Manufacturing employers are fighting an extremely competitive war for talent, and keeping valued employees is a critical aspect of winning that war.
Especially considering how challenging it can be to recruit manufacturing employees and the growing manufacturing skills gap, it’s critical that the manufacturing industry retain those hard-won, qualified team members. The unprecedented employee turnover seen over the last year–dubbed the “Great Resignation”—makes employee retention in the manufacturing industry even more crucial.
Here, we’ve outlined four ideas for employee retention in the manufacturing industry that can allow companies to establish a process that will reduce turnover and keep employees around for the long haul.
Why do manufacturing employees leave?
When it comes to employee turnover, there are two categories.
Voluntary turnover is when an employee leaves of his or her own accord, such as through retirement or resignation. Involuntary turnover is when an employee is separated from the company through layoffs or termination.
For our purposes, we’ll focus on voluntary turnover, since that’s the area where you can make changes that will reduce the number of employees who choose to leave. Voluntary turnover makes up approximately 75% of all turnover.
Generally speaking, employees leave for reasons related to the following categories:
- Career development
- Work-life balance
- Manager behavior
- Job characteristics
- Compensation and benefits
How can you increase employee retention in the manufacturing industry?
Turnover is a symptom that employers are not recruiting the right employees and doing enough to create an environment wherein employees stay and are most productive.
If your manufacturing company is experiencing high turnover, it’s important to quickly create a strategy to remedy the situation. We recommend the following process if you’re looking for ideas for employee retention in the manufacturing industry:
- Make a business case for retention
- Identify the unique causes of turnover in your company
- Use employee insights to determine areas for intervention
- Measure results and adjust as needed
1. Make a Business Case for Employee Retention
In order to decide how much time and resources you should commit to an employee retention strategy, you need to determine exactly how turnover is affecting your manufacturing company.
There are both direct and indirect costs when an employee leaves and must be replaced.
Direct costs include the actual financial expenses, including resources used to recruit, select, hire and train an employee, the expense of temporarily covering an employee’s duties (such as overtime for other staff or temporary staffing) as well as departure costs such as exit interviews, severance pay and increased unemployment taxes.
Indirect costs are less tangible (but equally important) and include factors such as decreased organizational performance, poor productivity (which is common when an employee plans to quit), lost institutional knowledge and damage to a company’s employer and customer brands.
In order to calculate the exact cost of turnover, a company must determine the following:
- Cost of Termination
- Cost of Replacement
- Vacancy Cost: number of days job is open times the average value of the job per day
- Learning Curve (productivity) Loss: revenue per employee per day times the number of days it takes to get the new hire up to standard performance.
Calculating exactly how much turnover costs your manufacturing company allows leadership to make a business case for employee retention initiatives that are financially advantageous. By knowing how much turnover is costing your manufacturing company, you can justify the expense involved in implementing an employee retention initiative.
2. Identify the Unique Causes of Turnover in Your Company
Once you’ve figured out how much turnover is costing your company (and thereby how much you’re able to commit to employee retention initiatives) you need to uncover the deeper reasons why your employees are leaving.
Every organization within the manufacturing industry is unique, so we recommend looking within to develop employee retention strategies, rather than merely relying on best practices or ideas from others within the manufacturing industry. The best way to understand the reasons for turnover is by going directly to the source—your employees.
While exit surveys are the most common form of gathering employee feedback related to turnover, there are a variety of other mechanisms that are important for developing employee retention strategies, and each type has unique benefits and uses.
These mechanisms will help you understand why people come to work for your manufacturing company, why current employees have stayed, why former employees chose to leave and why they would (or wouldn’t) work for your company in the future.
- Onboarding/new hire surveys are used to get feedback from new employees and identify improvements that can be made in the entry process. They are especially useful if you’re experiencing high turnover in the first year of employment.
- Annual satisfaction surveys are used to measure employee satisfaction and engagement, understand perceptions about the workplace, establish a baseline for improvement and assess employee intentions to stay/leave.
- Exit surveys/interviews are used to discuss departing/former employees’ experiences, determine their reasons for leaving and identify ways you could have prevented them from leaving.
- Stay studies are used to understand employee intentions to stay or leave and identify changes that will increase retention. It’s important to understand why employees choose to stay, as these reasons are often different from why employees choose to leave. Stay surveys can also help predict when employees are planning to leave to guide proactive talent management strategies.
Regardless of the mechanism you’re using to gather employee feedback, there are a few ways to make sure you’re getting accurate, honest responses that can be used to create data-driven employee retention strategies for your manufacturing company.
- Feedback gathered by an independent, objective third-party is preferable. When feedback is internally sourced, employees tend to censor their responses for fear of retaliation or being singled out.
- Research that incorporates both qualitative and quantitative methods provides the most valuable information. Quantitative data tells you how many employees feel a certain way while quantitative data tells us why they feel the way they do.
- Questions should be tailored based on the segment of the workforce being surveyed; for example, surveys designed for management/salaried employees will not always work for employees on the factory floor.
3. Use Employee Insights to Determine Areas for Intervention
Now that you’ve gathered employee feedback and identified the drivers of turnover within your manufacturing organization, it’s time to make a plan.
While the changes you make will depend on your company’s unique circumstances, here are some examples of common causes of turnover and suggested solutions:
Turnover driver identified: Lack of career development
- Ensure clear career paths are present
- Implement cross-training initiatives and provide leadership development opportunities
- Hire a career counselor to help employees navigate their career path and explore existing developmental opportunities
Turnover driver identified: Issues with management/supervisors
- Implement an upward feedback policy by which employees can provide developmental feedback to their direct supervisors
- Identify supervisors associated with higher-than-average turnover rates for employees they manage and provide additional leadership training
- Hold management accountable by tying retention outcomes to their performance objectives and bonus opportunities
Turnover driver identified: Lack of appreciation
- Encourage an atmosphere of respect and respectful feedback
- Practice regular recognition by implementing an accessible employee recognition/rewards program including peer-to-peer recognition
- Consider including “points” that can be redeemed for rewards
4. Measure Results and Adjust as Needed
Employee retention strategies should become part of your organizational objectives; they shouldn’t be treated as a one-time intervention.
It’s also important to practice transparency with your employees. Discuss the results of any surveys, communicate the changes you’re implementing and why. Once you’ve implemented your recruiting strategy, you should continue to gather employee feedback, measure the results and adjust your strategy as needed.
Connect with an Expert for More Ideas for Employee Retention in the Manufacturing Industry
In today’s talent landscape in the manufacturing industry, it’s more important than ever to hang on to your employees. If your company is experiencing high turnover, now is the time to be proactive about retention.
If you need help getting started, we’re here to help! Warren Averett’s Workforce Development professionals offer services that help where it matters when it comes to ideas for employee retention in the manufacturing industry.
Reach out to your Warren Averett advisor directly, or ask a member of our Workforce Development team to reach out to you and get the conversation started.