capabilities these new jobs will need to embody
• Execute plans to aggressively attract and develop these capabilities
• Refine their company’s employee value propositions (making sure to also account for generational considerations) to enable key talent retention mechanisms

The times are definitely changing. HR leaders should capitalize on this opportunity or risk being left behind.